Variable universal life insurance, referred to as variable universal life insurance, is insurance that combines the payment flexibility of universal life insurance with the investment flexibility of variable life insurance. Variable universal life insurance is designed for policyholders who view the cash value of a life insurance policy as an investment. Variable universal life insurance is a type of whole life insurance that combines the payment flexibility of universal life insurance with the variability of death benefits and the investment flexibility of variable life insurance.
Variable Universal Life Insurance Overview
Variable universal life insurance follows the premium payment method of universal life insurance. The policyholder can decide the premium payment amount for each installment within the prescribed limits, or arbitrarily choose to reduce or adjust the premium payment amount under the conditions of insurability and compliance with the policy minimum insured amount. High coverage; but its assets are kept in separate accounts, its cash value changes the same as variable life insurance, and there is no guarantee of minimum investment yield and principal. In other words, the worst-case expected cash value could drop to zero. Therefore, this product is considered an investment securities product in the United States and must be registered with the SEC and sold by an agent with a securities broker license and insurance qualification.
Investments in variable universal life insurance, like variable life insurance, are a collection of various investment funds. Policy owners can transfer their cash value from one account to another over some time. However, its death benefit adopts the same method as universal life insurance, which can be selected by the policyholder. In the case of Plan B, the death benefit varies with the value of the investment assets; in the case of Plan A, it is the balanced death benefit, and the size of the investment income only reflects the cash.
In variable universal life insurance, the policy owner assumes the entire investment risk of the assets in his investment account. If the investment in the investment account increases, it will be a great joy, no reduction in income will occur, and the policy will be valid; but once the cash is reduced to zero, if the policyholder does not pay enough premiums, the policy will lapse.
Variable universal life insurance is completely different from traditional insurance products. Due to its strong investment function, flexibility in premium payment, and optionality of death insurance benefits, various countries have more difficulties in their operation and management. high demands. This type of insurance is a premium investment-linked product.
Comparison of common investment-linked insurance
1. The payment of variable life insurance is fixed, and it can be paid regularly or in one lump sum ;
2. Variable universal life insurance is more flexible than the former, and the investment operation and management of the two are similar;
3. Variable annuity is a mixture of variable life insurance and annuity, but because the payment is determined by investment profits and losses (the product of the number of units of the annuity fund and the current fund price), the payment is unstable.
An example analysis of a company’s variable-value universal life insurance product in the United States
Premium.
Customers can pay monthly, semi-annually, or annually, or they can pay at any time after the first payment, but each payment must not be less than $100.
Warranty face value.
One year after the policy is issued, the customer may request an increase or decrease in the face value of the policy, but the face value of the policy shall not be less than US$100,000 for the first 5 policy years and US$50,000 thereafter.
Policy payment.
Policy benefits are death benefits plus riders, less outstanding policy loans, interest, and other delinquent charges. There are three options for the death benefit: first, the death benefit is always equal to the face value of the policy; second, the death benefit is equal to the face value of the policy plus the cash value of the policy (the cash value of the policy is equal to the cash value of the general account, the cash value of the loan account and the cash value of the separate account ). Third, the death benefit is equal to the difference between the face value of the policy plus the accumulated premium paid by the customer minus the accumulated withdrawal amount. After meeting the company’s requirements, customers can adjust their options one year after purchasing the policy. To make the product meet the definition of life insurance stipulated by the US tax law, the company also stipulates “alternative death benefit”, when the alternative death benefit is greater than the aforementioned death benefit, it will be paid according to its amount.
Separate account structure.
A fund is set up under a separate account, comprising 18 investment portfolios managed by the company’s affiliated investment companies and 5 investment portfolios managed by external investment companies. Clients can allocate assets in up to 17 of these portfolios. The segregated account is established by the relevant laws of the State of New York, and the fund is registered as an investment company under the Investment Company Act of 1940.
Policy loan.
The company stipulates that the minimum policy loan is US$250, and the maximum total policy loan cannot exceed 75% of the cash value of the termination of the contract. The company will withdraw the cash value from each account and transfer it to the ” loan account ” according to the proportion of the cash value of the ordinary account and the independent account to the cash value of the entire policy. The loan account will bear interest at the loan rate less an expense rate of not more than 2%, with a minimum interest rate of 3%. At least once a year, the company distributes the income from the loan account to the ordinary account and the independent account according to the method of allocating premiums. If the customer has not paid the interest of each policy year, the company will withdraw an amount equal to the interest amount from each account in the manner of issuing policy loans.
Policy fees charged by the company
(1) Federal and state sales taxes. Federal sales tax is charged at 1.2% of each premium, and state sales tax is charged up to 2.25% of each premium.
(2) Sales expenses. If the policy term is less than 10 years, the maximum charge is 9% of the premium; if the policy term exceeds 10 years, the maximum charge is 3%. Sales charges are waived for each year more than the “target premium” (determined by access age and policy face value).
(3) Administrative expenses. The maximum is 1.05% of each premium, and only 0.05% is charged for the part exceeding the “target premium”.
(4) Insurance premiums. The amount charged each month is the insurance amount minus the cash value at the beginning of the month, multiplied by the premium rate. The premium rate is determined by factors such as the insured’s age, gender, premium standard, etc., and the maximum premium rate shall not exceed the premium rate. The insurance premium is deducted from the ordinary account and the independent account according to the proportion of the cash value of the policy in each account.
(5) Death risk and expense risk fee. This is what the company charges to prevent mortality and expense ratios from exceeding predetermined levels. It is charged monthly based on a certain percentage of the cash value of the separate account, with a maximum of 0.9% per year.
(6) Underwriting expenses. When a customer requests an increase in the face value of the policy, a one-time fee of $3 is charged for every $1,000 increase.
(7) Fund switching fee. The company allows customers to switch portfolios up to 6 times per policy year for free, with a fee of $25 each for more than 6 times.
(8) Investment management fees and other direct expenses. All withholding is based on a certain percentage of the annual average assets managed in separate accounts or the net asset. In 1998, the former charging standard was 0.2%-0.75%, and the latter was 0.04%-1%.
Fund Assessment Date.
The company has been able to evaluate the assets daily. The fund evaluation date is each trading day of the New York Stock Exchange, and the company believes that the asset value of the investment portfolio has changed significantly and should be evaluated.
Buy an annuity income plan.
When the beneficiary receives the insurance benefits, he can change the total amount of the policy payment at one time to purchase a lifetime annuity income plan, and he can choose the fixed-term lifetime annuity with regular payment or single payment, and the single-payment fixed-payment lifetime annuity.
