A Comparison of Term Insurance Rates to Protection-Related Charges in Universal Life Insurance

Universal life insurance is designed to be a "transparent" product. Policyholders make deposits into a fund, from which mortality and expense charges are deducted, with the balance accumulating at interest. Policyholders have the alternative of buying individual term insurance and investin...

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Bibliographic Details
Published in:The Journal of risk and insurance 1992-09, Vol.59 (3), p.470-475
Main Authors: Corbett, Richard B., Nelson, Jack M.
Format: Article
Language:English
Subjects:
Casualty insurance
Comparative studies
Death
Evaluation
Insurance expenses
Insurance policies
Insurance premiums
Insurance providers
Insurance rates
Life insurance
Life insurance companies
Mortality
Policyholders
Pricing policies
Protection
Shorter Articles
Term insurance
Term life insurance
Universal life
Universal life insurance
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Summary:Universal life insurance is designed to be a "transparent" product. Policyholders make deposits into a fund, from which mortality and expense charges are deducted, with the balance accumulating at interest. Policyholders have the alternative of buying individual term insurance and investing through other media. This article shows that the mortality and expense charges in a sample of universal life policies are generally higher than the annual renewable term premiums charged by the same companies. This suggests that transparency may not be complete or that some other feature of universal life justifies the higher costs.
ISSN:0022-4367
1539-6975
DOI:10.2307/253058