Variable Unit-Linked Flashcards
A life insurance policy that offers both insurance protection with benefits (or fund value) directly related to the performance of the investment funds chosen by the client.
Variable Unit-Linked
The price which the insurer uses to allocate units to a policy when premiums are paid
Offer Price or Selling Price
The price which the insurer will give for the units if the policyholder wishes to cash in or claim under the policy
Bid Price or Buying Price
These are single premium injections which can be used to buy additional units
Top-ups
This refers to the cessation of premium payments on a variable life insurance contract for a period, with a view to continue it later on
Premium Holiday
This is a pricing structure wherein the buying and selling prices of units are determined at the next valuation date
Forward Pricing
This is the periodic distribution of premiums to insurance and units
Allocation of Premiums
This means that the contract may be returned within 15 days of receipt by the policyholder
15-day cooling-off period
How many days given in a Grace Period?
31 Days
A fee that covers the administrative expense
Policy Fee
This covers mortality cost (dependent on age)
Mortality Charges
This is a part of the premium being deposited for marketing & setting-up expenses of the policy
Unallocated Premiums
This is deducted when the policy is fully withdrawn
Full Withdrawal Charges
This is the difference between bid and offer prices
Bid-Offer Spread
It is imposed on each investment fund (0.5% - 2% per annum) and is used to cover investment expenses
Fund Management Fee
- Facility for transferring from one fund to another
- Limited number of switches are usually not charged
- Useful in retirement and education fees planning
Switching
Charges that are imposed when there are changes in the fund allocation in the policy
Fund Allocation Charge
- Premiums, cash values and death benefits are pre-determined.
- Policyholders do not have investment options
- Implicit charges
Examples: Whole Life, Endowment and Term
Traditional Policies
- Cash Values/Fund Values are not pre-determined
- Additional premiums may be allowed (on top of regular premiums)
- Policyholders may have investment options
- Explicit charges
Examples: Universal-Linked, Variable Life, and Variable Unit-Linked
Non-Traditional Policies
- Unbundled
- Flexible Premiums, Death Benefit
- Seen as savings account plus term insurance
- Interest credited to account value, usually subject to minimum interest rate
- Policy owner does not have a choice of the investment funds
Universal Life (UL)
- Fixed premium, minimum death benefit
- Cash value depends on investment performance
- Policy owner has a choice of investment funds
Variable Life
- Fixed premium, minimum death benefit
- Cash value depends on investment performance
- Policy owner has a choice of investment funds
Variable Life
Is a life insurance policy that offers both insurance protection with benefits (or fund value) directly related to the performance of the investment funds chosen by the client.
Variable Unit-Linked or VUL
VUL combines both the:
Premium & death flexibility of Universal Life (UL)
Investment Control of Variable Life (VL)
Advantages of VUL are:
Diversification Professional Management Flexibility Access Administration Changes are Transparent Investment Risk (Risk/Reward Trade-off) Gets the client involved
