Industrial Alliance offers four Cost of Insurance options with their Universal Life plans.
1. Level Cost of Insurance: Level cost of insurance is fixed and guaranteed for life. Its cost is determined by the insured’s age at the time of issue. The policy’s accumulation fund will basically amount to zero if the insured pays only the minimum premium. Level cost of insurance plans have gone up significantly in cost in recent years. Many companies have increased their cost by as much as 40% and some companies have discontinued their Universal Level cost plans altogether. Most insurance companies do require a surrender charge on their Universal Life plans — even with a level cost of insurance plan.
2. Yearly Renewable Term (YRT) Cost of Insurance Options: This plan is guaranteed and based on the insured’s age at each anniversary of the coverage. The costs of insurance for this type of plan are lower than the level cost of insurance option, but they increase each year until the insured reaches age 65. Then the cost remains level. The policy holder accumulates value in the accumulation fund, starting in the first years, even if he or she pays just the minimum premium. The surrender charges apply for seven years under this cost of insurance option. Most Universal Life Policies with a YRT cost of insurance option have surrender charges on accumulation for the first ten policy years.
LSM Tip: Be careful when paying the minimum premium on YRT Cost of Insurance plans. Since the cost of insurance escalates in later years the coverage may lapse if the minimum premium is paid.
3. Level Investor Cost of Insurance: This option is similar to traditional level cost of insurance, but it differs in that there is a lower initial cost and higher maximum premium levels. The downside to this plan is there is a surrender charge effective in the first seven policy years rather than no surrender charges from day one.
4. Level Cost of Insurance with Quick Pay Options (10-Pay, 15-Pay, or 20-Pay): A quick pay option allows the insured to have her or his cost of insurance charges stopped after 10, 15, or 20 years. The cost of this option and paid-up costs are 100 per cent guaranteed. Quick pay options can be very popular when insuring children because it allows them to have a paid-up policy from a very young age.
For more details on Universal Life policies in Canada, please contact us at 1866-899-4849 or visit our Universal Life Quote Page.
