In universal life insurance, mortality charges are based on what?

In universal life insurance, mortality charges are based on what?

• A. Current cost of insurance.
• B. Fixed rate set at issue and never changes.
• C. Annual term basis.
• D. The owner's investment choices.

Answer: (C)

Mortality charges reflect the insurer’s cost to provide the death benefit for that policy year. This cost is determined using annual term rates that correspond to the insured’s current age and underwriting class, and it’s recalculated each year. Because age and risk change over time, the annual cost can rise, which reduces the cash value as it’s deducted to cover death benefit protection. The owner’s investment choices affect how much cash value grows or earns interest, but they don’t set the mortality cost. Mortality charges aren’t a fixed rate established at issue; they’re an annual, age-related cost that varies year to year.

Mortality charges reflect the insurer’s cost to provide the death benefit for that policy year. This cost is determined using annual term rates that correspond to the insured’s current age and underwriting class, and it’s recalculated each year. Because age and risk change over time, the annual cost can rise, which reduces the cash value as it’s deducted to cover death benefit protection. The owner’s investment choices affect how much cash value grows or earns interest, but they don’t set the mortality cost. Mortality charges aren’t a fixed rate established at issue; they’re an annual, age-related cost that varies year to year.