Current Assumption UL Policies and Life Settlements: Made For Each Other

The optimized premium on a current assumption universal life policy, however, is typically a fraction of the illustrated premium. For most such policies, the charges for mortality and expenses are deducted from the account value, and so long as there is a sufficient account balance to pay the charges in any given month, the policy stays in force. By using actuarially designed software, it is possible to determine a schedule of future monthly cost of insurance (COI) and expense charges. This optimized premium stream may only amount to $10,000 to $15,000, rather than $50,000, in the first year, and can be paid monthly if the fund manager so desires. Although the COIs will rise over time and will ultimately exceed $50,000 per year, the present value of future premiums is lower than the other two policy types, making the current assumption policy more valuable as a life settlement.

If there's a possibility the policy could be sold as a life settlement, make sure to realize this difference of value at the time of issue or prior to a term conversion.