See how a universal life policy's mortality deductions are priced (rising yearly-term cost vs a level charge) and where the two lines cross.
Net amount at risk (NAAR) = death benefit − account value. The insurer only prices the amount at risk.
Adjustable policies let the insurer raise the YRT schedule; most cap the increase (e.g. 25%, 50%, 100%).
How this works. A universal life policy charges a monthly/annual
cost of insurance on its net amount at risk (NAAR): the death benefit
minus the account value the policy has built up. YRT (yearly renewable term) prices each
year at that year's true risk of death, so it starts cheap and climbs steeply with age.
LCOI (level cost of insurance) charges one flat rate for life. YRT wins in the early years;
the curves cross once age catches up, after which YRT deductions can quickly erode the account value.
Educational illustration of standard Canadian insurance concepts. Figures are illustrative, not an insurer’s rates.
Illustration only, not a quote or advice. Figures are simplified for education and do not
reflect any specific insurer's rates. Consult a licensed advisor.