variable universal life FAQs
Frequently asked questions about variable universal life insurance
Is there a limit to how much premium can be put into a policy?
Yes, there is a limit to how much premium can be put into the account value in the first seven years for the policy to retain all its tax advantages. If premiums exceed 7-year IRS guidelines (which vary by age and gender of the insured and must be calculated by the insurance company) a Modified Endowment Contract (MEC) is created. While a MEC still offers a tax-free death benefit and tax-deferred growth potential, there are income tax implications if the policy owner borrows, withdraws from or surrenders the policy. The policy owner may also experience a 10% tax penalty on any gains distributed prior to age 59½.
Are there other tests to make sure my policy retains the tax advantages of a life insurance policy?
Yes, there are two alternative tests. The test selected can have a significant impact on premiums, cash surrender values and death benefits.
- The Cash Value Accumulation Test (CVAT) limits the account value relative to the death benefit
- The Guideline Premium Test (GPT) limits the premiums paid relative to the death benefit
Generally, the GPT offers lower cost of insurance charges over a long period of time. CVAT offers more premium and death benefit flexibility and provides a higher death benefit at life expectancy, although GPT offers higher death benefits at other ages.
Can the amount of coverage be changed after the policy is issued?
Yes, the policy owner can change the death benefit as needed. Death benefit increases may require new medical information.Decreases are permitted after the first policy year and the first 12 policy months following the effective date of an increase. The minimum base policy amount permitted after a decrease is $50,000.
Which death benefit option (A, B or C) is best for my client?
It depends. If there is a need for a level death benefit and the objective is to keep the premium required to maintain the policy as low as possible, then Option A may be the most suitable choice. If the objective is to have any favorable investment performance and account value increases reflected in an increased death benefit, then Option B may be the best choice. Option C is used most often in business insurance situations where there is a need for a death benefit equal to the initial amount plus cumulative net premium. See product details for more information.
Will this policy last a lifetime?
That’s how we designed it. However, insufficient premium, poor investment returns, higher policy costs, or excessive loans and withdrawals could cause the policy to lapse. We encourage you to use the automatic statements both you and your client will receive to monitor the policy's value.
How can I keep track of my client's policy values?
We can help. If you have proper authorization signed by your client, you and your client will automatically receive regular statements regarding the progress of the policy each time a premium payment is received or when a partial withdrawal, loan, investment portfolio transfer or other change occurs. Plus, you and your client will receive quarterly statements of current policy values, including a breakdown by investment option. Each year, you’ll receive a report detailing the past year's activity. You can also check on the current value of the investment options and review policy benefits by signing in to our secure platform via the link on the home page.
What happens when my client applies for a policy?
We’ll take it from there. When we receive the application, an Ameritas Life associate will contact our examination vendor. The vendor will contact the applicant to schedule a convenient time for a trained medical professional to come to the applicant's home or office to complete a medical questionnaire; gather weight, height, heart rate and blood pressure information; and collect a sample of blood and urine. We will keep you updated on the progress, alert you when an underwriting offer has been made and before we mail the policy.
What happens when the policy is issued?
When your client receives the policy, they have a ten-day "free look" period. During this time, any initial premium is allocated to the Money Market Portfolio. If the policy is returned within the "free look" period, your client will be refunded in full. If the policy is not returned after the “free look” period, the premium is allocated according to the instructions given on the application.