How to Maximize Your Life Insurance Premium Payments by Minimizing Premium Expense Charges


Do you own any Universal Life, Variable Universal Life or Guaranteed Universal Life insurance policies? If you do, you may be able to increase the cash value in your policies simply by strategically timing your premium payments.

Every time you pay a premium, a certain percentage of the premium goes towards premium expense charges and the balance goes towards the cost of insurance and cash value. Premium expense charges include fees, commissions, and the life insurance company’s overhead. To the extent you can minimize premium expense charges, a greater portion of the premium will go towards the cost of insurance and cash value. As a result, your cash value should increase.

It is common for the percentage of each premium that goes towards premium expense charges to change from year to year. It is also common for premium payments in excess of your target premium to have a lower premium expense percentage than the target premium. If you ask your life insurance agent for a chart of your insurer’s premium expense charge brackets, you can use this information to your advantage. For example, you can consider doubling up premiums in years when the premium expense charge rates are low, and skipping premiums in years when premium expense charge rates are high. This can often be accomplished by simply paying a premium a day earlier or later than you would otherwise. Following are some examples...

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