Why Is Term-UL Cheaper Than Term?

  • Originally published February 14, 2012 , last updated March 30, 2016

Why are hybrid term-UL policies consistently cheaper than their traditional term counterparts?

Basically, it has to do with the reserve requirements. Because Term UL policies are structurally similar to traditional universal life (secondary death benefit guarantees, shadow accounts), the carriers are able to file it as a universal life product. As a result, Term-UL falls under the AG 38 reserve regime, rather than the Regulation XXX reserve regime used for standard term. The result is less redundant reserves, which translates to lower prices for the consumer.

Though Term-UL is filed as a UL product, their low premiums and term like guarantees allow them to be sold as term and quoted alongside traditional term policies.