Understanding universal life cost of insurance
Universal life combines insurance coverage with a policy account structure. The insurance cost and investment assumptions matter over time.
What is cost of insurance?
Cost of insurance (COI) is the cost charged for the insurance risk according to the contract. Product designs can use different charge structures, underwriting classes, coverage amounts and administrative expenses. Charges may be level or change with age depending on the policy.
Why an investment return assumption is not enough
Account value projections depend on premium timing, policy credits, investment options, fees, insurance costs and tax/contract rules. A fixed-rate spreadsheet is useful to understand sensitivity but cannot reproduce every real policy.
What does “lapse” mean?
Insufficient policy value could require additional premiums or lead to a loss of coverage under actual contract terms, but the precise test varies. An educational model cannot certify a future lapse or the absence of one.
Explore a simplified model
Our universal life scenario lab makes its formula and assumptions visible. For an actionable outcome, request a current insurer in-force illustration and qualified advice.
Independent educational software prototype. Not affiliated with an insurer or regulator. No individual advice, official quotes, coverage, underwriting or transactions are provided. Information reviewed for prototype on 11 Nov 2026.