In a universal life policy, premium payments are NOT used for which of the following?

• A. Mortality Charges
• B. Separate Account Investments
• C. Cost of Insurance
• D. Cash Value

Answer: (B)

In universal life, premium payments are used to cover the mortality and cost of insurance charges and to build up the policy’s cash value in the general account. The cash value grows based on a credited interest rate set by the insurer, not by market investments. Separate account investments, with investment risk borne by the policyholder, are a feature of variable life (and variable universal life), not standard universal life. So the premium isn’t allocated to separate account investments in a typical universal life policy. The other uses—mortality charges, cost of insurance, and the cash value—are inherent parts of how universal life operates.