Florida 2-14 Life And Annuity Practice Test

In a universal life policy, the amount added to (or subtracted from) the cash value in a period comes from the interest credited to the cash value, limited by a minimum guaranteed rate, minus the policy charges. The insurer credits interest to the cash value based on current interest rates and the policy’s credited rate (with a floor), and then deducts policy charges such as cost of insurance and admin fees. So the net change to cash value is the credited interest amount minus those charges. If the credited rate exceeds the charges, the cash value grows; if charges overwhelm the credited interest, the cash value can stay the same or decline. The face amount inflation factor, the insured’s age as the sole determinant, or the insurer’s profit margin do not directly set the credited cash value.