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LEARN THE CONCEPTS & FEATURES

There are numerous concerns on how VUL charges are applied to the policy. Most people I
encounter tend to be reactive when we start discussing the concept behind VUL charges.
Before we begin though, I personally prefer to dub these charges as fees instead. For me, it
sounds more acceptable as a rational cost behind every product set-up.

The Insurer collects fees with the intent to fund administrative costs, sales transaction, future
claims, taxes, and essentially make profit. These are being determined using tables
computed by Actuaries based on mathematics and actuarial science.

Premium

Guaranteed Policys
Face Amount Fund Value

RISK-SHARING
BUSINESS

Premium
Charge

Periodic Charge, COI,


Fund Mgt Charge
Both Traditional life insurance and
VUL products have a variety of fees.

Traditional life insurance fees are VUL products on the other hand,
bundled and billed all together. In put greater responsibility on the
essence, its embedded and implicit client. The client assumes all the
in the products premium. investment risk, potential market
growth as well as selects and
The client does not have a choice of monitors his own underlying
the investment funds. Its the Insurer investment options, instead of the
who invests and guarantees the Insurer doing the decision for him.
products cash value and face
amount. The Insurer looks for safe The fees in VUL are transparent,
instruments and usually requires clear or explicit. The control and
more money (or higher premium) to allocation of every premium the
generate the guarantees. client pays should also be detailed
or well-defined to him unlike
traditional life insurance.
Sun MaxiLink Prime/Male/30/NS/1M FA/ADB/TDB
SAMPLE PROPOSAL: Sun MaxiLink Prime
Male/30/NS
FA: 1,000,000/ADB: 1,000,000/TDB: 1,000,000

Illustration of Premium
Policy Premium Charge CANCELLATION OF UNITS
Year 1
F.M.C2
(Initial Charge) Monthly Periodic Charge Insurance Charge
Basic Plan
1st 65% of the Basic Premium n/a based on Net Amount Fund Mgt Charge is
2nd 5% 40% of the Basic Premium/12 at Risk (NAR) at attained imposed on each
3rd 5% 20% age up to age investment fund. It
4th 5% 5% 88 accrues daily and is
5th 5% 5% deducted monthly in
the calculation of
net asset value on
each investment
fund.

Excess Premium*
5%
*Excess Premium starts on the 11th year onwards.

Note:
No Premium Charge & Monthly Periodic Charge on Rider Premium and Extra Premium.
No Monthly Periodic Charge on Excess Premium.
Lets take the 10-year paying period of Sun MaxiLink Prime and learn the
charges and see also what happens on the 11th year onwards.
1. Compute for the Premium Charge
Basic Premium ADB Premium TDB Premium
Step 1: 1,800/price per unit 1,230/price per unit
54,000 x 65% = 35,100
Step 2: No premium charge No premium charge
54,000 35,100 = 18,900
Step 3:
18,900/price per unit

2. Compute for the cost of insurance (COI)


Basic Coverage ADB Coverage TDB Coverage
Step 1: Step 1: Step 1:
1.85300*(2M/1000) = 3,706 1,800/12 mths = 150 1,230/12 mths = 102.5
Step 2: Step 2: Step 2:
3,706/12 months = 308.8 150/price per unit 102.5/price per unit
Step 3:
1st Year 308.8/price per unit

Summary:
*Tabular Insurance Rate (increasing every year) 35,100 + 3,706 + 1,800 + 1,230 = 41,836
1. Compute for the Premium Charge
Basic Premium ADB Premium TDB Premium
Step 1: 1,800/price per unit 1,230/price per unit
54,000 x 5% = 2,700
Step 2: No premium charge No premium charge
54,000 2,700 = 51,300
Step 3:
51,300/price per unit

2. Compute for the cost of insurance (COI)


Basic Coverage ADB Coverage TDB Coverage
Step 1: Step 1: Step 1:
1.85620*(2M/1000) = 3,712 1,800/12 mths = 150 1,230/12 mths = 102.5
Step 2: Step 2: Step 2:
3,712/12 months = 309.3 150/price per unit 102.5/price per unit
Step 3:
2nd Year 309.3/price per unit

*Tabular Insurance Rate (increasing every year)


3. Compute for the Monthly Periodic Charge (starts on the 2 nd year)
Basic Premium ADB Premium TDB Premium
Step 1:
54,000 x 40% = 21,600
Step 2: Not applicable Not applicable
21,600/12 months = 1,800
Step 3:
1,800/price per unit

2nd Year
continuation Summary:
2,700 + 3,712 + 1,800 + 1,230 + 21,600 = 31,042
1. Compute for the Premium Charge
Basic Premium ADB Premium TDB Premium
Step 1: 1,800/price per unit 1,230/price per unit
54,000 x 5% = 2,700
Step 2: No premium charge No premium charge
54,000 2,700 = 51,300
Step 3:
51,300/price per unit

2. Compute for the cost of insurance (COI)


Basic Coverage ADB Coverage TDB Coverage
Step 1: Step 1: Step 1:
1.8594*(2M/1000) = 3,719 1,800/12 mths = 150 1,230/12 mths = 102.5
Step 2: Step 2: Step 2:
3,719/12 months = 309.9 150/price per unit 102.5/price per unit
Step 3:
3rd Year 309.9/price per unit

*Tabular Insurance Rate (increasing every year)


3. Compute for the Monthly Periodic Charge
Basic Premium ADB Premium TDB Premium
Step 1:
54,000 x 20% = 10,800
Step 2: Not applicable Not applicable
10,800/12 months = 900
Step 3:
900/price per unit

3rd Year
continuation Summary:
2,700 + 3,719 + 1,800 + 1,230 + 10,800 = 20,249
1. Compute for the Premium Charge
Basic Premium ADB Premium TDB Premium
Step 1: 1,800/price per unit 1,230/price per unit
54,000 x 5% = 2,700
Step 2: No premium charge No premium charge
54,000 2,700 = 51,300
Step 3:
51,300/price per unit

2. Compute for the cost of insurance (COI)


Basic Coverage ADB Coverage TDB Coverage
Step 1: Step 1: Step 1:
1.8626*(2M/1000) = 3,725 1,800/12 mths = 150 1,230/12 mths = 102.5
Step 2: Step 2: Step 2:
3,725/12 months = 310.43 150/price per unit 102.5/price per unit
Step 3:
4th Year 310.43/price per unit

*Tabular Insurance Rate (increasing every year)


3. Compute for the Monthly Periodic Charge
Basic Premium ADB Premium TDB Premium
Step 1:
54,000 x 5% = 2,700
Step 2: Not applicable Not applicable
2,700/12 months = 225
Step 3:
225/price per unit

4th Year
continuation Summary:
2,700 + 3,725 + 1,800 + 1,230 + 2,700 = 12,155
1. Compute for the Premium Charge
Basic Premium ADB Premium TDB Premium
Step 1: 1,800/price per unit 1,230/price per unit
54,000 x 5% = 2,700
Step 2: No premium charge No premium charge
54,000 2,700 = 51,300
Step 3:
51,300/price per unit

2. Compute for the cost of insurance (COI)


Basic Coverage ADB Coverage TDB Coverage
Step 1: Step 1: Step 1:
1.8658*(2M/1000) = 3,732 1,800/12 mths = 150 1,230/12 mths = 102.5
Step 2: Step 2: Step 2:
3,732/12 months = 310.96 150/price per unit 102.5/price per unit
Step 3:
5th Year 310.96/price per unit

*Tabular Insurance Rate (increasing every year)


3. Compute for the Monthly Periodic Charge
Basic Premium ADB Premium TDB Premium
Step 1:
54,000 x 5% = 2,700
Step 2: Not applicable Not applicable
2,700/12 months = 225
Step 3:
225/price per unit

5th Year
continuation Summary:
2,700 + 3,732 + 1,800 + 1,230 + 2,700 = 12,162
1. Compute for the Premium Charge
Basic Premium ADB Premium TDB Premium
54,000/price per unit 1,800/price per unit 1,230/price per unit

No more premium charge No premium charge No premium charge

2. Compute for the cost of insurance (COI)


Basic Coverage ADB Coverage TDB Coverage
Step 1: Step 1: Step 1:
1.8690*(2M/1000) = 3,738 1,800/12 mths = 150 1,230/12 mths = 102.5
Step 2: Step 2: Step 2:
3,738/12 months = 311.5 150/price per unit 102.5/price per unit
Step 3:
6th Year 311.5/price per unit

Summary:
*Tabular Insurance Rate (increasing every year) 3,738 + 1,800 + 1,230 = 6,768
1. Compute for the Premium Charge
Basic Premium ADB Premium TDB Premium
54,000/price per unit 1,800/price per unit 1,230/price per unit

No more premium charge No premium charge No premium charge

2. Compute for the cost of insurance (COI)


Basic Coverage ADB Coverage TDB Coverage
Step 1: Step 1: Step 1:
1.8722*(2M/1000) = 3,744 1,800/12 mths = 150 1,230/12 mths = 102.5
Step 2: Step 2: Step 2:
3,744/12 months = 312 150/price per unit 102.5/price per unit
Step 3:
7th Year 312/price per unit

Summary:
*Tabular Insurance Rate (increasing every year) 3,744 + 1,800 + 1,230 = 6,774
1. Compute for the Premium Charge
Basic Premium ADB Premium TDB Premium
54,000/price per unit 1,800/price per unit 1,230/price per unit

No more premium charge No premium charge No premium charge

2. Compute for the cost of insurance (COI)


Basic Coverage ADB Coverage TDB Coverage
Step 1: Step 1: Step 1:
1.8754*(2M/1000) = 3,751 1,800/12 mths = 150 1,230/12 mths = 102.5
Step 2: Step 2: Step 2:
3,751/12 months = 312.58 150/price per unit 102.5/price per unit
Step 3:
8th Year 312.58/price per unit

Summary:
*Tabular Insurance Rate (increasing every year) 3,751 + 1,800 + 1,230 = 6,781
1. Compute for the Premium Charge
Basic Premium ADB Premium TDB Premium
54,000/price per unit 1,800/price per unit 1,230/price per unit

No more premium charge No premium charge No premium charge

2. Compute for the cost of insurance (COI)


Basic Coverage ADB Coverage TDB Coverage
Step 1: Step 1: Step 1:
1.8786*(2M/1000) = 3,757 1,800/12 mths = 150 1,230/12 mths = 102.5
Step 2: Step 2: Step 2:
3,757/12 months = 313 150/price per unit 102.5/price per unit
Step 3:
9th Year 313/price per unit

Summary:
*Tabular Insurance Rate (increasing every year) 3,757 + 1,800 + 1,230 = 6,787
1. Compute for the Premium Charge
Basic Premium ADB Premium TDB Premium
54,000/price per unit 1,800/price per unit 1,230/price per unit

No more premium charge No premium charge No premium charge

2. Compute for the cost of insurance (COI)


Basic Coverage ADB Coverage TDB Coverage
Step 1: Step 1: Step 1:
1.8818*(2M/1000) = 3,764 1,800/12 mths = 150 1,230/12 mths = 102.5
Step 2: Step 2: Step 2:
3,764/12 months = 313.66 150/price per unit 102.5/price per unit
Step 3:
10th Year 313.66/price per unit

Summary:
*Tabular Insurance Rate (increasing every year) 3,764 + 1,800 + 1,230 = 6,794
1. Compute for the Premium Charge
Basic Premium ADB Premium TDB Premium
54,000/price per unit 1,800/price per unit 1,230/price per unit

No more premium charge No premium charge No premium charge

2. Compute for the cost of insurance (COI)


Basic Coverage ADB Coverage TDB Coverage
Step 1:
1.8850*(2M/1000) = 3,770 No more rider charge No more rider charge
Step 2:
3,770/12 months = 314.16
Step 3:
11th Year 314.16/price per unit
ONWARDS Summary:
*Tabular Insurance Rate (increasing every year) 3,770 = 3,770
o Despite probable risks, fees and volatility in value, if the market is good, VUL
can potentially give higher returns, especially on a long term basis.

o Before buying a life insurance policy, be sure you understand the policy fees.

o Insurance companies deduct some industry standard fees from your premium
and cash/fund value. Keep in mind that these fees vary by product.

o No Premium Charge for Riders and Excess Premiums (it goes to FV directly)

o No Monthly Periodic Charge for Riders and Excess Premiums (INCLUDING


Single Pay VUL).
ADDITIONAL NOTES
VUL Products and Charges
Policy Premium Charge CANCELLATION OF UNITS
Year 1
F.M.C2
(Initial Charge) Monthly Periodic Charge Insurance Charge
Basic Plan
1st 85% of the Basic Premium n/a based on Net Amount Fund Mgt Charge is
2nd 5% 50% at Risk (NAR) at attained imposed on each
3rd 5% 25% age up to age investment fund. It
4th 5% 5% 88 accrues daily and is
5th 5% 5% deducted monthly in
6th 5% the calculation of
7th 5% net asset value on
8th 5% each investment
9th 5% fund.
10th 5%
Excess Premium
5%

Note:
No Premium Charge & Monthly Periodic Charge on Rider Premium and Extra Premium.
No Monthly Periodic Charge on Excess Premium.
Policy Premium Charge CANCELLATION OF UNITS
Year 1
F.M.C2
(Initial Charge) Monthly Periodic Charge Insurance Charge
Basic Plan
1st 30% of the Basic Premium n/a based on Net Amount Fund Mgt Charge is
2nd 5% 15% of the Basic Premium/12 at Risk (NAR) at attained imposed on each
3rd 5% 5% age up to age investment fund. It
5% 88 accrues daily and is
5% deducted monthly in
the calculation of
net asset value on
each investment
fund.

Excess Premium*
5%
*Excess Premium starts on the 6th year onwards.

Note:
No Premium Charge & Monthly Periodic Charge on Rider Premium and Extra Premium.
No Monthly Periodic Charge on Excess Premium.
Policy Premium Charge CANCELLATION OF UNITS
Year 1
F.M.C2
(Initial Charge) Monthly Periodic Charge Insurance Charge
Basic Plan
1st 65% of the Basic Premium n/a based on Net Amount Fund Mgt Charge is
2nd 5% 40% of the Basic Premium/12 at Risk (NAR) at attained imposed on each
3rd 5% 20% age up to age investment fund. It
4th 5% 5% 88 accrues daily and is
5th 5% 5% deducted monthly in
the calculation of
net asset value on
each investment
fund.

Excess Premium*
5%
*Excess Premium starts on the 11th year onwards.

Note:
No Premium Charge & Monthly Periodic Charge on Rider Premium and Extra Premium.
No Monthly Periodic Charge on Excess Premium.
Policy Premium Charge CANCELLATION OF UNITS
Year 1
F.M.C2
(Initial Charge) Monthly Periodic Charge Insurance Charge
Single Pay Plan
1st 5% of the Single Premium n/a based on Net Amount Fund Mgt Charge is
at Risk (NAR) at attained imposed on each
age up to age investment fund. It
88 accrues daily and is
deducted monthly in
the calculation of
net asset value on
each investment
fund.

Excess Premium
5%

Note: No Monthly Periodic Charge on Single Premium, Excess Premium Rider Premium and Extra Premium
Policy Premium Charge CANCELLATION OF UNITS
Year 1
F.M.C2
(Initial Charge) Monthly Periodic Charge Insurance Charge

n/a n/a based on Net Amount Fund Mgt Charge is


at Risk (NAR) at attained imposed on each
age up to age investment fund. It
88 accrues daily and is
deducted monthly in
the calculation of
net asset value on
each investment
fund.

Back-end charges for the first five years