Most current assumption and universal life policies use surrender charges rather than front-end loads to recover issuing expenses if the owner terminates the policy in the early years. Some of these policies provide a bailout provision that reduces or eliminates the surrender charge for early termination if the current rate credited to cash values falls below specified levels. This is an extremely attractive feature because it provides some assurance that the company is not using inflated current rates to encourage policy sales, only to lower the rates once they issue the policy.
Reproduced with permission. Copyright The National Underwriter Co. Division of ALM