Impact of Policy Rating (Table Ratings) on Universal Life Policy Solvency

For individuals with pre-existing health conditions who receive a **Substandard Rating** (or Table Rating) on a Universal Life (UL) policy, the higher premium drastically increases the risk of policy lapse later in life, particularly in low-interest environments.

The Amplified Cost of Insurance (COI)

A Table Rating means the monthly Cost of Insurance (COI) deducted from the cash value is significantly higher than for a standard-rated individual. This is a critical factor for UL because:

• **Higher COI:** The cash value must overcome a much higher hurdle to remain solvent.
• **Faster Cash Value Drain:** If the credited interest rate is low, the cash value depletes much faster because the expenses (COI) are elevated.

This necessitates that policyholders with substandard ratings pay a much higher premium than the target premium to “overfund” the policy, thereby creating a large cash value buffer to absorb the magnified COI in their older years.

Disclaimer: This content is for informational purposes only and is not financial or legal advice. Policyholders with Table Ratings must monitor their UL performance projections with extreme vigilance.