When making a partial withdrawal from a universal life policy, what may apply in the early years?

When making a partial withdrawal from a universal life policy, what may apply in the early years?

• A. A surrender charge may apply.
• B. There is never any charge.
• C. It increases the death benefit automatically.
• D. It triggers policy lapse.

Answer: (A)

With universal life, withdrawals from the cash value can trigger a surrender charge in the early years. Those charges are built into the policy to recover the costs of issuing and funding the contract, and they typically apply when you take money out or surrender the policy during the surrender-charge period. So a partial withdrawal in the early years may not be fully available as cash because part of it goes to the surrender charge, and the withdrawal can also reduce the death benefit by the amount withdrawn (net of the charge), depending on the policy terms. As the policy ages and the surrender-charge period ends, the charge usually declines to zero, making withdrawals cheaper.

With universal life, withdrawals from the cash value can trigger a surrender charge in the early years. Those charges are built into the policy to recover the costs of issuing and funding the contract, and they typically apply when you take money out or surrender the policy during the surrender-charge period. So a partial withdrawal in the early years may not be fully available as cash because part of it goes to the surrender charge, and the withdrawal can also reduce the death benefit by the amount withdrawn (net of the charge), depending on the policy terms. As the policy ages and the surrender-charge period ends, the charge usually declines to zero, making withdrawals cheaper.