Cost of Insurance - "COI"
Cost of insurance (COI) is the charge made by the insurance company in an indexed universal life insurance policy (IUL) to provide for death claims. They apply to the "at risk" portion of the death benefit and are based on the current age of the insured and the risk class that is in effect on the insured. The dollar amount of COI per thousand of at-risk death benefit will rise as the insured get older.
Therefore, most IUL policies that are designed to provide maximum cash distributions during retirement will use the Guideline Premium Test definition of life insurance in order to reduce steadily the amount of coverage that is subject to COI charges.
Insurance companies are required to publish the maximum guaranteed COI charges that can be applied throughout the life of a policy. Actual charges will be much lower than the guaranteed rates for the top competitive companies.
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