What specific element must be disclosed in a universal life policy?

In a universal life policy, it is essential to disclose the policy's surrender charges. This is important because surrender charges can significantly impact the cash value and overall return on the policy if the policyholder decides to withdraw funds or terminate the policy early. These charges are fees imposed by the insurance company, particularly during the initial years of the policy, which can reduce the amount that a policyholder will receive if they surrender their policy.

By providing this information, insurers ensure that consumers are fully aware of the financial implications associated with early withdrawal or cancellation. This transparency is crucial for policyholders to make informed decisions and to understand the long-term cost associated with their insurance contracts. Consumer awareness of surrender charges helps mitigate potential dissatisfaction or financial loss should the policyholder need to access their funds or exit the policy.

While elements like the premium structure, loan provisions, and death benefit terms are important in their own right, the mandatory disclosure of surrender charges serves to protect consumers from unexpected financial burdens, ensuring they have all necessary information before committing to the policy.