What is the purpose of establishing the target premium for a universal life policy?

Establishing the target premium for a universal life policy is important because it ensures that the policy will remain in force for the desired duration and provide the desired level of coverage. The target premium is the premium amount that is calculated to cover the cost of insurance charges and investment components of the policy, as well as any other charges or fees associated with the policy.

By determining the target premium, policyholders can ensure that their policy remains in force and continues to provide coverage for their beneficiaries. The target premium also helps to provide transparency for policyholders, as they can see exactly how much they need to pay in order to maintain their coverage.

Additionally, establishing the target premium allows policyholders to make informed decisions about their policy, such as adjusting the premium amount or coverage levels to better suit their needs and financial goals. Overall, the purpose of establishing the target premium for a universal life policy is to provide a clear understanding of the costs associated with the policy and ensure that it remains in force for the desired duration.