What is a critical factor in determining premiums for a VUL policy?

A critical factor in determining premiums for a Variable Universal Life (VUL) policy is the policyholder's health status and age. This is because these factors significantly influence the risk assessment that insurers perform when underwriting life insurance policies.

Insurers evaluate the health status and age of applicants to ascertain the likelihood of premature death, which directly affects the mortality risk associated with the policy. Individuals who are younger and in good health may be viewed as lower risk, leading to lower initial premiums. Conversely, older policyholders or those with health issues may be considered higher risk, hence their premiums are typically higher.

While the investment choices the policyholder makes, the performance of the investment sub-accounts, and the cash value accumulated do play roles in the overall functioning of a VUL policy, they primarily impact the policy's growth and potential benefits rather than the underwriting process that determines the premium itself. Therefore, health status and age are fundamental components in establishing the premium rate for a VUL policy.