What is typically included in the premium of a VUL policy?

In a Variable Universal Life (VUL) policy, the premium typically consists of various components, primarily including the cost of insurance and administrative fees. The cost of insurance is essential as it covers the mortality risk associated with the policyholder, ensuring that the insurance company can provide the death benefit. Additionally, administrative fees cover the ongoing expenses related to policy maintenance, such as record-keeping and processing transactions.

This combination of costs allows policyholders to have both life insurance coverage and the ability to build cash value through investments within the policy. The cash value is dependent on the performance of the selected investment options, but it is not a direct component of the premium itself; rather, it accumulates over time as premiums are paid and invested.

In contrast, the other options do not provide a complete picture of what constitutes the premium. Focusing solely on the cost of insurance neglects the additional expenses incurred for effective policy management, while listing only the cash value fails to address the necessary costs for maintaining coverage. Similarly, mentioning only government fees and taxes overlooks the integral costs that are included in the premium structure of a VUL policy.