In a universal life policy, what component covers the cost of insurance and provides a cash value accumulation?

In a universal life policy, the component that covers the cost of insurance and also provides a cash value accumulation is indeed the cost of insurance charge. This unique structure of universal life insurance allows policyholders to adjust their premiums and coverage amounts, providing both flexibility and a savings component.

The cost of insurance charge is critical as it determines how much premium is allocated toward the insurance protection itself. This charge is deducted from the premiums paid, leaving the balance to accumulate as cash value. As the policy grows, this cash value can serve as a resource for policyholders, offering the potential for loans or withdrawals.

In terms of utility, while the investment account is part of the broader structure of a universal life policy, it specifically refers to the portion of premiums invested, which could grow based on market performance. The base premium refers more to the minimum payment required to keep the policy in force but does not directly account for cash value accumulation. The cash value account is a result of the premiums paid after the cost of insurance has been deducted, rather than a component that directly covers insurance costs.

Thus, understanding the function of the cost of insurance charge clarifies its dual role in both covering insurance needs and facilitating the growth of cash value within the universal life policy framework.