Cost of Insurance
Also called COI, COI charge, mortality charge, cost of insurance charge
The monthly charge a carrier pulls out of your policy's cash value to pay for the actual death-benefit protection — and it climbs every year as you age.
The cost of insurance is the monthly charge an insurer deducts from inside a permanent policy’s cash value to pay for the pure death-benefit protection. It’s quoted as a rate per $1,000 of net amount at risk — roughly, the death benefit minus the cash value the insurer is already holding.
Two things about COI catch people off guard.
First, it rises every year. As you age, the odds you die this year go up, so the per-$1,000 charge goes up with them. Early on, when you’re young and the cash value is small, it’s cheap. Decades later it can become the dominant cost inside the policy.
Second, most contracts carry two COI scales: a current scale (what the carrier charges today) and a guaranteed maximum scale (the contractual ceiling). Sales illustrations run on the friendly current scale. But the carrier reserves the right to raise the current scale toward the guaranteed maximum — and on older universal life blocks, several have done exactly that, hitting policyholders with steep, unexpected increases.
That’s why COI is the number that quietly decides whether a permanent policy survives to pay a claim. When someone shows you a policy that “pays for itself,” ask what the cost of insurance does at ages 75, 85, and 95 — on the guaranteed scale.
COI is the meter that never stops running inside a permanent policy. Because it rises with age, a policy that looks self-sustaining at 55 can quietly drain itself at 78 — and carriers are allowed to raise the current COI scale on policies you already own.
A universal life policy is illustrated to 'carry itself' on the cash value alone by retirement. But the cost of insurance keeps rising, and in a few flat-interest years the charges outrun the interest credited. The cash value erodes, and the owner gets a letter demanding thousands more per year — or the policy lapses.
The spread between the current COI scale and the guaranteed maximum scale in the policy. That gap is a future premium increase the carrier can trigger at will — and several have, on entire blocks of older policies.