<strong>Concept </strong><p>Prior to Secondary Guarantee, it was often impossible, or at best very expensive to produce a premium in UL contact that would provide a lifetime guarantee. This concept stipulates how this might be accomplished without forcing high premiums and cash values. The guaranteed premium is usually accomplished based upon one of the two calculation methods.</p><p><strong>Stipulated Premium Method</strong></p><p>Early versions of UL contracts with Secondary Guarantees stipulate a premium that, if paid on a cumulative basis, would guarantee the death benefit to certain age. If the contacts provided a Secondary guarantee of certain period, then there would be a stipulated premium required for each time period.&nbsp;</p><p>The stipulated premium method is the simplest Secondary Guarantee method to understand, but it does not necessarily produce the lowest guaranteed premium. However a stipulated premium method that provided “Catch-up” at any time with no interest can be very appealing to those wanting to invest their own money while minimizing their outlay to the insurance company for lifetime guarantee</p><p><strong>Shadow Account Method</strong></p><p>The shadow account method of providing secondary guarantees is more prevalent. There is no specified premium stated in these contracts. Instead the contract maintains a shadow cash value account based on credited interest that is higher than guaranteed minimum interest and COI rates that are lower than guaranteed maximum COI’s. As long as this shadow account remains positive, the secondary death benefit guarantee remains in force.</p><p>Shadow account value is not available to the policy owner for any purpose other than to maintain the death benefit.</p>