ultimate cost
The total net cost, including the cost of all benefits and expenses, incurred by a pension plan over the life span of the plan.

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unallocated funding
A method of funding a pension plan in which the pension funds as a whole are held and managed by a funding agency, often an insurance company, and are not allocated to specific plan participants. When a participant retires, the funding agency either purchases an annuity for the retiree or pays periodic benefits directly from the fund. However, the funding agency makes no contractual promises that it will pay any specific benefit amounts. Contrast with allocated funding.

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unappropriated earned surplus
In Canada, the amount of an insurer's surplus remaining after determination of an insurer's reserves, capital, and other surplus amounts.

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unbundled insurance product
An insurance product in which the mortality, investment, and expense factors used to calculate premium rates and cash values are each identified in the policy. Some nontraditional products, such as universal life insurance, are unbundled. See also bundled insurance product.

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unclaimed benefits
Policy benefits for which no payee can be found. Under typical state statutes for unclaimed property, when an insurer cannot locate anyone entitled to policy benefits, the insurer will hold the unclaimed benefits for seven years and then turn them over to the state. Usually, the unclaimed property statute of the state of the beneficiary's last known address applies. If no address is known, the statute of the insurer's state of domicile will govern.

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unclaimed property statutes
Statutes that regulate the disposition of funds for which no owner can be found. Insurers typically hold unclaimed property for seven years. If the rightful owner is not found during this time, the property is turned over to the state. Also known as escheat laws. See also unclaimed benefits.

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underwriter
(1) The person who assesses and classifies the potential degree of risk that a proposed insured represents. (2) The person or organization that guarantees that money will be available to pay for losses that are insured against. In this sense, the insurance company is the underwriter.

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underwriting
(1) The process of assessing and classifying the potential degree of risk that a proposed insured represents. Also called selection of risks. (2) Providing guarantees that money will be available to pay for losses that are insured against.

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underwriting department
The department in a life and health insurance company that selects the risks that the company will insure. The underwriting department tries to make sure that the actual mortality or morbidity rates of the company's insureds do not exceed the rates assumed when premium rates were calculated. The underwriter considers an applicant's age, weight, physical condition, personal and family medical history, occupation, financial resources, and other selection factors to determine the degree of risk represented by the proposed insured. This department also participates in the negotiation and management of reinsurance agreements, through which an insurance company transfers some or all of an insurance risk to another insurance company. Also called the new business department.

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underwriting impairments
Factors that tend to increase an individual's risk above that which is normal for his or her age.

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underwriting manual
A summary of the methods used by a particular insurer to evaluate and rate risks. The underwriting manual provides underwriters with background information on underwriting impairments and serves as a guide to suggested underwriting actions when various impairments are present. See also risk class.

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underwriting requirements
Printed instructions that indicate what evidence of insurability is required for a given situation and which of several optional information sources will be needed to provide underwriters with necessary information. Sources of information may include medical records and the results of physical examinations. Underwriting requirements are graduated based on the proposed insured's age and the amount of coverage requested.

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Unemployment Insurance Act
In Canada, a federal statute that provides unemployment insurance to almost all persons who are employed in Canada. Benefits are provided to covered employees who are laid off or unable to work due to accidental injury, sickness, or pregnancy.

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Uniform Accident and Sickness Insurance Act
In Canada, model legislation governing health insurance contracts agreed upon by the Canadian Council of Insurance Regulators (CCIR) and enacted with minor variations by all the common law jurisdictions.

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Uniform Life Insurance Act
In Canada, model legislation governing life insurance contracts agreed upon by the Canadian Council of Insurance Regulators (CCIR) and enacted with minor variations by all of the common law jurisdictions.

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Uniform Pension Plan (UPP)
In Canada, a prototype pension plan (see prototype plan) developed by members of the Canadian Life and Health Insurance Association and approved by the appropriate Canadian regulatory authorities, including Revenue Canada.

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unilateral contract
A contract in which only one party promises to do something. A life insurance policy is a unilateral contract.

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uninsurable risk class
The group of people with a risk of loss so great that an insurance company will not offer them insurance.

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union welfare fund or union welfare trust
A fund organized by a union and one or more employers to which contributions are made by the employer(s) so that group benefits can be made available to the union's members.

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unit-benefit formula
A method of calculating benefits for a defined benefit pension plan based on years of service. The formula may take into account only years of service (for example, $50 per month for each year of service) or years of service and compensation.

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universal life insurance
An unbundled whole life insurance product in which the mortality, investment, and expense factors used to calculate premium rates and cash values are expressed separately in the policy. In a universal life insurance policy, any applicable expense charges are deducted from the premium and the remainder of the premium is then credited to the policy's cash value. Each month the insurer deducts the mortality costs from the cash value and credits the remainder of the cash value with interest.

The owner of a universal life policy can specify the premium amount he or she will pay, as long as this amount falls within the minimum and maximum specified by the company. If the renewal premium is insufficient to pay the policy's mortality and expense charges, the balance is taken from the policy's cash value. If the premium exceeds the maximum level specified by the company, then the policy's cash value may grow too large in proportion to the policy's death benefit and the policy will be considered an investment contract rather than an insurance contract. The difference in size that must be maintained between the cash value and the death benefit is called the corridor.

In a universal life policy, the policyowner is permitted to change the policy's death benefit after the policy has been issued, although this right is subject to restrictions. First, if a policyowner wishes to increase the policy's death benefit the insurer may require evidence of insurability. Second, any decrease in the policy's death benefit must not violate the corridor guidelines.

A universal life insurance policy describes the mortality rate assumptions that the company is using to calculate the mortality charges. In addition, a maximum mortality charge per thousand dollars of coverage at each age is listed, and the insurer guarantees not to exceed this charge.

Most universal life insurance policies guarantee a minimum interest rate of 4 percent or 4 1/2 percent on the money in the policy's cash value. If economic conditions warrant, the interest rate may be higher, but it can be no lower. Normally, insurers state that the interest rate paid on the cash value will reflect current interest rates in the economy.

The cash value of a universal life insurance policy may be used as collateral for a policy loan in much the same way that the cash value of a traditional whole life policy may be used. The money in a universal life policy's cash value may also be withdrawn, rather than used as collateral for a policy loan. The cash value is reduced by the amount withdrawn plus any applicable cash withdrawal fees, but the policy remains in force. In contrast, the owner of a traditional whole life insurance policy can withdraw the cash value only by cancelling the policy.

For other information about universal life insurance, see also back-loaded policy, corridor, front-loaded policy, group universal life insurance (GUL), option A plan, and option B plan. See also bundled insurance product and unbundled insurance product.

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usual and customary charge
The amount a health plan will recognize for payment for a particular medical procedure. It is typically based on what is considered "reasonable" for a specific procedure in your service area.

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unregistered reinsurer
In Canada, a reinsurer who is not licensed to accept reinsurance in a given jurisdiction. Contrast with registered reinsurer.

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