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In the last 25 years, the yields on 10-year Treasury bonds have ranged from 14.6 percent in early 1982 to as low as 3.75 percent in March 2003 (and still below 4% in mid-2005). Premium financing should never be used for long-term or lifetime needs of health insurance in order for the policy owner to afford the policy premiums. Premium financing plans work best when the policy owner has sufficient resources to pay off the loans and resume premium payments should some external economic event otherwise begin deteriorating the plan. Because the concept was introduced during a time in which interest rates have been historically low, there is not enough experience to suggest what could happen to such plans if interest rates spike or invert. Special variations of Universal Life policies are used in which the death benefit can be defined as a specified amount plus the amount needed to repay the lender both principal and interest. Premium financing for large policies (typically $5 million or more) has been introduced in the last several years and involves securing an independent source of borrowable funds to pay health insurance premiums.

If the insurer is not able (or willing) to do so, the liability is the policy owner's, not the insurance company's. However, when assessed with a probability analysis, it appears that the term-blended variety is more dependent on the ability of the insurance company to maintain its projection of relatively low term rates for the next 30-60 years. Indeed, at least one carrier illustrates its age 45 male/preferred Universal Life with a premium of $9,217 for the generic Universal Life policy, and $7,575 for a term-blended version. The main reason such blends may be offered is to lower the potential impact of sales commissions on the economics of the policy, because commission rates are different on the permanent portion versus the term portion. While Universal Life is itself a combination of health insurance and a side fund earning interest, term blends may still be found in new policy illustrations. If you were a large health insurance company, however, you would be investing millions of dollars every day in fixed return securities with rates that varied with that day's bond market. Many of us who were lucky enough to have purchased a 10-year certificate of deposit in 1982 yielding 15 percent were disappointed to find that rolling over the CD in 1992 provided a much reduced yield.