$7.$ Understanding universal life insurance Universal life insurance combines elements from term life insurance and whole life insurance. Term policies provide a death benefit savings component, whole life policies provide a death benefit savings component, and universal policies provide a death benefit savings component. To understand how universal premiums are allocated, consider the following example. Caroline is a $37-$year$-$old lawyer who has taken out a universal life insurance policy to protect her two children $($ages $8$ and $8)$ in the event of death. Each year, Caroline chooses how much would like to contribute to the policy, as shown by the first row of the table below. The insurance company subtracts from this an administrative fee along with the cost of the death benefit $($the portion of the policy$)$ then puts the remainder into the cash value $($or $)$ portion of the policy. This money earns interest at a rate of return. Based on the given information, calculate the amount that is added to the cash value portion of the policy in each of the first three years. Year $1$ Year $2$ Year $3$ Premium $($annual contribution$)$ $$2,587$ $$2,062$ $$1,645$ Administrative fee $$95$ $$95$ $$95$ Cost of death benefit $$130$ $$130$ $$130$ Amount added to cash value $ $ $ The cost of the death benefit portion of universal policies is only fixed for certain periods and rises with age, as is the case with life insurance policies. Suppose that in the $14$th year of her policy, her cost of death benefit has risen substantially. At the same time, she is helping to pay her mother$$s medical expenses after a major surgery and currently cannot afford to pay her life insurance premium. True or False: Under the terms of a standard universal policy, if Caroline stops paying her premiums, then her policy will be cancelled and the value of the cash portion will be paid out to her immediately. True False