Universal Life Insurance Report

There are two excerpts in this report taken from the latest Full Disclosure edition featuring 83 UL insurance policies for sale on Jan. 1, 2005. The large chart (see pages 28-31) includes illustrated values on a current basis and is accompanied by a smaller one featuring select minimum premiums needed to guarantee the premium and death benefit to age 100 or for life.

Current illustrations are based on a male age 40 with a best nonsmoker class (representing at least 15% of the contracts issued) paying a $7,500 annual premium and a $1,000,000 policy. If our specified premium of $7,500 is too low to illustrate the policy for this age and face amount, the policies are blended with term insurance, if available. The death benefit type is level; however, a column is included with a true increasing death benefit for each policy to provide an indication of which are designed to generate maximum death benefits.

The guaranteed minimum premium excerpt is for long-term (age 100 or lifetime) guaranteed premium and death benefit. Whether by rider, a minimum premium level or automatically, mechanisms to include the guarantee may differ. Other guarantee variations include duration, pre-payment discounts and other nuances that help differentiate products in a crowded market and serve individual customer needs (in addition to making the jobs of product wholesalers a little more exciting). If a policy is not also featured in the minimum guaranteed premium chart, it does not offer a long-term secondary guarantee but may offer shorter guarantee durations as specified in the main chart featuring illustrated values.

Internal rates of return (IRRs) figures included in the main chart indicate which products are designed to be more efficient in producing cash values, death benefits or providing an all-around solution. The IRR can be applied to cash values as well as death benefits, and we have chosen to measure both at a policy duration of 30 years. Those seeking to analyze the relationship between cash values and death benefits will find the IRR measurement a useful tool. Information is included to show what the death benefits would be illustrated under an increasing death benefit option. Its easy to see, using the provided IRRs, which policies are built to generate death benefits, which is why it would be unfair to compare them under a level death benefit only. These values are meant to be a snapshot of how individual UL plans are being illustrated on the street as a way to gauge their relative positions for our sample policyholder.

The real product differentiation is at the policy level in the features, limitations, and current and guaranteed cost structure of each. In that spirit, Full Disclosure also includes information on what each product is designed to do under Product Design Objectives. While not all of a products design objectives may be listed, you can see for what market many of these policies are meant. Some are built for low premiums, while others are meant to generate major league cash values. Some may be designed with special commission considerations such as high or rolling target premiums.

Reproduced from National Underwriter Edition, March 25, 2005. Copyright 2005 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.