The most recent review of universal and indexed universal life in Full Disclosure featured 115 policies including 33 indexed varieties. On the indexed side this is an increase from 25 just six months ago. To accommodate as much information as possible we have divided the report into two parts with traditional UL products following at a later date. There are two parts of this indexed report with a large chart including illustrated values on a current basis, and one featuring minimum premiums necessary to guarantee the premium and death benefit to age 100, age 121 or for life for two issue classes.
While indexed products are marketed with a simple message of participating in the gains of equity or other market indexes, they can be quite complex to understand and make accurate comparisons. Crediting rates are typically based on the historical performance of an underlying index (there could also be combinations of indexes used) at various durations. Then the methods used to credit value back to the policy can vary widely, as can the participation rates or caps that can limit credited values. Additionally, more policies offer numerous indexes beyond the traditional S&P 500 index. Some policies also offer blending between indexes and even blending with current assumption interest rates like a traditional universal life policy.
In previous editions of Full Disclosure we asked that companies contributing illustrations base them on the S&P 500 Index. Most would have. We also requested that they use an annual point-to-point crediting method (if available). This time out we have asked the companies to provide illustrated figures based on the indexing option and crediting method most representative of how each is marketing a particular product to the end consumer. As you can see by the options and methods used in the current values excerpt, most used the S&P 500 Index as their choice. As always, we try to achieve meaningful comparisons while accommodating the design strategy of products in our reports.
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 indicate which are designed to generate maximum death benefits. All of the data is current for products for sale on July 1, 2007. The minimum premiums to endow and carry each policy are requested as of the latest policy maturity age.
