If there is a silver lining in the phase-in-phase-out estate tax repeal legislation, and all of the discussions it is provoking in the industry, it is that people are realizing just how versatile a product survivorship life insurance is and that its utility extends into a variety of planning areas. Private split-dollar plans and charitable giving come quickly to mind, and care of a dependent child or parent, and key person coverage, can be added to the list. Flexible riders and designs, such as benefits at the death of the first insured and a “Type C” death benefit option that enhances the benefit, make survivorship even more appealing for these purposes and others.
And, even if the estate tax is fully repealed permanently, the mission of providing liquidity in a family business will still be important. Only about a third of family businesses last through the second generation. There is nothing like cold, hard cash to make a transition succeed!
This report features illustrated values for whole, universal, and variable life survivorship products from the leading companies in the market. And while these are excerpts from the Full Disclosure software series, the report will give you an idea of how these products illustrate in the market, as well as some of their particular strengths in the accompanying text.
Illustrations, of course, are merely tools based on assumptions that can range from conservative to aggressive, depending on the insurer. However, illustrations are the most commonly used hypothetical barometers of how a policy may perform.
Use these illustrated values with caution, for like most things in life, there is most always more to the story.
We use the internal rate of return method applied to current illustrated accumulation values and current death benefits measured at policy durations 30 years dependent on age combination. The IRR of cash values rise over time as the IRR for the death benefits falls. A careful analysis of the IRR measurements indicates which policies are designed (in an illustration at least) to build current cash values, guaranteed cash values, or death benefits.
You will notice at the end of each chart (SVL & SUL), there are columns showing how the policy would have performed under an increasing death benefit option. The cash value of an increasing death benefit policy, while not listed, would be lower because of the added costs of insurance.
The whole life policies have naturally rising death benefits due to the paid-up additions dividend option.
This report features abstracts of 75 universal, whole and variable policies and is excerpted from Full Disclosure featuring Survivorship Life, Volume I edition. Data is current as of May 1, 2001.