Full Disclosure's Survivorship Life Report

The excerpts in this report feature illustrated values for whole, universal, and variable life survivorship products from the leading companies in the market. And while these charts are only slices of data, they will give you an idea of how these products illustrate in the market.

This report features abstracts of 86 universal, whole and variable policies and is excerpted from Full Disclosure Survivorship Life Volume I edition. Due to fewer survivorship WL policies this time, the survey is off its all-time high of 89 policies.

The popularity of flexible premium policies with guarantees of death benefits and premiums (secondary guarantees) are taking their toll on whole life. They are able to offer generally lower premiums with lesser risk of interest rates or equity returns potentially torpedoing an expensive plan. (Caution should be exercised that there are no contingencies on these guarantees.)

All data is current as of May 1, 2002. We do not charge companies to be in Full Disclosure, and strive to be fair through consistency maintained between all types in age combinations of insureds, product specifications, measurements of values and death benefits at various points. Flat premium amounts are the same between UL and VL illustrations, and the VL illustrations are based on an assumed 10% rate of return net of average fund expenses.

Full Disclosure applies the internal rate of return method to current illustrated accumulation values and current death benefits measured at policy durations of 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 the SVL and SUL charts, 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 WL policies have naturally rising death benefits due to the paid-up additions dividend option.

Not all companies use the same averaging method to calculate the fund expenses used to calculate the illustrated values in variable policies, so we have added a column at the end of the SVL chart to delineate those using either a regular arithmetic average or a weighted average. Under weighting, the average is tilted towards larger subaccounts with usually lower expenses, thus reducing the average expense charge and benefiting the final illustrated values of the policy. This is only one factor of many including policy expenses and fees and cost of insurance in a policys illustrated performance, but is useful to see the approach used by each company.

Reproduced from National Underwriter Life & Health/Financial Services Edition, September 2, 2002. Copyright 2002 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.