Full Disclosures Universal Life Insurance Report
Our comprehensive survey performed in January and July of upper market life insurers for inclusion in the Full Disclosure policy analysis and comparison software series affirmed what company competition analysts already knew: From the beginning to the middle of the year the trend toward offering so-called secondary guarantees of universal life insurance premiums and death benefits continued to accelerate.
Full Disclosures January release featured 57 policies, with 42% of them offering the assurance that no matter what happened to a policys nonguaranteed elements, such as the current interest rate, to at least age 95 the premium required would not rise nor the death benefit fall below the initial specified amounts (level death benefit option).
In July, 56% of the 63 policies submitted for inclusion in Full Disclosure featured the same guarantees.
Many of these newer generation policies, whether offering built-in long-term secondary guarantees funded by a minimum premium level or by rider, provide lifetime guarantees or periods up to age 120.
And while their pitch is that they enable whole life guarantees for about half the cost, the real picture is not as clear. The premiums that are developed to fund the guarantees are based upon the guaranteed values of the policy. Anything that affects the values may compromise the secondary guarantees of premium and death benefit. This could include switching the policy from a level to an increasing death benefit option (or vice versa), or increasing or decreasing the face amount of the policy.
Some companies provide a detailed list of what specific policy changes will negatively impact the guarantees. Many policies contain “catch-up” provisions that enable a restoration of secondary guarantees if the minimum premium to maintain them is paid. Generally this is a cumulative premium test within a given time period. While this doesnt help if there is a policy change, it is something most of the newest UL designs contain.
There are two main parts of this report: current illustrated values and illustrations designed to show heavily funded policy performance when providing retirement income streams.