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July 20, 2005 at 08:00 PM
Death benefit guarantee products continue to dominate the survivorship life market and are a key option of most new products. While Full Disclosure has featured long-term guarantee (age 100 or lifetime) minimum premiums for survivorship universal life, we also have added these for variable products. Excerpts from the latest edition of Full Disclosure are included in this report in addition to the regularly featured product design objectives, illustrated values and death benefits.
Competition in the guaranteed premium/face amount market only has caused minimum premiums to fall, adding to the products’ luster. Our guess is that they will fall further.
The other good news for insurers is that a complete repeal of the “death tax”–for which survivorship life is an ideal solution–as recently proposed in Congress is unlikely to pass. The tax raised over $23 billion last year even as the threshold was raised to $1.5 million. In 2000, by contrast, the threshold was $675,000. Current arguments swirling in Congress are that the tax should kick in at between $3 million and $5 million, indexed or not to inflation. I don’t like taxes as much as anyone else, but with our industry providing a cost effective “pennies on the dollar” solution, it’s not all bad.
The excerpts in this report focus on 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 the Full Disclosure database, they give an idea of how these products perform on a prospective basis. The additional components in the latest edition of Full Disclosure are low-cost long-term guarantees of premiums and death benefits in flexible premium policies for both SUL and SVL policies. These tables provide minimum annual premiums to age 100 or beyond (lifetime) with little or no cash value at maturity.
In addition to the guaranteed premium charts, three others cover current illustrated values for variable, universal and whole survivorship life. These illustrated values are based on current interest or dividend crediting, expenses and in the case of variable designs, a predetermined crediting rate. Full Disclosure applies the internal rate of return method to current illustrated accumulation values and current death benefits measured at policy durations 30 years dependent on age combination. The IRR of cash values rises over time, as the IRR for the death benefit falls.
