One of the challenges of analyzing universal life products of late is finding out how they should be grouped (and compared) by their fundamental mission.
Ongoing specialization in this market means that policies are likely to be in three different categories by design. These are cash value accumulation (and income), low guaranteed premiums with maximum death benefits and little cash value (sometimes referred to as “term alternative plans”), and those meant to provide a balanced approach to cash values and death benefits (the generalists).
These divisions primarily apply to fixed products as equity indexed UL products, which we also have included in this report, are designed for maximum cash values.
Full Disclosure looks at products from different angles to determine what they are designed to do best. For cash value products and those designed for maximum death benefits we assign internal rates of return on these values respectively based upon an assumed premium. For those designed to be sold in the minimum premium guarantee market, we’re not really concerned with values so we look at minimum premiums coupled with level death benefits. To get an idea of where the more general purpose policies fall, we gather data relevant to all of these aspects.
Increasingly, straightforward fixed UL products can be as different as night and day. When looking at an amalgamation of products in a large chart, such as we have included here, it is therefore imperative not to fall into the trap of judging products based on one or two criteria but to take the data and relate it to the mission of each product. For example, a guaranteed death benefit product may have low cash values in one chart but may shine on a minimum premium basis in another. The key is to look at all of the data together.