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Life Health > Life Insurance

Full Disclosure Survivorship Life Report

By Roger L. Blease

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The latest Full Disclosure life policy excerpts feature 81 survivorship universal life, whole life and variable life insurance policies. Policy changes seem to be concentrated in the universal life area in this review, with 6 new policies and 11 that are utilizing the new 2001 CSO mortality tables. This mortality change implementation is behind that going on in individual products, but could create dramatic performance changes in survivorship policies that consider joint lives. Companies are required to adopt the new tables by 2009, so this process should accelerate greatly this year. Three indexed (ISUL) varieties are included as a subset of the universal life tables.

Companies not in the previous survey in May that have returned are Lincoln Benefit Life and Transamerica Occidental Life. Merger fever continues with AvivaUSA acquiring the AmerUs Group and its Bankers, Indianapolis, and AmerUs Life units. Other than these changes and additions, the universe of companies marketing survivorship life policies remains unchanged.

The excerpts in this report focus on illustrated values for whole, universal, indexed 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 will give an idea of how these products perform on a prospective basis. Also included are charts for minimum long-term guarantee products. This increasingly popular use for flexible premium survivorship life insurance provides minimum annual premiums to age 100 or beyond (lifetime) with little or no cash value at maturity, but with low guaranteed annual premiums.

In addition to the guaranteed premium charts, 3 others cover current illustrated values for SVL, SUL and SWL. 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 of 30 years, dependent on age combination. The IRR of cash values rises 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 that 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.

Full Disclosure software includes complete policy specifications and features, current and guaranteed costs and expenses, and a wide sampling of illustrations. Policy data in these excerpts is current as of Nov. 1, 2006. Standardized annual premiums are the same between UL and VL illustrations, and the VL illustrations are based on a 10% gross rate of return with average subaccount expenses “netted out” of the projected values.

Because survivorship life products are designed for certain objectives, whether maximum cash accumulation or none at all, for example, we have summarized what each is designed for. Some have simplified underwriting, short-term values, living benefit riders or many others. We not only examine a product’s premiums and illustrated values but look at what it is designed to do best. That is the key to any successful comparison in this time of product specialization. Also, the market is adding new hybrid, indexed and guaranteed premium variations (of flexible premium products) to the mix. Often, simply looking at the numbers doesn’t tell enough.

Whether it’s for family business continuation, funding a grandchild’s education, providing for a special needs child who needs care after both parents die, or boosting a charitable-giving intention, there are a wealth of opportunities for a product at the critical juncture in time that is the death of the second spouse. It’s also a good way to leave a legacy of giving and opportunities to others via a school endowment, for example, that appeals to our own need to know that we can continue to do good even after we are gone.

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