This report features charts and information on 27 policies. All of them are participating (dividend-paying) with the exception of 3 all-guaranteed policies. The 4 parts of this excerpt are from the newest whole life edition of the Full Disclosure software series. As in past reports, there are sections covering current and guaranteed illustrated values, the industry’s only actual historical performance analysis, policy retirement income illustrations, and a narrative detailing what each policy’s fundamental design objectives are.
All data is current as of February 1, 2009, a period by which most insurers have declared their current dividend scales for the year. Current illustrated values are based on a $250,000 policy for a Male Age 40. The class specified is best nonsmoker as long as the class represents at least 15% of issued policies. Illustrations are divided between all base (100% whole life coverage) and policies blended with 50% term. Blending policies in this fashion allows a lower premium outlay while retaining a responsible level of all base coverage to cushion any adverse changes in dividend scales. It can also provide a level of flexibility regarding additional paid-up additions if required.
All policies in the newest release now utilize the new 2001 mortality table. This change is important as the lower mortality costs allow insurers to lower premiums and/or increase policy performance. Previously there was a mix of 1984 and 2001 priced policies, but now they are all on the same footing.
The Internal Rate of Return is applied to current cash values and death benefits measured at 30 years. The IRR of the death benefit in the early years of a policy is very high because of the few premiums paid. The IRR of cash values rise over time, as the IRR for the death benefit 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. It is good way to measure policies that have dissimilar annual premiums, but its downside is that it favors policies with large premiums due to economies of scale. Pay careful attention to the footnotes for this section as not all policies are participating nor have a long premium paying period.