Guaranteed Universal life has Policy riders: term, spousal, child, wavier of premium, ADB. Death Benefit options use level, increasing, cash & death benefit. Additional advantages: premium flexibility and adjustable death benefits. The death benefit can be increased (subject to insurability), or decreased at the policy owner's request.
The premiums can be flexible, from a minimum amount specified in the policy, to the maximum amount allowed by the contract. However, minimum premium thresholds may not satisfy the guaranteed contractual premium. Similar to whole life policies, guaranteed premiums secure the death benefit guaranteed to the maturity date in the policy, usually age 95 to age 121. Some of these polices offer a premium catch up provision to reinstate the guarantees when minimum premium payments have been paid. . A UL policy will lapse when the cash values are no longer sufficient to cover the cost of insurance and policy administrative expense.
Many people use life insurance as an indemnification product, so cash values are generally minimized. A few accumulate cash values as a source of benefits to the owner of the policy (as opposed to the death benefit which provides benefit to the beneficiary). These benefits include loans, withdrawals, collateral assignments, split dollar agreements, pension funding, and tax planning. Current Assumption Universal Life is also is used with second to die or survivorship polices, which include two insured on one contract and pay out the death benefit proceeds upon the death of the second of the two insureds.
Carrier proposals illustrate the current assumed interest rate and cost of insurance as well as guaranteed. The proposal’s viability depends on the current rates and cost of insurance. Some of these polices also have frond end loads and all have policy fees. The policy is designed to be a permanent fixture in the indemnification planning for domestic, business and estate scenarios. However, with the advent of guaranteed universal, current assumption universal life has been purchased as a conservative interest rate and tax favored product supplemental income.
Guaranteed Universal and the use of shadow accounts: Actuarial Guideline XXX regulations neither speak directly to secondary guarantees on UL policies nor shadow accounts. But it does detail how to do the valuation of policies that use shadow account. The Commissioners Reserve Valuation Method (CRVM) reserve is still regulated and defined as the policy's minimum reserve. The reserve necessary depends on the level of the policy's account value and shadow account value or secondary gurantees.
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