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June 25, 2018

June 25, 2018 Posted by: Category: Life Insurance No comments

Permanent Life Insurance comes in a number of variations, but they are primarily built on the underlying investment and the performance of that asset. If Indexed Universal life is the contract of choice, there are some critical components that need to be identified and monitored to secure lifetime benefits.

Here is what you need to know:

1) What index is it? I reviewed a significant IUL contract recently to conduct a stress test. Nowhere in the supporting material did it specify, with this A++ rated company, what index was being used as the basis.

2) Performance – once you know the Indices, if the contract has a ceiling of 12% and a floor of 1%, it’s important to compare the index performance, to the credited performance in the contract. In the review referenced above, the S&P grew by >10% and the credited performance was below 7%. We/you need to know why?

3) Guarantees – does the indexed policy have a Secondary Guarantee? How long does it last (hopefully to age 100) and what are the requirements to satisfy the Guarantee?

Implementing a permanent life insurance policy at any age, the primary objective should be for the coverage to pay in full at the insured’s death. But permanent policies have moving parts that need to be audited against the original assumptions. The policy needs to be stress tested at anticipated future returns, to be certain that objective is met.

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