Monday, October 15, 2012

AG 38 and You

Back in the day, we did a two-part series on Universal Life (UL) insurance policies, pointing out some of the pitfalls inherent in those plans. Since then, there've been some terrific advances, industry-wide, addressing these shortcomings. Called Guaranteed Death Benefit UL, they promised to keep the policy in-force regardless of whether or not there was sufficient (or any) cash value.

In a sense, these are term-to-age-100 (or even 120!) policies, since they're heavy on death benefit guarantees and pretty light on cash values. But for long term planning, they're difficult to beat.

So of course the National Association of Insurance Commissioners felt the need to step in and meddle:

"The [NAIC] adopted revisions to a controversially applied actuarial guideline that governs reserves for universal life products with secondary guarantees after almost a year of intense debate among regulators on all levels and the industry."

So what, you ask?

Here's what:

"For example, for certain policies, companies must “perform a good faith high-level analytical review of the product design with respect to the premium payment patterns to be expected with respect to that design.”

In short, look for premiums on newly written plans to be substantially higher than existing ones. And don't even think about messing around with your in-force policy (if you have one).
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