As long as you pay the premium....

  • Let's review the basic mechanics of Universal Life.
    • The policy does not lapse if a premium is not paid; rather, it lapses if the fund balance becomes too small to pay the next month's cost of insurance. 

--  Ben H. Mitchell, [Bonk: a consulting actuary with Tillinghast in Atlanta - Years-?]

1981 - SOA - Universal Life (RSA81V7N412), Society of Actuaries - 16p

  • Life insurance is available in two basic types:
    1. term and
    2. permanent (which includes whole life, universal life, variable life, and variable universal life). 205
  • Permanent (cash value) life insurance pays the beneficiary whenever the insured dies, as long as premiums have been paid. (p38)

2016 11 - FIO (Federal Insurance Office) - Report on Protection of Insurance Consumers and Access to Insurance - 58p

Life insurance is available in two basic types: term and permanent (which includes whole life, universal life, variable life, and variable universal life). 205  - ACLI 

  • A great deal of the confusion seems to stem from a lack of understanding of how cash value insurance products work and a lack of understanding of insurance terminology.
  • Also, because most people presume that if you pay your premium continuously, your policy will remain in effect, quite a few people had a hard time understanding how or why the policy would terminate in policy year 31.
    • This was simply foreign to their way of thinking.
  • One person was so confused that he said that the maturity age and endowment benefit were moot points, since the policy was going to end at year 31 anyway.

1990-1A, NAIC Proceedings - NAIC / LIMRA - Universal Life Disclosure Form Focus Group Summary  ---   [BonkNote]  ---  10p

  • After receiving these notices, John contacted Glasgow who had retired in 2000, to inquire why his policies would be terminating, even though he had timely paid the premiums on the policies for approximately 18 years.  (p4-5)

2010 - LC - Maloof v. John Hancock - Alabama Supreme Court Opinion - 39p

  • Q - Defense Attorney (Phillip E. Stano, Sutherland, Asbill & Brennan): The next sentence, quote, this can happen due to insufficient premium payments if loans or withdrawals are made or if current interest rates or charges fluctuate. So the illustration gives three reasons by which the cash value might be insufficient. Let me repeat those. One is insufficient --
  • A - Blumenthal (Policyowner - Plaintiff):  You don't need to.
  • Q - You understand that?
  • A - Yeah. Jesus.
  • Q - Okay.
  • A - Get to the point that you're trying to establish.  Jesus, this is ridiculous.
  • Q - You --
  • A - This has nothing to do -- I know I was paying the premium. That's all I know, period. That's it.
  • Q - So--
  • A - We paid every month whatever it was.
  • Q - So the three reasons that are given in the illustration that the cash surrender value can be insufficient, you understand those three reasons that I just mentioned?

2011 - LC - Blumenthal v. New York Life -  2010 0302 - 85-1 and 85-7 - Exh 1 and 6 - Deposition of Irving Blumenthal - 61p

  • [re: Vanishing Premium]
  • I think any way that we can make illustrations more understandable to the public is certainly going to help us.
    • We've seen the problems that have occurred when Senator Howard Metzenbaum (OH-D) was given an illustration with a vanishing premium, andhe had absolutely no idea that he had bought a policy that was not paid up in four years.
    • It caused many problems for the industry; it caused many problems because the press got involved, and the press doesn't understand the products as well as it thinks it does.
    • [Bonk: policy = Executive Life policy]

--  Linda M. Lankowski

1995 - SOA - Practical Illustrations and Nonforfeiture Values, Society of Actuaries - 14p

  • Universal life insurance, like whole life insurance, is a type of permanent life insurance policy that accumulates tax- deferred cash value.
  • The policy stays in effect for as long as you remain alive and pay the premiums.

usnews.com/360-reviews/life-insurance/universal-life-insurance

  • Life insurance pays a death benefit if you die while the policy is in effect, in exchange for premiums you pay before your death.

2018 - NAIC Life Insurance Buyer's Guide - 8p

  • g. Clarifying “Coverage Period Description”
    • The Working Group discussed what information is intended to be included.
    • Mr. Yanacheak said this is intended to capture how long a policy’s term is—a term of years or for life.
    • Mr. Birnbaum said it is intended to answer the question: If I pay my premium, this policy will cover x amount of time.
    • Mr. Wicka suggested, and the Working Group agreed, to the following revised language to Section 5A(2)(e)(iii): (iii) Indicate whether it is a term or permanent policy.
      • If it is a term policy, indicate the length of the initial term.

2019 0917 - NAIC (LIIIWG) - Life Insurance Illustration Issues (A) Working Group Conference Call  ---  [BonkNote]

  • Whole (or universal) life insurance policies are considered permanent.
  • As long as you pay the premium, the policy is in effect.  (p32)

2015 Version - Consumer Action Handbook, published by USAGov, part of the U.S. General Services Administration’s (GSA) Office of Citizen Services and Innovative Technologies - 146p 

  • The most popular document distributed by Pueblo remains the annual Consumer Action Handbook, a free trouble-shooting guide to help Americans solve all sorts of consumer problems.

govbooktalk.gpo.gov/tag/free-government-books/

  • 2013 0905 - LC - Johnston & Johnston v Conseco - 5th Circuit Court of Appeals - 13-30010 ---   [BonkNote]
    • 2013 0905 - LC - Johnston & Johnston v Conseco - 5th Circuit Court of Appeals - 13-30010 - Oral Argument - mp3  ---  [BonkNote] ---  [link-mp3-audio]
      • 20 -  Judge Carl E. Stewart  .....usually the Policy Due Date is not a mystery. 
  •  ....the concept of a "premium due date" was thought to be inapposite to flexible premium policies.

1983-1, NAIC proceedings

[def. inapposite: out of place; inappropriate]

  • Term insurance is for a specific period of time whereas permanent is for life as long as the premiums are paid.

MassMutual - massmutual.com/insurance/life-insurance

  • The personalized information in the Policy Overview is the premium for the policy – based on information known to the producer or insurer at the time and subject to change based on additional or revised information – and that information can be provided prior to purchase.
  • If an insurer can produce an illustration for a complex, investment type life insurance product prior to the consumer purchase, it is clearly possible for an insurer to provide the premium for a policy prior to purchase.

2019 0830 - Letter - CEJ / Birney Birnbaum to NAIC (LIIIWG) Life Insurance Illustrations Issues Working Group - 12p

  • Since universal life insurance was then being marketed only on a very limited basis, the council task force's proposals did not address this product.
    • The council has now developed a recommendation for universal life insurance, which we would like to present for your consideration.
  • The essence of the proposal is that universal life insurance be treated for cost disclosure purposes as a life insurance plan with a nonguaranteed cost element.
  • Thus, the policy summary would show for the prescribed policy years the anticipated premiums and, both on the guaranteed and currently illustrated bases, the death benefits, cash surrender values, and endowment amounts, if any.
    • The life insurance cost indexes would be calculated on the currently illustrated basis, using the anticipated premiums, and would be required to be shown along with corresponding nonguaranteed elements.
  • An additional item of information that is recommended to be required in the policy summary is the point at which the policy will expire based on the policy guarantees and the anticipated premiums shown in the summary.

--  1981 1215 - Report - ACLI to NAIC - Paper on Cost Disclosure for Universal Life, by the Special Task Force of the ACLI Cost Disclosure Subcommittee  to NAIC Task Force on Life Insurance Cost Disclosure - 4p

1982-1, NAIC Proceedings