Guideline Level Premium
1996-x, NAIC Proceeding
- 10 If the guideline level premium will not provide coverage to the end of the term of the contract, does the illustration have to display the annual term charges allowed by § 7702 or can the illustration explain that the coverage will terminate?
- See Question 7.9. Either may be illustrated as long as the insurer discloses the effect of what is illustrated.
17 CFR Part 270
[Release No. IC-13632; S7-10041
Request for Comments on Issues
Arising Under the Investment
Company Act of 1940 Relating to
Flexible Premium Variable Life
AGENCY: Securities and Exchange
ACTION: Request for written comments.
I’ll talk about the complications.
- The typical policy that runs into this issue is a policy with a 3% interest guarantee where the guideline level premium requires a 4% interest guarantee.
- Therefore, under the policy guarantees, and by paying the guideline level premium year by year, the policy will expire at age 68 without value. --- It’ll be term to 68.
- Your guideline level premium is less than the premium that would be theoretically required to mature the policy at age 100 or 95.
- Therein lies the problem.
- If you were to use that interpretation, it makes the reserving calculation extremely complex.
Let me give an example. I’m going to contradict what I just said in this example.
- The policy doesn’t really expire at age 68 because there’s a provision in 7702 that enables you to pay YRT premiums if the policy would otherwise lapse.
--Edward L. Robbins
1999 - 1999 Valuation Actuary Symposium - Session 44, Society of Actuaries - 28p