Plan of Life Insurance

Section 2. Purpose
A. The purpose of this regulation is to require insurers to deliver to  purchasers of life insurance information that will improve the buyer’s ability to select the most appropriate plan of life insurance for the buyer’s needs and improve the buyer’s understanding of the basic features of the policy that has been purchased or is under consideration.

Life Insurance Disclosure Model Regulation, MDL-580 - <link>

The 818(c) election is another issue that is being looked at by the Service <International Revenue Service>

One question that was discussed briefly was what was the plan of insurance?

  • How do you know whether you have a permanent policy that qualifies for $21 per thousand,
  • or a term policy that qualifies for $5,
  • or perhaps some that qualifies for nothing.

    That is an unanswered question.

-- WILLIAM B. HARMAN, JR

1981 - Universal Life, Society of Actuaries

U.S. Department of Veterans Affairs

https://www.benefits.va.gov/insurance/plans.asp

Plans of Insurance

Government Life Insurance is issued in a variety of insurance plans. Select a plan below to view a brief description of that plan. This information is for policy numbers beginning with K, V, RS, W, J. JR. JS and RH. Information for: Servicemembers' Group Life Insurance policies (SGLI) and Veterans' Group Life Insurance policies (VGLI).

(p243) Any of the foregoing provisions or portions thereof not applicable by reason of the plan of insurance may to that extent be omitted from the policy.


Gross Premiums
Calculated on Basis of Assumptions
Plan Ages: 26 ~~ 40
Ordinary Life $15.03 $15.42 $48.20
20 Payment Life 22.23 33.53 53.93
20 Year Endowment 42.46 46.60 57.70

1942-Supplement, NAIC Proceedings

- MCCORD V. MINNESOTA MUTUAL LIFE INSURANCE COMPANY, (D.MINN. 2001)
https://www.casemine.com/judgement/us/5914b9b9add7b0493478cbb9

Adjustable life is characterized as either "term" or "whole" life depending on how long the plan of insurance will last on a guaranteed basis with the face amount and premium chosen.

EXHIBIT A
NAIC MODEL REGULATION AS AMENDED AND ADOPTED 6/6/73
LIFE INSURANCE INTEREST-ADJUSTED COST COMPARISON INDEX
Section l Authority - This rule is adopted and promulgated by (title of supervisory authority) pursuant to Sections of
the insurance code.
Section 2 Purpose - It is in the interests of prospective purchasers of life insurance that there should be available to such persons a cost comparison index prepared on a uniform basis for comparison of the relative cost of similar plans of insurance.

  • It is in the public interest to make such an index available so that price competition in the life insurance market is encouraged and stimulated.

1973-2, NAIC PROCEEDINGS

Proposed Article IV, Section 3f
f. a provision that at any time during the first eighteen months of the variable life insurance policy, so long as premiums are duly paid the owner may exchange the policy for a policy of permanent fixed benefit life insurance on the life of the insured for the same initial amount of insurance as the variable life insurance policy and on a plan of insurance specified in the policy, provided that the new policy:

1976-1 (p564), NAIC Proceedings

5. Effect of an Election Under Section 5-c of the Standard Nonforfeiture Law for Life Insurance

  • Mr. Montgomery's letter of October 15, 1982 contained a copy of a California Bulletin which set forth the conditions under which companies could elect separate operative dates by plan of insurance.
  • Under the Bulletin, a company could issue a new plan on the new standards provided like plans on the old standards were discontinued in California and in other states permitting plan-by-plan elections.
  • In addition, once a company had issued a plan on the new standards, those standards would apply to other new plans unless the company could demonstrate a need to apply the old standards.
  • Mr. Montgomery suggested that the California Rule could serve as a basis for developing an NAIC guideline.

1983-1 (p478), NAIC Proceedings

I guess my problem can be stated thus: how can you emphasize that the guaranteed plan of insurance may be term to age 65 but then say it is all right to ignore that and take a whole life expense allowance calculated at a low interest rate because the plan is sold as whole life? 

--  JEFF T. DUKES

1983 - UNIVERSAL LIFE VALUATION AND NONFORFEITURE: A GENERALIZED MODEL, Society of Actuaries

Drafting Note: The drafters chose a whole life initial expense allowance for several reasons. Although highly flexible, universal life insurance is generally considered a permanent life insurance plan.

  • Most companies encourage a premium level which will provide lifetime insurance protection.
  • Every universal life insurance policy of which the drafters are aware has a “net level premium” that could be computed which would guarantee permanent protection.

As a result, it is expected that most universal life insurance policies will be sold as permanent plans.

Universal Life Insurance Model Regulation, MDL-585 - [LINK]

Plans of insurance fall into five categories: term, limited pay whole life, continuous premium endowment, limited pay endowment, and income endowment where the ratio of amount of insurance to maturity value may be varied.
1976Toward Adjustable Life Products, Walter L. Chapin, Society of Actuaries

1976 Toward AL Plan Solve 123 2

Defining the principal elements of a policy as amount of insurance, gross premium, and plan of insurance, an original issue involves election of any two of the elements and calculation of the third. Each change after issue involves a change elected for one element, either a change or continuation
for a second element, and calculation of the third element.

The guaranteed maturity fund at any duration is that amount which, together with future guaranteed maturity premiums, will mature the policy based on all policy guarantees at issue.

(C) is the quantity ((a)-(b))ax+t r where (a)-(b) is as described as

in [insert reference to Section 4 of the Standard Valuation Law] for the plan of insurance defined at issue by the guaranteed maturity premiums and all guarantees contained in the policy or declared by the insurer.

NAIC - UNIVERSAL LIFE INSURANCE MODEL REGULATION - [LINK]

Those who are interested in the stock plan of life insurance,
maintain that this rule holds even to the extent of a six per
cent reserve.

1871-2, NAIC Proceedings

NEITHER IS BETTER

Reams of copy have been written about the relative values of term and straight

life.

  • Pennsylvania Insurance Commissioner Herbert Denenberg, a severe critic of the insurance industry, concludes: "Neither plan of insurance is necessarily superior to the other.
  • They are fundamentally different but both are useful contracts and there are 'good buys' and 'bad buys' on both." (802)

1973 - GOV - The Life Insurance Industry - Hart - Part 1

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