Project – Universal Life Premium

Project - Universal Life Premium

(p5) - Drafting Note: ... 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.
re: Guaranteed Maturity Premium -
- The guaranteed maturity premium for flexible premium universal life insurance policies shall be that level gross premium, paid at issue and periodically thereafter over the period during which premiums are allowed to be paid, which will mature the policy on the latest maturity date, if any, permitted under the policy (otherwise at the highest age in the valuation mortality table), for an amount which is in accordance with the policy structure.
  - The guaranteed maturity premium is calculated at issue based on all policy guarantees at issue (excluding guarantees linked to an external referent).

NAIC - Universal Life Insurance Model Regulation (ULMR) - (#585) - 22p

re: Planned Premium - 2013 0905 - LC - Johnston & Johnston v Conseco - 5th Circuit Court of Appeals - 13-30010 --- [link-mp3-audio]
- Defense Attorney: Judge Stewart to you point you mentioned that the payment of premium shouldn't be a mystery. What did they bargain for?
  - This is exactly what they bargained for. They bargained to have a planned annual premium. It's not required to be paid.
    - ⇒ The plan when the policy is issued is pay this premium every year and that will sustain the policy.
re: Minimum Premium - 2015 - Legal Case - Walker vs Life Insurance Company of the Southwest - TRIAL DAY 11 - Case 2:10-cv-09198-JVS-JDE Document 820 Filed 12/01/15 Page 40 of 279 Page ID # 33532
- A: JEFFREY STEMLER - (Agent): This is -- when we are sitting down talking about insurance, we try to explain to the prospects exactly how the insurance works.
  - In the example we'll often say: Well, let's just assume that this is $500,000 that we are dealing with here and the minimum premium is a thousand dollars and the maximum premium is $5,000.
  - Why would anyone put $5,000 into a contract if you could buy the same amount of coverage for only 1,000?
re: Target Premium - 2014 - LC - Walker v Life Insurance Company of the Southwest - 2014 0425 - DOC 813 - Trial Transcript - Walker v LSW - 224p --- [BonkNote]
- (p137) - Defendant Attorney - This is what the designer of the policy believed about the policy.
  - He wrote: The reality is that if you fund Provider at target premium, the probability that it will ever lapse is virtually zero.
  - You want to know what the company thought about the policy, what it intended about the policy, whether it had an intent to deceive and to sell people a defective policy?
  - Then look at what the designer of the policy said back at the time.
    - Designer = Michael Tivillini

re: Minimum Premium
(p40-41) - Q: Could you describe for the jury what you were trying to convey when you drew this drawing, Exhibit 774, on the back of her illustration. - <WishList - Exhibit 774>

A: JEFFREY STEMLER - (Agent): This is -- when we are sitting down talking about insurance, we try to explain to the prospects exactly how the insurance works.
- So this is part of our talk that we give to explain how it works.
  - So this would be a build slide.
  - This didn't just start there.
- I drew a line on the bottom and I said: When you buy insurance, there is a minimum amount that you must pay for insurance to pay for the costs and put the policy in force.
  - And I drew the line and I wrote minimum, and I would ask who do you think sets that price.
    - Some people will say: I don't know.
    - Others: Well, the insurance company.
    - I go, yes, you're correct.
  - And I said: They have actuaries, and the actuaries, their job is to figure out how much they need to collect for any given amount based on the age of the person so that they can cover the risk and also still make a profit.
- I said: But there's another line that we need to be concerned about, and then I draw the line up on top and I put the max there.
  - And I say this is the maximum you can pay for a contract.
    - I said: Do you know who sets that limit?
    - People will often say: Well, the insurance company; right?
    - And I say: No. It's actually the government.
- In the example we'll often say: Well, let's just assume that this is $500,000 that we are dealing with here and the minimum premium is a thousand dollars and the maximum premium is $5,000.
  - Why would anyone put $5,000 into a contract if you could buy the same amount of coverage for only 1,000?

2015 - Legal Case - Walker vs Life Insurance Company of the Southwest - TRIAL DAY 11 - Case 2:10-cv-09198-JVS-JDE Document 820 Filed 12/01/15 Page 40 of 279 Page ID # 33532

2013 0905 - LC - Johnston & Johnston v Conseco - 5th Circuit Court of Appeals - 13-30010 --- [link-mp3-audio]
- AUDIO-CLIP - 01:55 (Approx. Time - From 41:00-43:00)

- 41:00-00:43 - Defense Attorney - re: Planned Premium
  - Well, your Honor, when I first started I said that this is a very simple and straightforward issue.
    - The question is when was the policyholder required to pay a premium under the terms of the policy.
  - All opposing council had to do was come up here and tell you where in the policy it says that Johnston and Johnston was required to make a premium payment before the end of the Grace Period. And he didn't do it. It's because he can't do it.
    - Instead what you heard were analogies about gas tanks.
    - The general definition of Grace period that is used in other policies.
    - You didn't get any reference to the terms of the policy.
  - Judge Stewart to you point you mentioned that the payment of premium shouldn't be a mystery. What did they bargain for?
    - This is exactly what they bargained for. They bargained to have a planned annual premium. It's not required to be paid.
      - ⇒ The plan when the policy is issued is pay this premium every year and that will sustain the policy.
      - You can pay more than that or you can not pay at all.
    - It gives the policyholders, and this is a sophisticated policyholder who had an accountant running the transaction for then assume that discretion.
      - And then the policyholder failed to make that premium payment.
      - And this is what's on the Policy Data Page, Bold all Capital Letters "IT IS POSSIBLE THAT COVERAGE WILL EXPIRE PRIOR TO THE MATURITY DATE SHOWN WHERE EITHER NO PREMIUMS ARE PAID FOLLOWING THE INITIAL PREMIUM OR SUBSEQUENT PREMIUMS ARE INSUFFICIENT TO CONTINUE COVERAGE TO SUCH DATE."

re: Target Premium
(p137) - Defendant Attorney - This is what the designer of the policy believed about the policy.
- He wrote: The reality is that if you fund Provider at target premium, the probability that it will ever lapse is virtually zero.
- You want to know what the company thought about the policy, what it intended about the policy, whether it had an intent to deceive and to sell people a defective policy?
- Then look at what the designer of the policy said back at the time.
  - Designer = Michael Tivillini

2014 - LC - Walker v Life Insurance Company of the Southwest - 2014 0425 - DOC 813 - Trial Transcript - Walker v LSW - 224p --- [BonkNote]