Prudential Joins the IUL Market

[Lowcountry 42]

I would start by reading an illustration. And I don't mean just look at the numbers. Read the portion before the ledger, it explains the product and key terms.

I have read the illustration carefully but it seems to me from bits and peices I've gleaned off this site there are different ways to adjust the premiums to accomplish different goals.

 

[BNTRS]

I have read the illustration carefully but it seems to me from bits and peices I've gleaned off this site there are different ways to adjust the premiums to accomplish different goals.

Without diving too much into the minutia when it comes to UL, I'll start by saying that I think your confusion (or lack of understanding) has less to do with IUL specifically and more to do with UL in general. So let's review that in general.

There are a few different ways to approach UL design.

One is cash value accumulation focused. The ultimate way of doing this (i.e. maximizing cash value within the policy) is to determine, use the Guideline Premium Test for life insurance qualification, and solve for either the Guideline Death Benefit or the TAMRA (7-pay) Death Benefit. You have to do with the higher of the two (whatever that comes out to). You should also elect an increasing death benefit (which you typically will plan to make level at some point in the future--typically when distributions begin or when outlay stops if as long as there is no future plan to being putting money into the contract, again).

The other focus is death benefit focused, which typically has a few different approaches. Sometimes there's a plan to simply continue paying premiums and maintaining the death benefit until death. Usually the comparison you are making for this is what assumed premium (outlay) to maintain a certain death benefit. You cannot simply compare declared interest rates (or even guaranteed interest rates) because internal charges for the UL contract will vary widely (i.e. one contract might pay 4% and another might pay 5%, but the contract that pays 5% might come with drastically higher internal charges making it less attractive).

The other focus, which I'll claim is probably more appropriate, is concerned with how much money will be needed to make a contract "endow." Endow means something slightly different with UL than WL. Endow when it comes to UL essentially means the amount of money the contract will need to require no further premiums and maintain the death benefit indefinitely (or, in some cases, to a certain age).

It's important to note that unless we're talking GUL, we're almost always using assumed rates of returned and assumed internal charges (mortality costs being main internal charge with which we are concerned) when it comes to calculating these assumptions (in either case). That's not to be negative, it's just to point out that the amount stated, will not guarantee the death benefit, but we can reasonably assume it'll work based on the assumed rate of interest and contract charges.

If focusing on death benefit the solve can be specified as premium paid to a certain age or for a certain number of years. If, for example, you are endowing say in 10 years, you'll simply specify the death benefit that you want and ask for the required premium if paying for only 10 years. You can usually even go so far as you stipulate that you'd like the assumptions to be based off current rates and charges, assumed (slightly lowered interest and increased charges), or even guaranteed (somewhat rare, but you can do it). You'll usually use the Cash Value Accumulation Test for life insurance qualification (thought sometimes in certain shorter pay endowment scenarios, GPT might be a better option).

If the plan is to pay for a long period of time, then an increasing death benefit is usually used. If looking for a shorter pay period, level death benefit options are usually more useful.

This is all intentionally very broad on purpose, since details of a specific situation will sometimes change the plan of action.

That should get you started for now.

 

[Lowcountry 42]

Without diving too much into the minutia when it comes to UL, I'll start by saying that I think your confusion (or lack of understanding) has less to do with IUL specifically and more to do with UL in general. So let's review that in general.

There are a few different ways to approach UL design.

One is cash value accumulation focused. The ultimate way of doing this (i.e. maximizing cash value within the policy) is to determine, use the Guideline Premium Test for life insurance qualification, and solve for either the Guideline Death Benefit or the TAMRA (7-pay) Death Benefit. You have to do with the higher of the two (whatever that comes out to). You should also elect an increasing death benefit (which you typically will plan to make level at some point in the future--typically when distributions begin or when outlay stops if as long as there is no future plan to being putting money into the contract, again).

The other focus is death benefit focused, which typically has a few different approaches. Sometimes there's a plan to simply continue paying premiums and maintaining the death benefit until death. Usually the comparison you are making for this is what assumed premium (outlay) to maintain a certain death benefit. You cannot simply compare declared interest rates (or even guaranteed interest rates) because internal charges for the UL contract will vary widely (i.e. one contract might pay 4% and another might pay 5%, but the contract that pays 5% might come with drastically higher internal charges making it less attractive).

The other focus, which I'll claim is probably more appropriate, is concerned with how much money will be needed to make a contract "endow." Endow means something slightly different with UL than WL. Endow when it comes to UL essentially means the amount of money the contract will need to require no further premiums and maintain the death benefit indefinitely (or, in some cases, to a certain age).

It's important to note that unless we're talking GUL, we're almost always using assumed rates of returned and assumed internal charges (mortality costs being main internal charge with which we are concerned) when it comes to calculating these assumptions (in either case). That's not to be negative, it's just to point out that the amount stated, will not guarantee the death benefit, but we can reasonably assume it'll work based on the assumed rate of interest and contract charges.

If focusing on death benefit the solve can be specified as premium paid to a certain age or for a certain number of years. If, for example, you are endowing say in 10 years, you'll simply specify the death benefit that you want and ask for the required premium if paying for only 10 years. You can usually even go so far as you stipulate that you'd like the assumptions to be based off current rates and charges, assumed (slightly lowered interest and increased charges), or even guaranteed (somewhat rare, but you can do it). You'll usually use the Cash Value Accumulation Test for life insurance qualification (thought sometimes in certain shorter pay endowment scenarios, GPT might be a better option).

If the plan is to pay for a long period of time, then an increasing death benefit is usually used. If looking for a shorter pay period, level death benefit options are usually more useful.

This is all intentionally very broad on purpose, since details of a specific situation will sometimes change the plan of action.

That should get you started for now.

Great info, you helped clarify some issues I am working on for a case next week. Thanks!

 

[indexedannuity_girl]

@ LowCountry 42-
First, read the section of my website at LifeSpecs dot com, entitled, "The Basics." That will provide a great foundation. Then, go to one of my other websites, IndexedULNerd dot com, and read every article that I have written on indexed life under "Sheryl's Articles." Then, I would likely go to the Brokers Alliance website, and watch the video interviews that Steve Savant at The Insurance Zone conducted with me, in regards to indexed life.

Lastly, holler at your girl. No one can break-down this product in easy-to-understand terms the way that I can.

P.S. Been working on another book on the topic for about seven years; problem is that there is only one of me :(
sjm
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@BNTRS-
*like*
Typically, companies stick to what they know, even when venturing into a new market.
sjm

 

[agentjhc]

Anyone have an update on how this product is selling and performing? I know it has not been on the market long, but I am curious.

 

[BNTRS]

Anyone have an update on how this product is selling and performing? I know it has not been on the market long, but I am curious.

I've yet to see an earnings call to speak about it specifically, so we know it's not likely beating any expectations at Pru.

If the wheels completely fall off GUL, then maybe Prudential has some potential clout. Until then, it's a product trying to accomplish something that GUL can guarantee gets accomplished. But then again, that wouldn't make it any different than any of Pru's cash value life products.

 

[indexedannuity_girl]

Pru's 3Q2012 sales put them at a ranking of 25/48 companies selling indexed life.
sjm