Universal Life with Secondary Guarantees (ULSG)

  • Regulation XXX
  • The Universal Life contract with secondary guarantees has been one of the most controversial life insurance products introduced in the United States.

2014 04 – SOA – Model Validation for Insurance Enterprise Risk and Capital Models, Sponsored by CAS, CIA, SOA Joint Risk Management Section, prepared By Markus Stricker, Shaun Wang, Stephen J. Strommen, research-2014-model-valid-ins – Society of Actuaries – 47p

  • In addition, XXX affects reserving for universal life plans with secondary guarantees.
  • The specific concern addressed here deals with a term plan that is hidden in a universal life plan.
  • These plans will have an additional guarantee that, if a certain premium is paid for 15 or 20 years, then the policy will not lapse, despite the fact that there may not be a positive account value on the policy.
  • Essentially, this allows the policy to operate like a 15- or 20-year level term.

—  Craig R. Raymond

1995 – SOA – Valuation Actuary Symposium Proceedings (VASP) – Session 2 – Life and Annuity Valuation Issues, Society of Actuaries – 18p

  • p14 – B. Universal Life Insurance
  • I. UL With Secondary Guarantees – The major new life insurance non-traditional benefit is a secondary guarantee on universal life (UL). This guarantee has been a driver of recent sales of UL policies.
  • The guarantee is that a certain level of premium will guarantee that the policy stays inforce for a certain duration.
    • For example, payment of the minimum premium may guarantee 10 or 15 years inforce, payment of the commissionable target premium may guarantee 20 years inforce, and payment of a higher premium may guarantee lifetime inforce.

2004 – SOA – Non -Traditional Guarantees on Life and Annuity Products, by Victoria Pickering and John P. Glynn, Non-Traditional-Guarantees-12-1 – Society of Actuaries – 129p