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  #1  
Old 06-30-2003, 03:19 PM
OlderMan OlderMan is offline
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Default Term Insurance Nonforfeiture

We are reviewing a 10 year renewable term policy of an affiliated company.
This policy allows renewals through age 70, but there are no Cash Values associated with it.
What are they doing to comply with the SNFL?
Are there any other safe harbor provisions that we don't know about?
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Old 06-30-2003, 03:30 PM
Chris Poirier Chris Poirier is offline
 
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I'd be pretty surprised to see cash values required on a typical 10-year renewable term product going to age 70. The "de minimus" rules should take care of them by itself. They might be intending for it to qualify using the "20 year, Age 70" exemption as well - how you interpret the exemption to handle the tail premiums might vary with each company. It's been a little while since I've looked at the reg on that one, but I wouldn't think the tail should be excluded (i.e. you can't just pretend the premiums beyond the first level period, including any ART tail-end premiums, are not there). As I recall, there are a handful of other exemptions as well.
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Old 06-30-2003, 04:07 PM
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kazh kazh is offline
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Default de minimus

"de minimus" means required cash values don't exceed $25 per 1000 of insurance, i.e., no cash values are required unless the value at some duration exceeds $25 per 1,000.
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Old 06-30-2003, 04:50 PM
OlderMan OlderMan is offline
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At renewal age 70, as well as some younger ages, it looks like cash values can get as high as $65/M. Definitely NOT de minimus.
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Old 07-01-2003, 10:01 AM
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Default missing material mandates

If cash values are required, FL mandates RPU; others would need ETI or RPU. Even if approved without them, the law would make them part of the contract as mandated benefits -- maybe an endorsement could be approved. Tables of values and nonforfeiture benefits would also be needed in the contract; disclosure material, i.e., illustrations and/or policy summaries, would also be affected.
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Old 07-01-2003, 11:51 AM
A Student A Student is offline
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When I was pricing a term product not too long ago, and looking at the actuarial guideline it seemed like the cash values could come from two places - either the guaranteed premium pattern, or the current premium pattern. Its possible to "sculpt" the guarantees to remove any cash values, and have it be transparent (for the most part) to the customer. For the older ages on a current basis we had to go to a shorter renewal period to eliminate the cash values. I think our latest ten year period ended at 75, and we went ART afterwards.
FWIW...
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Old 07-01-2003, 11:54 AM
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Quote:
Originally Posted by A Student
When I was pricing a term product not too long ago, and looking at the actuarial guideline it seemed like the cash values could come from two places - either the guaranteed premium pattern, or the current premium pattern. Its possible to "sculpt" the guarantees to remove any cash values, and have it be transparent (for the most part) to the customer. For the older ages on a current basis we had to go to a shorter renewal period to eliminate the cash values. I think our latest ten year period ended at 75, and we went ART afterwards.
FWIW...
Another good reason SNFL needs to be revised -- if the consumer reasonably expects no cash values, and the market wants this product, the majority should make the law sufficiently flexible to permit it.
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Old 07-01-2003, 11:57 AM
Chris Poirier Chris Poirier is offline
 
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Where the product under question conveniently ends at exactly age 70, I'd guess there was a misunderstanding of the 20/70 rule involved. Or perhaps the product originally had higher ART tail premiums which were removed (without full consideration of the consequences) before the product was introduced.
But that's a first guess - very tough to say without seeing the exact product specs. I'm sure that the actuary who designed the plan believed it did not require cash values - if you can contact that actuary, that might be your best course.
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