I just noticed something, wondering if anyone has any general idea on ‘why’ this is.
Quick pay life insurance always has cash values. My general understanding is that this is generally forced by pricing structure/reserves and a bit by regulations.
Quick pay critical illness insurance generally does not have cash surrender values. Any idea why that is? or what’s different from life insurance that doesn’t effectively require csv’s?
What is quick pay life insurance? I’ve never heard that term before.
Like a 20.pay whole.life
Not required by law/reg?
Explain what the structure and term of this insurance is.
Asking for a friend who is not in life nor critical illness insurances.
Duration of coverage is for life or until claim.
Premiums for 20 years then zero thereafter.
OK, so there might never be a claim, unlike a whole life policy?
I hope this answers your question.
Answered by a friend, who knows nothing about life or critical illness insurances.
I’ve never heard of a “limited pay” CI policy, so there’s that.
In general, though, CI is not used as a savings investment tool like some LI, just risk transfer.
Okay, gotcha. Basically, your cash surrender value is PV(future guaranteed benefits) - PV(future adjusted premiums).
Adjusted premiums are defined in standard nonforfeiture law (maybe this has been overridden by VM-20, it’s been a while). Adjusted premiums have some “cushion” built into them so they are higher than the net premiums used to calculate reserves.
For a 10 or 20 year term policy, PVGB-PVAP is negative at every point in the policy’s life. But when you get to a 30 year term policy, the benefits are curving up quickly in the late years and the cushion isn’t enough to offset the future benefits after 10 years or so, so they have to provide a CSV.
Same thing applies to limited pay whole life. All the premium is front-ended, so you quickly hit a point where future benefits exceed future adjusted premiums and a CSV is required.
I’m actually aware of the mechanics of this. Id assume limited pay ci has the same mechanics. So why no csv?
Lower level of excess of pvfb over pvfp compared to life (flatter morb curve?)? I mean you canucks have t100, so whatever.
Sorry, my brain misread your question. Is CI considered a supplemental benefit? I believe those have a different way for calculating adjusted premiums.
While it can be a supp ben, sounds like SL is describing a stand-alone policy.
I am…ci is popular in Canada. Which is funny because I’d say the is needs the coverage more.
Maybe? I wondered about this, but have no actual information to validate.
CI is health insurance. Health insurance (US) is not required to have cash values. Side note: when LTCI was a new line, the industry persuaded the NAIC that nonforfeiture/ cash value requirements would add too much to the cost.
Thanks. Without a definitive answer ,im going to.assume this is the answer. Ci in canada is also not under life insurance, so thats likely it.
OK, so determine the cash value of a CI policy.
Go ahead, make an estimate.
I mean, every year there is a P(CI), and there is probably some extremely wide Severity of CI. So use an average/median severity of CI. Or is the severity basically, “If you have a CI, you will receive $50K”? so PV all of those.
My “back of a napkin using a pen with no ink estimate,” while also knowing nothing, is that it’s worth $1,000. Less than what it costs, I bet.
Suppose 0.1% flat annual P(CI) AND A $50k payout and 5% interest over 50 years.
I’m getting $912 PV over 50 years.
So, I’ll pat my own back on that no-look estimate.
If I wanted to do math, I’d be credentialled. I thought instead I’d just ask an actuary.
Some CIs are not severity based, just lump sum on diagnosis.