Non-Zero Death Benefit in Overloan Protection Uniform Standard
If you offer Overloan Protection with your products, please share this weekly tip with your actuaries.
The Additional Standards for Overloan Protection Benefit, IIPRC-L-08-I-LB-OLP § 1B(1)(a), requires the following be included in the actuarial memorandum:
A numerical demonstration of how the overloan protection benefit functions and that any minimum benefit requirements applicable under the benefit are met, and that a non-zero death benefit is preserved until the benefit terminates.
The non-zero death benefit requirement ensures that there are always positive death benefit proceeds when the overloan protection is in effect. That is, the net death benefit, equal to the death benefit less any reduction for outstanding policy debt, must be greater than zero until the overloan protection benefit terminates. This is typically accomplished by designing the benefit such that the account value is always greater than the policy debt.