How to correctly illustrate face amount decreases with Inforce ...

1June 2003How to correctly illustrate face amount decreaseswith Inforce Illustrations 1.2Following is a step-by-step guide to producing accurate illustrations when there is a faceamount/payout decrease.STEP 1 Accessing the Policy InformationTo prepare a life insurance inforce illustration quotation, you’ll need to open bothTransamerica’s LifeView illustration software and the webCAPPOW system, and then proceed asfollows:• On webCAPPOW, display the policy that you would like to illustrate. You can easilyreference the policy by policy number or by name of insured. Next, click the “Inforce”tab on the far right side of your webCAPPOW screen and click “Download”. The systemwill download the policy information to your computer.• On LifeView, click “Inforce Illustrations” (located on the main menu screen) and select“Import from webCAPPOW”. You’ll be guided to download the policy information justcaptured from webCAPPOW. The system will populate the LifeView screens with actualpolicy information based on the last month anniversary day.STEP 2 Illustrating a Face Amount DecreaseOn LifeView, go to the “Coverages” tabDO NOT enter the decreased face amountDO click the “Custom”in the “Death Benefit” field, as the correctbox to enter the reducedsurrender charges will not be reflected in face amount detailsthe policy’s cash value.1

2After you click the “Custom” box on the Coverages tab, the Face Amount Decreases window willappear. Use this window to enter the details of a future face amount decrease and proceed asfollows:• Enter the year in which the original face amount ends in the “To Yr” field on the top line.• The year in which the reduced face amount begins will be automatically updated in the“From Yr” field on the next line.• Enter the year in which the reduced face amount ends in the “To Yr” field on this line.• Enter the new face amount where shown.Important:You must apply for face amount reductions using the correct forms andprocedures. Your distributor can provide you with this information. As well,Transamerica will soon post this information on the Administration section ofthe Distribution Resource Centre (DRC).In the current inforce software, the face amount deduction is illustrated as ofthe policy anniversary date. Please contact your distributor if you require anillustration showing a face amount deduction within policy year.2

3STEP 3 Saving your changesAfter you enter details in the “Face Amount Decreases” window and click ‘OK’, the informationis automatically saved.To delete the face amount reduction,uncheck the “Custom” box.To edit the face amount reduction,click “Edit”.3

Step 4 Presenting the Illustration4In this example, the face amount was reduced from $300,000 to $200,000 in year 7. Please notethe face amount adjustment as well as the reduction in the fund value. The reduction in the fundvalue reflects the partial surrender charges that are taken, in accordance with our contracts, whena face amount is reduced.With Face Amount reduction:Without Face Amount reduction :4

Why are surrender charges required for face amount reductions?There are many up-front costs such as the expense of financial and medical underwriting, policyset-up, and compensation that a company has to cover when issuing a UL policy. These costs arenormally recovered over time through the Cost of Insurance, which is tied to the face amount.However, if the face amount is reduced in the early policy years, the company cannot recoup itsexpenses.Surrender charges protect the company by ensuring that these costs will be recovered if the faceamount is decreased or the policy is cancelled. The duration and method for determiningsurrender charges is stated in the policy contract and is guaranteed not to change.5Which plans can I use to illustrate Inforce Illustrations 1.2?Please note that Inforce Illustrations 1.2 can be used to illustrate only the following plans:• ADVANTAGELife Plus• ADVANTAGELife• Assured Life• TPlan• Transaver• LifetimesaverPlease contact your distributor for any other inquiries about inforce illustrations and for thefollowing inforce illustrations not currently supported by Inforce Illustrations 1.2:• Switching from ART (YRT) cost of insurance to level cost of insurance on the above plans• Optimizer on ADVANTAGELife PLUS• EstateADVANTAGE• WealthADVANTAGE• CHALLENGER and other former NN plans5