Guideline Annual Premium (GPT)

[celiothrkn]

I'm working on an IUL case right now using the GPT test. The illustration software came out with these 3 stipulations:

Initial Guideline Annual Premium (GAP): $6K
Initial Guideline Single Premium (GSP): $70K
Initial 7-Pay MEC Premium: $17K

The client was originally planning to 10-Pay the policy with $6,500/year in Y1 and $4,500/year in Y2-Y10. I noticed that the Y1 premium exceeds GAP, but an internal wholesaler told me that I shouldn't worry at all. Is that correct?

 

[DHK]

The GPT is the kind of calculation you're using when solving for the death benefit for the premium input. You could do a minimum, target, or maximum funding within the GPT calculations.

If you're not doing a maximum-funding calculation, I'd be looking at a non-lapse guarantee rider premium or find another product. Maximum-funding is the ONLY way I'd sell an IUL without a non-lapse guarantee rider.

I wouldn't let a wholesaler do my illustrations for me.

 

[Allen Trent]

I'm working on an IUL case right now using the GPT test. The illustration software came out with these 3 stipulations:

Initial Guideline Annual Premium (GAP): $6K
Initial Guideline Single Premium (GSP): $70K
Initial 7-Pay MEC Premium: $17K

The client was originally planning to 10-Pay the policy with $6,500/year in Y1 and $4,500/year in Y2-Y10. I noticed that the Y1 premium exceeds GAP, but an internal wholesaler told me that I shouldn't worry at all. Is that correct?

Depends on client age & if the client cares if the policy is a MEC. If you are short paying like 10 years a no-lapse IUL purely for guaranteed death benefit protection, having the paid premium in year 1 exceed GAP wont matter because the policy being a MEC might be a non issue.

If you are designing for max cash accumulation, you wont want it to be a MEC & likely cant get enough premium into policy in 10 years. Look at the illustration & see if it has the MEC symbol in any of the years to show it exceeded the allowable premiums in any of the years

 

[Tahoe Ray]

Assuming you're trying to avoid MEC and want to max the cash, take the extra 2k and spread it over the 10 years. 4700/yr. You should have a lower DB (and more cash) if your internal is just default running it based on that funding.