Current Assumption Whole Life (CAWL)
Chapter 9
Tools & Techniques of Life
Insurance Planning
 What is it?
 Hybrid of traditional whole life (WL) and universal life (UL)
 level and fixed premium (like WL)
 Unbundled interest, mortality and expense charges (like UL)
 Features of universal life possessed by CAWL
 Policy elements are “unbundled”
 No or low front end loads
 Back end surrender charges instead
 Death benefit options I and II
 Current interest crediting rate lined to a specific index (such as treasury bills)
9-1
Current Assumption Whole Life (CAWL)
Chapter 9
Tools & Techniques of Life
Insurance Planning
 What is it?
 Features of traditional level premium life insurance possessed by CAWL
 Level premium and level death benefit between each “re-determination” period
 Minimum interest guarantee
 Maximum guaranteed mortality charges
 Minimum guaranteed cash values
 Nonforfeiture values
 Policy loan provisions
 Reinstatement period and settlement options
9-2
Current Assumption Whole Life (CAWL)
Chapter 9
Tools & Techniques of Life
Insurance Planning
 What is it?
 Features of traditional level premium life insurance that can be obtained as options
by CAWL
 Waiver of premium
 Guaranteed purchase of insurability
 Accidental death benefits
 Cost of living adjustments
 When is the use of this tool indicated?
 When a person wants a fixed premium, “forced savings” feature of traditional whole
life and the potential for better investment results than those guaranteed in
traditional policies
9-3
Current Assumption Whole Life (CAWL)
Chapter 9
Tools & Techniques of Life
Insurance Planning
 Advantages
 Premiums are level and fixed between each re-determination period
 Cash value interest or earnings accumulate tax-free or tax-deferred depending on
whether the gains are distributed at death or during lifetime
 Cash values are not subject to the fluctuations in the market value characteristic of
longer term municipal bonds or other long term fixed income investments, when
market rates change
 Policy cash values can be borrowed at a low net cost
 Policy is “transparent” or unbundled
9-4
Current Assumption Whole Life (CAWL)
Chapter 9
Tools & Techniques of Life
Insurance Planning
 Advantages (cont'd)
 Cost of living riders that, without evidence of insurability, automatically increase
death benefits periodically by the increase in the CPI
 Most of the policyowners premiums go into the policy cash values
 Most policies have “back-end” loads or charges
 Most CAWL policies permit policyowners to withdraw excess cash value
accumulations without impairing the policy or changing the death benefit
 Disadvantages
 In the early years , amount of protection with CAWL is lower relative to premiums
spent than with term insurance. In later years the reverse is true
9-5
Current Assumption Whole Life (CAWL)
Chapter 9
Tools & Techniques of Life
Insurance Planning
 Disadvantages (cont'd)
 In the early years , amount of protection with CAWL is lower relative to premiums
spent than with term insurance. In later years the reverse is true
 Surrender of the policy in the first five to ten years might result in considerable loss
9-6