Introduction to Current Assumption Whole Life (CAWL) Insurance

Current Assumption Whole Life insurance (CAWL) is essentially a hybrid of traditional cash value whole life insurance and Universal Life insurance (UL). At the time of issue, the premium and death benefit levels are fixed, similar to traditional whole life policies. However, like UL, the insurer credits separately identifiable interest and assesses separately identifiable mortality and expense charges to an accumulation account.

As a result of this combination of features of both ordinary whole and universal life, CAWL is sometimes called interest-sensitive whole life or fixed-premium universal life. But neither of these terms is quite accurate. The term “fixed premium” is not apt because premium and death benefit levels generally remain fixed only for a certain period of time, such as five years, based on anticipated interest, mortality, and expenses. At the end of each period, the premium level and sometimes the death benefit level are recalculated taking into account the actual accumulation account value and new experience assumptions. Also, the term “interest sensitive” is not correct because most CAWL policies are “sensitive” not only to interest or investment performance on the underlying assets but also to the mortality and expense experience of the company.

Reproduced with permission.  Copyright The National Underwriter Co. Division of ALM

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