One Year Term Cost For Envelope Funding

[Guest merlin]

Should the OYTC be calculated on the full face amount of the insurance or on the net amount at risk (FA-CV)?

[david rigby]

Although this is not my usual type of client, I thought the term cost is just that, the cost.

Determine all liabilities; determine all assets. Combining them is what makes a funding method.

[Ron Snyder]

On the full face amount.

[Guest merlin]

I've seen it done both ways. Any reason for the full FA rather than the NAAR?

[Guest Roman]

I have always seen it as having the CV as part of the assets and then valuing the term cost as qx times the Face amount.

[JAY21]

My experience is the same as Roman.

[SoCalActuary]

My experience is that the plan death benefit definition determines the method.

If the benefit is only the face amt, or PVAB if greater, then the NAAR is the basis for the term cost. If the benefit is face, plus PVAB - CV, then use the full face for the term cost.

[Guest merlin]

Great answer,SoCal. Thank you and all other responders very much.