The Pacific Venture IUL 2 is a second-generation Indexed Universal Life (IUL) insurance policy offered by Pacific Life Insurance Company. It is designed to provide permanent life insurance coverage combined with the potential for cash value accumulation linked to the performance of underlying market indices, without direct market risk.

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Core Features and Structure

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Type of Policy

The Pacific Venture IUL 2 is a flexible premium, adjustable death benefit universal life insurance policy. It falls under the category of Indexed Universal Life, meaning the cash value growth is tied to external index performance.

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Cash Value Accumulation

The policy's cash value is credited interest based on the returns of various stock market indices, such as the S&P 500 or NASDAQ-100, subject to specific limits (caps and participation rates) and protections (floors).

 

• Indexing Strategies: The policy typically offers several index account options, allowing the policyholder to choose how their cash value is allocated. Common strategies include:

  • Annual Point-to-Point: Interest is credited based on the index change from the beginning to the end of the policy year.

  • Monthly Averaging/Sum: Interest is calculated based on monthly changes or averages, potentially smoothing out volatility.

• Cap Rate (Maximum Interest Rate): This is the highest rate of interest that can be credited to the policy's cash value in an index segment, regardless of how high the underlying index return is.

• Floor Rate (Minimum Interest Rate): This guarantees that the credited interest rate will not be less than a specific minimum (typically 0% or 1%), protecting the cash value from negative index performance.

• Participation Rate: This determines the percentage of the index gain that will be credited to the policy, applicable to certain strategies.

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Death Benefit Options

Policyholders can choose from flexible death benefit options, allowing them to adjust the focus between maximizing initial coverage and optimizing cash value growth:

 

Option

Description

Option A (Level Death Benefit)

The death benefit remains level. As the cash value increases, the net amount at risk (the amount paid by the insurer) decreases. This is generally preferred for maximizing cash value accumulation.

Option B (Increasing Death Benefit)

The death benefit equals the specified face amount plus the current cash value. As the cash value grows, the total death benefit increases. This is generally preferred for maximizing the death benefit over time.

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Premium Flexibility

Premiums are flexible, allowing the policyholder to pay premiums above or below the planned target premium, within IRS guidelines (TAMRA/MEC rules) and subject to maintaining sufficient cash value to cover policy expenses.

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Key Financial Guarantees and Policy Mechanics

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Guaranteed Minimum Death Benefit

As a form of permanent life insurance, the policy generally includes a no-lapse guarantee, which ensures the policy remains in force and the death benefit is paid as long as a minimum required premium is paid.

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Policy Charges and Deductions

The cash value is subject to several ongoing charges that reduce the accumulation, including:

 

• Cost of Insurance (COI): A monthly deduction based on the insured's age, rating, gender, and the policy's net amount at risk.

• Policy Fee: A fixed monthly or annual administrative charge.

• Premium Expense Charge: A percentage deduction taken from each premium payment.

• Surrender Charges: Fees applied if the policy is fully surrendered (canceled) during the initial surrender charge period (typically 10–15 years).

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Loans and Withdrawals

The policy allows for accessing the accumulated cash value through:

 

• Policy Loans: Funds can be borrowed against the cash value. Loan interest is charged, and the borrowed amount is generally collateralized by the policy's value. The policy may offer standard loans or potentially participating or fixed loan options, where the borrowed funds remain in the index account and are subject to the declared loan interest rate.

• Withdrawals: Direct withdrawals of cash value are possible but reduce the death benefit and can potentially be taxable if they exceed the basis (premiums paid).

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Target Audience and Applications

The Pacific Venture IUL 2 is often suitable for individuals seeking:

 

1. Permanent Protection: A need for lifetime life insurance coverage.

2. Tax-Advantaged Growth: Cash value growth is tax-deferred, and the death benefit is generally income tax-free.

3. Potential for Higher Returns: A desire for cash value growth linked to market indices, aiming for higher potential returns than traditional whole life or fixed universal life policies, but with downside protection.

4. Supplemental Retirement Income: Strategic use of tax-free policy loans during retirement, provided the policy is properly funded.

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Underwriting and Issue Details

Detail

Description

Issue Ages

Varies by underwriting class (typically 0–85)

Face Amounts

Generally requires a minimum face amount, which can vary by issue age and underwriting class (e.g., $50,000 or $100,000+)

Underwriting Classes

Standard classifications (e.g., Preferred Best, Preferred, Standard Plus, Standard, Table Ratings) based on health, lifestyle, and medical history.