Patent ID: 8175940

Claim:
A computer-implemented method for use with a computer of the type used to administer a variable universal life insurance product having a volatility reduction feature, said computer having a memory for storing data relating to a life insurance policy and a calculation engine for performing calculations necessary to the administration of a life insurance policy, comprising the steps of: a. providing a life insurance policy having a cash surrender value; and using the computer: b. creating a plurality of variable subaccounts associated with said policy, at least one of said subaccounts being an unsmoothed variable subaccount and at least one other of said subaccounts being a smoothed variable subaccount; c. for each unsmoothed variable subaccount; 1. storing a number of variable accumulation units associated with said subaccount in the memory; 2. storing a variable accumulation unit value associated with said subaccount in the memory; and 3. using the calculation engine, periodically determining an account value of said subaccount by multiplying the number of variable accumulation units by the variable accumulation unit value; d. for each smoothed variable subaccount; 1. storing a number of variable accumulation units associated with said subaccount in the memory; 2. storing a plurality of variable accumulation unit values associated with said subaccount in the memory; and using the calculation engine; 3. calculating an average of stored variable accumulation unit values, and using said average to determine a target unit value; and 4. periodically determining a surrender value of said subaccount by multiplying the number of variable accumulation units by the target unit value; and e. using the calculation engine and the account value of the unsmoothed variable subaccount and the surrender value of the smoothed variable subaccount, periodically determining the cash surrender value of the insurance policy.