Understanding North American Company Life Insurance LS170 Policy Series

The LS170 designation refers to a series of flexible premium Universal Life and Indexed Universal Life (IUL) insurance policy forms issued by North American Company for Life and Health Insurance. These policies focus on long-term death benefit protection combined with cash value growth potential linked to external market indices, such as the S&P 500, while providing a 0% floor against market losses.

North American Company for Life and Health Insurance (often simply called North American) has been a fixture in the American insurance landscape for over 100 years. As a member of the Sammons Financial Group, it consistently receives high marks for financial strength. The LS170 policy form series represents a significant portion of their "Builder" product line, which is designed for individuals seeking a balance between permanent protection and tax-advantaged wealth accumulation.

In 2026, policyholders with LS170 forms are often at a critical juncture in their policy’s lifecycle. Whether the policy was purchased recently or has been in force for a decade, understanding the technical nuances of the LS170 contract—from interest crediting methods to monthly deduction structures—is essential for ensuring the policy remains adequately funded and meets its original financial objectives.

The Foundation of the LS170 Policy Series

The LS170 form is not a single product but rather a foundational policy structure that governs several variations of Indexed Universal Life (IUL) insurance. At its core, an LS170 policy is a permanent life insurance contract that offers flexible premiums and an adjustable death benefit. Unlike Whole Life insurance, which has fixed premiums and a rigid structure, the LS170 series allows the owner to change the timing and amount of premium payments, within certain limits, as their financial situation evolves.

The "Indexed" component of these policies is what distinguishes them from traditional Universal Life. In an LS170 IUL, the cash value can be allocated to various "Index Accounts." The interest credited to these accounts is linked to the performance of a specific market index. However, the policyholder is not directly invested in the stock market; instead, the insurance company uses a formula to determine how much interest to credit based on the index's movement.

Financial Strength and Reliability

When evaluating an LS170 policy, the underlying strength of the issuing company is paramount. North American is a privately held company under the Sammons Financial umbrella. As of 2026, the company continues to maintain high ratings from major independent agencies. For example, A.M. Best historically rates the company in the "A+" (Superior) category, reflecting a strong ability to meet ongoing insurance obligations. High ratings provide confidence that the company can support the long-term guarantees and death benefit payouts associated with the LS170 series.

Technical Mechanics of Indexed Interest Crediting

One of the most complex aspects of the LS170 series is how it calculates interest. The policy typically offers a "Fixed Account" and one or more "Indexed Accounts." The Fixed Account offers a modest, guaranteed interest rate. The Indexed Accounts, however, provide the potential for much higher returns without the risk of principal loss due to market downturns.

Caps, Participation Rates, and Spreads

The LS170 contract uses several "levers" to determine the interest credit:

• The Cap: This is the maximum interest rate the company will credit to the policy in a given period (usually one year). If the S&P 500 returns 15% but the policy has a 10% cap, the policy receives 10%.
• Participation Rate: This determines what percentage of the index's growth is credited. If the index grows by 10% and the participation rate is 100%, the policy receives 10% (subject to the cap).
• The Floor: A hallmark of the LS170 series is the 0% floor. Even if the market index drops by 20%, the policy's cash value does not decrease due to market performance; it simply receives 0% interest for that period.

These parameters are not fixed for the life of the policy. The insurance company has the right to adjust caps and participation rates on new "segments" (blocks of cash value) as they are created. This flexibility allows North American to manage its own investment risk in changing economic environments.

Monthly Deductions and Policy Costs

While the 0% floor protects against market losses, it does not protect against policy expenses. An LS170 policy is "unbundled," meaning the costs are transparently deducted from the cash value every month. Understanding these deductions is vital to preventing policy lapse, especially in years where the index performance is flat.

Components of Policy Expense

The monthly deductions typically include:

1. Cost of Insurance (COI): This is the actual cost of providing the death benefit. COI rates are based on the insured's age, gender, and health classification. Because COI rates increase as the insured gets older, the cash value must grow sufficiently to cover these rising costs in later years.
2. Policy Fee: A flat monthly fee (often $10 to $12) to cover administrative costs.
3. Expense Charges: These are often calculated as a percentage of the premium paid or a charge per $1,000 of the face amount. These are typically higher in the early years of the policy to recoup the company's underwriting and commission costs.
4. Rider Charges: If the policy includes optional benefits like a Chronic Illness Rider or a Waiver of Monthly Deductions, these will have associated monthly costs.

If the interest credited to the LS170 policy is lower than the sum of these monthly deductions over a long period, the cash value will decline. If the cash value reaches zero, the policy may lapse, resulting in the loss of coverage and potential tax consequences.

Death Benefit Options and Flexibility

The LS170 series provides two primary death benefit options, often referred to as Option A (Level) and Option B (Increasing). Choosing the right option depends on whether the primary goal is maximum protection or maximum cash accumulation.

• Option A (Level Death Benefit): The death benefit remains constant (e.g., $500,000). As the cash value grows, the "amount at risk" to the insurance company decreases. This results in lower Cost of Insurance charges, which can help the cash value grow more efficiently over time.
• Option B (Increasing Death Benefit): The death benefit consists of the face amount plus the cash value. If you have a $500,000 face amount and $100,000 in cash value, the total death benefit is $600,000. This provides more protection for beneficiaries but costs more in COI charges because the amount at risk remains high.

Many LS170 policies allow the owner to switch from Option B to Option A later in life to reduce expenses, though switching from A to B usually requires new evidence of insurability (medical underwriting).

Comparing LS170 to Other Life Insurance Models

To understand the value proposition of the North American LS170 series in 2026, it is helpful to compare it against other common insurance types.

Accessing Cash Value: Loans and Withdrawals

The LS170 series is frequently used as a vehicle for "supplemental retirement income." Policyholders can access their cash value through withdrawals or policy loans. In 2026, with fluctuating interest rates, the type of loan selected can significantly impact the policy's long-term health.

Standard vs. Variable Interest Rate Loans

Most LS170 contracts offer two types of loans:

1. Standard (Fixed) Loans: The company charges a fixed interest rate on the loan (e.g., 5%) but also credits a fixed rate on the amount of cash value held as collateral (e.g., 4%). The "net cost" is the 1% difference.
2. Variable/Variable Interest Rate Loans: The company charges a market-based interest rate on the loan. However, the cash value held as collateral remains in the Indexed Accounts. If the index performs well (e.g., 8%), and the loan interest is 5%, the policyholder actually "makes" 3% on the money they have borrowed. Conversely, if the index returns 0%, the policyholder still owes the 5% interest, which can cause the cash value to deplete rapidly.

Essential Riders and Accelerated Benefits

The LS170 policy series often includes "living benefits" that allow the insured to access the death benefit while they are still alive under specific medical circumstances. These are governed by the National Association of Insurance Commissioners (NAIC) standards adopted by the state where the policy was issued.

• Accelerated Death Benefit for Terminal Illness: Allows the policyholder to receive a portion of the death benefit if diagnosed with a terminal illness with a short life expectancy (usually 12–24 months).
• Chronic and Critical Illness Riders: These provide access to funds if the insured cannot perform two of the six "Activities of Daily Living" (ADLs) or suffers a major health event like a heart attack or stroke. These riders can be vital for long-term care planning, though they typically reduce the final death benefit paid to heirs.

Managing Your LS170 Policy in 2026

Effective management of an LS170 policy requires more than just paying the premium. Because these policies are sensitive to market performance and internal costs, regular reviews are necessary.

1. Annual Statements: Every year, North American sends a statement showing the interest credited, the deductions taken, and the current cash value. Policyholders should compare these results against the original "illustration" provided when the policy was purchased.
2. In-Force Illustrations: If a policy has been active for several years, owners should request an "in-force illustration." This document projects how the policy will perform in the future based on the current cash value and updated assumptions about interest rates and costs.
3. Premium Adjustments: If the policy is underperforming due to years of low index returns (the "floor" years), it may be necessary to increase premium payments to ensure the policy remains active into old age.

Frequently Asked Questions

What happens if the S&P 500 is negative for the year?

In an LS170 policy, your cash value is protected by a 0% floor. This means your account will not be debited due to market losses. However, the monthly deductions (COI and fees) will still be taken from your cash value, so your total balance may decrease even though no market loss occurred.

Can I change my death benefit amount on an LS170 policy?

Yes. One of the primary features of the LS170 series is flexibility. You can generally request to decrease the death benefit at any time. Increasing the death benefit is also possible, but it usually requires a new medical exam and underwriting approval to ensure you still meet the company's health standards.

Are the loans from an LS170 policy taxable?

Generally, policy loans are not considered taxable income as long as the policy remains in force. This is because loans are technically a debt against the death benefit. However, if the policy lapses or is surrendered while a loan is outstanding, the amount of the loan that exceeds the total premiums paid (the cost basis) may become taxable as ordinary income.

Is the LS170 form still available for new purchases?

In 2026, North American may have newer versions of their "Builder" series (such as LS180 or higher). However, the LS170 remains a valid and active form for thousands of existing policyholders. The rights and guarantees within the LS170 contract are legally binding for the life of those policies.

How do I find out if my policy is an LS170?

You can find the policy form number on the bottom corner of the first few pages of your insurance contract. It will typically be listed as "Form LS170" or a variation such as "LS170A." You can also find this information on your annual statement or by logging into the North American client portal.

Final Recommendations for Policyholders

The North American Company Life Insurance LS170 series is a sophisticated financial tool that requires active oversight. While it offers excellent protection against market volatility and provides significant tax advantages, its success depends on proper funding and an understanding of the internal costs.

If you own an LS170 policy in 2026, your next step should be to request an updated in-force illustration from your insurance agent or directly from North American. Review this document to see if your policy is on track to provide the death benefit and cash value you originally intended. If the projections show the policy lapsing in your 80s or 90s, consider adjusting your premium payments now to capitalize on the compounding power of the indexed accounts.