Life Insurance Policy Provisions, Options & Riders

Front 1

For a Whole Life cash value policy, can you take cash surrender before you die or age 100?

Back 1

Yes. If you cancel after 35yrs for $1k/yr = $35k in premiums. Say cash value is $40k, subtract cost basis (how much you invested) of $35k. When you withdraw you'll have $5k leftover that IS taxable as ordinary income. The extra $5k came from the interest over the years.

Front 2

How many years from the start of your policy is there no Cash Value?

Back 2

Typically, 3 years.

Front 3

Can you take a loan from your cash value?

Back 3

Yes. Loans are not taxable. From $40k, you take $20k loan. But if you die then, it'll be your death benefit - Loan - interest owed on the Loan.

Front 4

If you reach age 100, what will the insurance company do?

Back 4

If you live past age 100, the insurance company will cut you a check for your policy amount minus premiums. And, that leftover amount is taxable?

Front 5

What is Continuous Premium?

Back 5

You pay the same amount for life (Whole Life).

Front 6

What is a Limited Paying policy?

Back 6

Select the stop paying at a predetermined age, yet coverage would continue. The shorter the premium paying time, the higher the premium. Maturity is always age 100 for Whole Life.

Front 7

What is the current interest rate of a Universal Life policy?

Back 7

It is the minimum guaranteed rate plus the excess rate (which could vary).

Front 8

What are the best pros with Extended Term & Reduced Paid-Up?

Back 8

ExTerm gives you the most insurance protection (face amount), while Reduced Paid-Up gives you the most time protection.

Front 9

For borrowing money of your cash value, how long can the insurance company defer your request?

Back 9

Up to 6 months.

Front 10

How much interest can a company charge from the money you borrow?

Back 10

Maximum of 8%.

Front 11

What is an Automatic Premium Loan?

Back 11

This policy have to have or will have a cash value, and if your payments elapse, it automatically borrows from the cash value. Although, that will need to be paid back, plus interest.

Front 12

Mutual insurance companies issue participating policies. What are the 6 ways to pay out these dividends.

Back 12

1. Check - simple check to policy owner

2. Reduction of Premium Payments - Keeps dividends to discount future payments

3. Accumulation of Interest - Keeps dividends and pays interest; which is taxable.

4. Paid-Up Addition - Keeps dividends to purchase new WL policy

5. Paid-Up Option - to pay up any Additions

6.One-Year Term Option - Keeps and creates new Term policy (non-renewable)

Front 13

What are the Disability Riders?

Back 13

Waiver of Premium Rider, Disability Income Benefit & Payer Benefit Life/Disability.

Front 14

Waiver of Premium Rider is?

Back 14

This rider will pay for the premium if the insured becomes totally disabled. The owner has to be disabled for at least 6 months; which he has to pay himself during that time.

Front 15

Disability Income Benefit is?

Back 15

Can also be sold separately, this income rider replaces net earnings from a disabled owner (usually kicks in sooner than later).

Front 16

Payer Benefit Life/Disability is?

Back 16

Pays for the premium of a child; usually paid for by parent. But, if that parent becomes disabled, this rider takes over until the child becomes of age to assume payments.

Front 17

What is Accelerated (Living) Benefit Provision?

Back 17

This rider allows a policy owner to 'accelerate' receipt of a portion of the policy's death benefit upon the insured's occurrence of a terminal illness, a catastrophic illness, or eligibility for Long-Term care.

Front 18

DB Riders include: Accidental Death, Guaranteed Insurability, Cost of Living, Return of Premium, & Return of Cash Value. Explain them.

Back 18

Accidental Death is if you die as a result of an accident, and within 90 days, your DB doubles/triples.

Guaranteed Insurability is the right to purchase more coverage without proof of health.

Cost of Living adjusts the face amount to match rate of inflation

Front 19

DB Riders include: Accidental Death, Guaranteed Insurability, Cost of Living, Return of Premium, & Return of Cash Value. Explain them (continued).

Back 19

Return of Premium Rider is simply buying additional term insurance.

Return of cash value will pay your cash value (since most insurance companies keep it), along with you DB.

Front 20

Important factors about Riders are:

Back 20

They modify the policy at low added costs to your premium; none of which go towards the cash value - for any rider, most riders drop off by age 65 due to AS.