The 4 Most Common Life Insurance Settlement Options

The 4 Most Common Life Insurance Settlement Options

The commonly offered and state-mandated settlement options include payments made as follows: in cash; in a fixed amount over some period of time; for a fixed period of time in some amount; or any of the common annuity options. The critical element to examine is not the options, per se, but whether or not the insurer makes age or time adjustments to the settlement options. A relatively small number of companies have provisions that are…

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Our Life Insurance Experts Reveal the Benefits of the Common Accident Provision

Our Life Insurance Experts Reveal the Benefits of the Common Accident Provision

Only about one in three contracts issued specifically includes a common accident provision, or what is sometimes called a survivorship clause or common disaster clause. Insurers have designed the clause to avoid inclusion of death benefits in the beneficiary’s estate if he or she dies within a designated period after the insured. Where found, the provisions provide that the principal beneficiary must survive the insured by anywhere from seven to thirty days to receive the…

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Bundling Comes to Life Insurance via Additional Insured Riders

Bundling Comes to Life Insurance via Additional Insured Riders

Additional insured riders generally are term insurance riders on insureds other than the insured named in the base policy. One of the most common uses of the additional insured rider is in what is called the family policy. The family policy insures all or selected members of the family in one contract. Typically the base policy is some form of permanent cash value policy on the principal breadwinner with term riders on the spouse and…

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Our Experts Explain the Little-Known “Change of Insured” Provision in Life Insurance Policies

Our Experts Explain the Little-Known “Change of Insured” Provision in Life Insurance Policies

The change of insured provision or rider is an attractive option in business insurance applications such as key person insurance or buy/sell funding. It is a special form of change of plan provision that essentially permits the policyowner to exchange a policy on one life for a similar policy on another life with evidence of insurability. The key attraction is that this type of policy exchange is less expensive than terminating the old policy and…

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The “Change of Plan” Provision in Life Insurance Policies and How it Could Help You

The “Change of Plan” Provision in Life Insurance Policies and How it Could Help You

Many policies provide a change of plan provision that gives the policyowner the privilege of exchanging the policy for some other contract issued by the company. In essence, this feature is an in house Code section 1035 exchange provision. In term contracts this generally is the conversion option that allows the policyowner to exchange a term contract for some form of permanent cash-value contract. In permanent cash value contracts, the privilege normally is to change…

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Life Insurance “Bailout Provisions” and how Having this could Help You

Life Insurance “Bailout Provisions” and how Having this could Help You

Most current assumption and universal life policies use surrender charges rather than front-end loads to recover issuing expenses if the owner terminates the policy in the early years. Some of these policies provide a bailout provision that reduces or eliminates the surrender charge for early termination if the current rate credited to cash values falls below specified levels. This is an extremely attractive feature because it provides some assurance that the company is not using…

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4 Methods Used by Life Insurers to Pay Dividends to Policyholders

4 Methods Used by Life Insurers to Pay Dividends to Policyholders

Although most companies provide the basic four dividend options—(1) cash, (2) reduced premiums, (3) dividend accumulations at interest, and (4) additional paid-up insurance—some do not provide all these options. In fact, one large New York company provides no options: the company uses dividends exclusively to reduce premiums. Many other companies, but certainly not most companies, also permit the policyowner to use dividends to buy one-year term insurance. In most cases, the insurer limits the term…

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2 Most Common Ways Life Insurers Charge Interest on Policy Loans

2 Most Common Ways Life Insurers Charge Interest on Policy Loans

Despite the fact that companies may use a variable policy loan interest rate, the majority of companies still use a fixed rate, which is commonly 8 percent, although it varies by company and from one policy type to another. This suggests that many consumers prefer the certainty of a fixed rate. Companies that use a variable rate usually determine that rate using the greater of: (1) Moody’s corporate bond yield for the month ending two…

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Our Experts Explain the Automatic Premium Loan Provision in Life Insurance

Our Experts Explain the Automatic Premium Loan Provision in Life Insurance

Many companies provide an automatic premium loan provision, but the policyowner must in some states actively elect to make the feature operative. When operative, if a premium is unpaid at the end of the grace period and there is sufficient cash value, the policy automatically will advance a loan to pay the premium and prevent lapse. Most companies place no restrictions or limitations on the use of the automatic policy loan provision. However, some companies…

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The Life Insurance Early Cash Value Rider Explained

The Life Insurance Early Cash Value Rider Explained

The early cash value rider is an optional rider providing for higher cash values in the early years of a policy in the event of a full surrender for cash. It effectively waives the surrender charges and premium load associated with a life insurance policy, or returns all or part of the cumulative paid premiums, whichever provides the greater benefit. In exchange for the early high cash value, the cash value in the later years…

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