Life Policy Provisions, Riders, and Options

Fixed Amount

Settlement Option; pays a fixed amount in installments until the proceeds are exhausted

Accumulation at Interest

Dividend option; insurer keeps dividends in an account where it accumulates interest. Policyowner allowed to withdrawal dividends at anytime. Amount of interest is specified and compounds annually. Interest on dividends is taxable to policyowner always

Paid-Up Insurance

Dividend option; accumulates dividends at interest and then uses the accumulated dividends plus interest and the policy cash value to pay the policy up early

Paid Up Additions

Dividend option; automatic option; dividends are used to purchase a single premium policy in addition to face amount of the permanent policy. Each addition will increase death benefit

Fixed Period

Settlement Option; Specified period of years is selected and equal installments are paid to the recipient, continue even if recipient dies before the period ends

One-Year Term

Dividend Option; Uses dividends to purchase additional insurance in the form of one-year term insurance that increases the policy death benefit

Reduction of Premium

Dividend option; Insurer uses dividend to reduce the next year's premium

Cash - Dividend

Insurer sends policyowner a check for the amount of the dividend as it is declared, usually annually

Extended Term

Nonforfeiture option; automatic option; uses policy cash value to convert to term insurance for the same face amount as the former permanent policy. Same face amount, shorter term of coverage

Reduced Paid - Up

Nonforfeiture option; cash value used as a single premium to purchase completely paid up permanent policy that has a reduced face amount from former policy

Cash - Nonforfeiture

Nonforfeiture option; surrenders policy for the current cash value; if cash value exceeds premiums paid, excess is taxable as ordinary income

Cash - Settlement

Settlement Option; Automatic option; pays policy proceeds in a lump sum upon death of insured or at point of endowment, not taxable as income

Interest Only

Settlement Option; Insurer retains policy proceeds and pays interest on them to the recipient at regular intervals. Considered temporary

Life Income

Settlement Option; Straight Life; provides recipient with an income that they can not outlive. Installment payments guaranteed for as long as recipient lives. Based on life expectancy and amount of principle