Nature of Variable life products
What is Universal Life?
-Permanent life insurance - Cash and loan value - Flexible premium- Adjust or skip premium- Current assumptions with transparency- Interest, mortality, expense- Adjustable death benefit- Option A or B
Universal Life Option B:
Increasing death benefit option Death Benefit gradually increases
Universal Life Provisions
Insurer must send an annual report to policyowner, with previous and current values, death benefit, cash surrender value, and amount of outstanding loan
Cash Value
NOT GUARANTEED, Separate account
Universal Life Option A:
The level death benefit option Death benefit remains level Cash Value gradually increases
Has Fixed Premium
Variable Life
Universal Life Policies
allowed to have loans
Variable Life policy loans
can borrow on the cash value
Seperate account
cannont be commingled with the general account
If an annuitant dies and beneficiary is not named,
death benefit will be paid to the annuitants estate
Variable Universal Life
- Combination of Universal Life and Variable Life .- Variable Life features: - Separate investment account for CV - No guaranteed minimum CV or loan value - Universal Life features: - Flexible premiums - Option A (level) or option B (increasing)death benefit- Current assumptions with transparency*Interest, mortality, expense
Advantages of UL
- Flexibility in premium payment - Death benefit is adjustable - Transparency of policy elements - Current assumptions for interest, mortality and expenses
When is Universal Life Indicated?
- Need for ultimate flexibility- Premium payment can be adjusted/skipped - Death benefit can be adjusted - Excellent program for young family if discipline and resources to pay adequate premiums to maintain the policy .- Low initial premium - High death benefit - Cash Value accumulation
What is Variable Life?
- Permanent life insurance with investment flexibility .- Level premium - Policyholder has separate investment account for cash value .- No guaranteed minimum CV or loan value. - Death benefit usually a multiple of CV subject to guaranteed minimum.
Accumulation Period AKA Pay-In Period
Period of time over which the woner makes payments (premiums into an annuity. Payments earn interest on a tax-deferred basis
Flexible premium policies
adjustable whole life policy may be suitable for someone with fluctuating income
Universal Life
also known as flexible premium adjustable life interest-sensitive policy always annually renewable term insurance
face amount/face value
amount of money listed on face page of policy, amount that will be paid in event of insureds death
Annuity income based on
amount of premium paid or cash value frequency of payment interest rate annuitants age and gender
Grace Period in flexible premium universal life
at least 30 days after lapse
Annuities
waive surrender charges for death or disability
Waiver of Premium Rider in Universal Life Disabled insured
waives the premium for a total disability after a waiver period
Variable (Universal Life)
Flexible Premium
Variable Life has
Guaranteed minimum death benefit Cash value based on investments in insurance company's general investment account
Must submit in Universal Life
a statement of policy information for the applicant, delieverd within 15 working days.
Universal life withdrawals and Partial surrenders
charge may apply but available
Before a variable life is submitted, must submit
copies and a general description of policies statement of assets held in seperate account
in seperate account
description of investment objective statement describing procedures for changing the investment policy
Variable Life is
dually regulated by the state and federal Gov SEC & FINRA Also regulated by the insurance department as an insurance product
Variable life
earnings on cash value are tax deferred
Variable life
face amount can increase or decrease to a stated minimum
Variable (whole Life)
fixed premium
Variable Life
fixed premium, minimum death benefit cash value and the actual amountof deah benefit are not guaranteed
Policy Loans
insurance company charges interest on outstanding policy loans
Variable Life
level fixed premium investment-based product fixed premiums & guaranteed minimum death benefit Cash value not guaranteed
Variable annuities
payments not guaranteed; premiums are in separate, and invested in stocks and bonds
If insured skips a premium payment in universal life
premium may be deducted from the policy's cash value policy wont lapse
option1/option A:
provides a level death benefit equal to the policys face amount as the policys cash value increases
Option 2/Option B:
provides for an increasing death benefit equal to the policys face amount plus the cash account
surrender charges
reduce the amount a policyowner will receive upon cash surrender
Agents selling variable life must be
registered with FINRA licensed by the state to sell life insurance recieved a securities license
If an annuitant dies during the accumulation period
the insurer is obligated to return to the beneficiary either the cash value, or the total premiums paid, whichever is greater the beneficiary is responsible for the taxes
Annuity Period AKA Annuitization Period Liquidation Period Pay-Out Period
time in which the sum that ahs been accumulated during the accumulation period is converted into stream of income payments to the annuitant.