Nonforfeiture, Dividend, and Settlement Options

Dividend Options

Crappo

Cash Lump Sum Payment

Death benefit is paid to the beneficiary as a lump sum to the beneficiary tax free.

Accumulation at Interest

Dividend option in which the insurer retains the dividend to be invested. The insured has access to the dividends at any time however they are not in the account of the insured. INTEREST IS TAXABLE

One-Year Term Option

Dividend option in which the policyowner uses the dividend as a single premium to purchase one-year term protection.

Paid-up Insurance

Dividend option in which the policyowner uses the dividend to pay up the policy earlier.

Paid Up Additions

Dividends are reinvested into the policy to increase the death benefit of the original policy.

Cash Surrender Value

For life insurance, the quantity that the owner is able to get if the policy does not remain in force until the insured's death. When this option is selected the insured is no longer covered and the policy cannot be reinstated.

Life With Period Certain Option (Life Income)

Under this payment option, payments must be paid for a specified period of time, as stated in the contract. Should the beneficiary outlive this period payments are continued to be paid for the rest of the beneficiary life. Should the beneficiary die before the period certain is over, the payments are paid to THEIR beneficiary.

Nonforfeiture Options

REC

Reduced Paid-Up Insurance

The cash value from a different policy is used to buy a single premium permanent policy that has a reduced face amount. The new policy will grow its own cash value and will remain in force until maturity or death

Extended Term

The cash value from an already enforced policy will be used to buy a term policy that is the same size of the previous policy. If a nonforfeiture option is not selected this is the default option insurers use.

Reduction of Premium

The insurer uses the dividend to reduce the NEXT YEARS premium

Fixed Amount Option

a fixed amount is periodically paid to the beneficiary until the principal and interest are exhausted

Single Life Option (Life Income)

can provide a single beneficiary income for he rest of his/her life. Upon the death of the beneficiary, the payments stop.

Life Income Option

installment payments are paid only while the beneficiary is alive and cease on the beneficiary's death AKA Straight Life

Joint and Survivor (Life Income)

payment to two or more beneficiary dies, the other still gets payments at a reduced payment. Commonly written Joint and 1/2 survivor.

Fixed Period Option

the policy proceeds are paid to a beneficiary over some fixed period of time

Settlement Options

CLIFF

Straight Life Option (Life Income)

In this option, the recipient cannot outlive the benefits paid to them and they receive monthly installments for the rest of the life.

Interest Only

Insurance company holds death benefit for a period of time and pays only the interest earned to beneficiaries

Cash Payment

Insured takes cash payment for the amount of the dividend