Please enable JavaScript.

Coggle requires JavaScript to display documents.

CH3 WHOLE LIFE AND TERM-100 INSURANCE (3.5 Non-forfeiture benefits (3.5.1…

- - - - builds up a cash
        surrender value (CSV) over time
    - - policy matures at age 100 typically
        do not have a CSV
    - - provides coverage for the entire lifetime of the life insured, but it also includes a savings component that is created through the deposit of excess premiums. Within
        certain limits, the policyholder can use a UL policy to accumulate savings that are completely sheltered from tax if they form part of the death benefit, or tax-deferred if they are withdrawn prior
        to death. UL insurance policies are noted for the flexibility
- - - - With term insurance, there is a chance that the insurance company will not have to pay out the death
        benefit, because the policy term could expire before the life insured dies
    - - Life insurance premiums are normally quoted on an annual basis, and premiums are payable
        in advance.
      - one of the pricing factors that affect insurance premiums is the rate of return the
        insurance company expects to get on invested premiums. However, the policyholder can usually choose to pay those premiums semiannually, quarterly or
        monthly. The insurance company calculates the periodic premium payment by applying a modal
        factor that reflects the insurance company’s loss of investment income, compared to the income
        it could have earned on an annual premium.
        
        When the policyholder opts for monthly, quarterly or semi-annual payments on a term or whole life
        policy, the total amount paid over the year (called the “annualized premium”) will always be higher
        than the quoted annual premium.(more frequently pay premium, higher premium)
        
        EX (longer period means higher modal factor)
        Victor bought a whole life policy with an annual premium of $956, but he wants to pay the premiums monthly.
        If the modal factor is 0.088, his monthly premiums will be $84.13, calculated as ($956 × 0.088).
        Over the course of one year, he will pay a total of $1009.56 in premiums, calculated as ($84.13 × 12).
        This annualized premium is 6% higher than the quoted annual premium.(1009.56-956/956)
    - - 3.2.4.1 Ongoing premiums
        (traditional option )
        (lifetime-pay policy)
        
        paying a fixed premium for the duration of the contract
      - 3.2.4.2 Single premium
        (“paid-up” policy)
        
        pay a single lump-sum premium for
        life insurance coverage that will last for the entire lifetime of the life insured.
      - 3.2.4.3 Limited payment
        
        somewhere between these two extremes, with premiums
        payable for a specific period of time
    - - The policyholder has a choice between guaranteed whole life and
        adjustable whole life
        
        3.2.5.1 Guaranteed whole life
        
        offers a death benefit and premiums that are guaranteed
        not to change over time, regardless of the insurance company’s experience with mortality costs,
        expenses and investment returns.
        
        insurance company is taking
        on all of the risk
        
        3.2.5.2 Adjustable whole life
        
        offers a death benefit and premiums that the
        insurance company may adjust periodically to reflect its actual experience.but Usually the insurance
        company will guarantee the death benefit and premiums for a certain period of time initially, such
        as five years
- - - - The insurance company retains some of this surplus to boost policy reserves, in case they
        experience a shortfall in revenue in the future.
- - - - Any funds left in the accumulation account on the death of the life insured are
        typically paid to the beneficiary of the policy
    - - evidence of insurability is not required. The amount of the PUA and the amount of coverage will depend on the size of the dividend
        and the attained age of the life insured at the time of purchase.
    - - ,medical evidence of insurability is not required.
        increase the face amount for one year.
  - - - DB increases
    - - DB increases temporarily
    - - DB and csv increases
- - - - EX Ella owns a $500,000 whole life insurance policy with a CSV of $226,000 and
        annual premiums of $11,500. She has been forced into early retirement,
        resulting in a substantial drop in income. She would like to keep the policy in
        force to meet her estate planning needs, but she cannot afford the premiums
        until her Canada Pension Plan (CPP) and Old Age Security (OAS) benefits
        commence in about five years. Ella can skip premiums for the next five years
        by using the APL provision because she has enough CSV to support this
        option. While this will reduce the death benefit by the amount of the unpaid
        premiums plus interest, it will allow her to keep the policy. She will also always
        have the option of repaying the loan and interest if/when she can afford to,
        which would restore the death benefit.
  - - - No medical evidence of insurability is required,
- - - -  He knows exactly when the premiums will end. Often the pay period is chosen to coincide with retirement, particularly if the policyholder expects to have a lower level of disposable income in retirement;
         It eliminates his longevity risk, which is the risk of living longer than anticipated or longer
        than average. For a regular whole life policy, premiums are payable for life, even if that
        extends to age 100 or even longer;
         The insurance company applies the time-value-of-money principle, which reduces the cost
        to the client over the long term because the insurer has the use of his money earlier than a
        normal lifetime payment policy
- - - - However, history has shown that agents need to exercise caution when marketing
        policies with these provisions to prospective clients because policy dividends are not guaranteed