The whole life insurance can come across a little scary at first. The insurance industry has a lot of specialized advocates and it is not always super clear for ordinary people who do not work with life insurance every day. With that said, with a little patience and this article, you will be able to read and understand your entire life insurance statement.
According to the Insurance Act, life insurers must provide policyholders with an annual report of their insurance once a year. This must come into the hands of the insurance owner within a certain time frame around the policy day date (normally 30 days before or after).
Whole life insurance normally contains information on the following five items:
- Death benefit
- Cash Value
- Dividend (if the insurance is dividend)
Whole life Death benefit Information
if death benefits in an entire life insurance account often contain several values. These may include:
- Basic Benefit for Lifetime Deaths
- Any death benefit provided by a term rider
- Death Benefit from Paid Supplements
Basic Benefit for Lifetime Deaths is the original death benefit from the Whole Life Policy. It excludes all riders and death benefits from paid supplements. This amount of death does not change over time. it is the original guaranteed death benefit for the policy.
Term driver death benefit is any death benefit on the policy created by the addition of a rider who adds the death benefit to the entire life policy. These riders can have several different forms depending on the insurance company. This rider is also the basis of the "mixture" of all life.
Paid Death Benefit Supplements are death benefits created either by the optional additional driver or the dividend option to purchase pre-paid supplements.
Here is an example of a policy statement with the distribution of death benefits:
Here we see that the policy has $ 375 000 in basic benefit for life. There is a term rider that adds $ 750,000 in death benefits to the policy. The policy has also won a total of $ 375,000 in death benefits through the use of paid supplements. This specific insurance company divides the paid supplements into three categories, in this case some companies will only divide it into two categories. It does not matter, the functionality is the same.
By the way, paid supplements can add an incredible amount of value to an entire life policy, and it is a feature that is well worth understanding. In The Ultimate Guide to Paid-Up Supplements, you can gain a master's understanding of the driver with paid supplements. Available for immediate surplus, now!
Some statements about life report death benefit and face amount as separate values. This can cause some confusion. Here is an example:
Here the insurer reports the original face amount of the base's entire life and then death benefit total for base lifetime, term and paid death benefit supplements. This reporting can confuse some people, and insurers may differ in how they report this.
Lifetime Cash Value
Whole Life Cash Values are usually divided into two broad categories; they are guaranteed base value and paid supplements cash value.
If we look at the example from the past, we can see a detailed breakdown of the cash value of the policy:
Police base value is $ 10,000. This is the cash value that can be attributed to the base's entire life policy with a death benefit of $ 375,000. The rest of the cash value in the insurance comes from paid supplements. This includes both the paid supplementary drivers and the dividend option for purchasing paid supplements.
Some life insurance companies will refer to the basic whole life cash value as the [ guaranteed cash value . “This is a confusing nomenclature because all cash values currently in an entire life policy are the guaranteed cash value. This is probably a retention from older systems and outdated reporting methods. If you see this, do not worry, all your cash value achieved under an entire life policy is guaranteed cash value.
Entire life insurance premiums
The annual report usually breaks up the premiums in connection with the insurance. This may or may not limit the exact amounts paid to each premium and may or may not include the eligible rider with paid supplements. But it will normally indicate the frequency of payment. Here is an example from the same policy that we have reviewed so far:
Here we see that the planned premium that includes the base whole life premium and terminator premium is $ 6,000. The paid supplements paid in the last year are $ 14,000. Because the paid supplements are not considered "scheduled", this company does not include them in the section on scheduled premium payments.
The annual report will report on any outstanding lending activity. This normally only reports the current loan balance and any loan interest that may fall due on the insurance date. Here is an example from another policy with an outstanding loan:
Here we see that the customer has an outstanding loan of 3,180, $ 26 and the loan interest rate on this loan is $ 235.57. The insurance owner can choose to pay $ 235.57 or he can choose to add the interest to the loan balance. The company will normally send a separate document to the client at approximately the same time describing the loan and the possibility regarding the interest rate.
Some of these messages can be a bit confusing and can make the insurer believe that the policy is in danger of ending. Why insurance companies do this is beyond me, but if you get one then do not worry immediately. There is a good chance that your insurance is good and a quick call to the insurance company or your agent can confirm this.
If the entire life insurance policy is entitled to a dividend, the annual report will generally report on the dividend received and the dividend option used. Here is an example from the previous policy we looked at:
Here we see that the policy earned 3000 dollars in dividends and that $ 3000 went to the purchase of paid supplements. This bought an additional $ 15,000 in death benefit for the insurance owner. The statement describes the details, but it also means that there is now about $ 3,000 in cash value throughout the life policy.
Note that the statement also mentions that the insurance owner has the right to change his dividend alternative and instructs him how to do this.
Dividends can sometimes cause some confusion for insurance owners because they want to combine the dividend to ensure that the life insurance company did the math correctly. Unfortunately, there is really no way to do this because the dividend calculation is ownership of the insurance company.
The loose rule of thumb is to deduct the guaranteed reserve value from the dividend interest rate (provided that the company publishes is) and then take this difference as a percentage against the insurance's cash value. This should give you a product somewhere close to the dividend, but this is not an exact figure. In addition, several variables can affect the dividend itself and this can create a higher or lower dividend than what this calculation gives. Catalog