SETTLEMENT OPTIONS Death proceeds of a life policy can be paid out in five different options: lump-sum, fixed amount, fixed period, interest only, and life income.
a. Lump-sum - Although this option is still available it is not used as frequently as the others.
b. Fixed amount - Policy proceeds plus interest are used to pay out a specified amount of income at regular intervals until the proceeds are exhausted.
c. Fixed period - Provides for equal payments of an amount that will exhaust the principal and interest by the end of the fixed period.
d. Interest only - Provides that the insurance company hold the death benefit in trust for a specified time, while the interest earned on the proceeds is paid to the beneficiary at stated intervals. The death proceeds are then payable under a life income plan.
e. Life income - Essentially the insurer uses the death proceeds to purchase a SPIA, even if the principal is depleted the income payments continue as long as the beneficiary is alive.

ILLUSTRATIONS
Definition:
An illustration is a presentation that shows theoretical policy performance based on both guaranteed and non-guaranteed basics of a life insurance product over a given time frame. Illustrations demonstrate how a life insurance product works and how policy values (premiums, dividends, cash values, death benefits, etc.) accumulate under the current dividend schedule, which is not guaranteed, and may change over time. These are based on certain expectations of what will or might happen. When premiums, rates of returns and death benefits are fixed, this is not a problem. However, when these become variable, the projected numbers are not guaranteed.

Are illustrations a good way to predict future performance?
No, illustrations should not be used to project future performance or as a means to compare products. Dividend performance may change over time. Since future policy values almost certainly will be different from those illustrated, illustrations of dividends and non-guaranteed values are not intended to be and should not be used as "estimates" of future performance. Professionals are strongly encouraged to use illustrations based on dividend interest rates one or two percentage points below the current rate to see how policies would react to changes in dividends, especially when illustrating situations that are particularly sensitive to dividend schedule changes.

Policy Replacement and Viatical Settlements

Related Articles
  1. Financial Advisor

    Understanding Life Insurance Premiums

    When buying permanent life insurance, what amount of premium should you pay for the coverage?
  2. Financial Advisor

    How New Rules Impact Indexed Universal Life Sales

    Indexed universal life insurance is growing in popularity. Here's how recently enacted new rules will effect the sale of these policies.
  3. Insurance

    How to Choose Permanent Life Insurance Policies

    When does it makes sense to buy a guaranteed rather than a non-guaranteed life insurance policy?
  4. Managing Wealth

    Life Insurance With an Increasing Death Benefit

    Why buy a life insurance policy with an increasing rather than level death benefit
  5. Financial Advisor

    Advising FAs: Explaining Life Insurance to a Client

    Life insurance was initially designed to protect the income of families, particularly young families in the wealth accumulation phase, in the event of the head of household's death.
  6. Retirement

    Beware the Sneaky Math of Universal Life Insurance

    Universal life insurance's cash value can be a cash cow – if there's any left. Read on to see if it'll work as an income source after you've retired.
  7. Retirement

    Understanding Different Types of Life Insurance

    Understand the various types of life insurance, how each can be used in personal or business financial planning, and for whom they are best-suited.
Frequently Asked Questions
  1. What's considered to be a good debt-to-income (DTI) ratio?

    Your debt-to-income ratio helps lenders determine your credit worthiness. Find out how to calculate your score and how to ...
  2. What is the difference between a loan and a line of credit?

    Learn to differentiate between lines of credit and standard loans, and determine when you are likely to use each method of ...
  3. What does a Chief Financial Officer (CFO) do?

    A CFO is responsible for accurate reporting of a company's financial information, investing the company's money and identifying ...
  4. How did George Soros break the Bank of England?

    George Soros pocketed $1 billion by betting against the British pound, cementing his reputation as the premier currency speculator ...
Trading Center