Distributions under a life insurance policy (including cash dividends and partial/full surrenders) are not subject to taxation up to the amount paid into the policy (cost basis). If the policy is a Modified Endowment Contract, policy loans and/or distributions are taxable to the extent of gain and are subject to a 10% tax penalty.

Access to cash values through borrowing or partial surrenders will reduce the policy’s cash value and death benefit, increase the chance the policy will lapse, and may result in a tax liability if the policy terminates before the death of the insured.

Here are some basics…

Let’s review… Whole life offers three guarantees. Circle the three features that are guaranteed in a whole life policy.

Guaranteed Level Premiums

• Premium is guaranteed and level
• Premium based on face amount of the policy, insured’s issue age, gender and underwriting issue class
• Policy riders can have a separate, additional premiums
• Contractual requirement to pay premium
  • Premiums may be paid via non-guaranteed policy dividends, surrenders of paid-up additions or loans, if there is sufficient value in the policy to do so.
  • No base policy premiums due after policy is paid up – but rider premiums may continue

Guaranteed Death Benefit

• The policy death benefit is level and contractually guaranteed
• Once the policy is paid-up the death benefit will remain in-force until death or surrender, assuming no policy loans are taken.
• The policy death benefit is net of any policy loans and accrued loan interest. For example…

Rick has a $500,000 face value whole life policy with $85,000 of cash value and an outstanding loan of $20,000, plus $5,000 of accrued loan interest. If Rick were to die today his widow would receive $475,000 of net death benefit.

Guaranteed Cash Value

Dividends

Sources of divisible surplus :

• Participating policyholders are eligible to receive an equitable share of “divisible surplus” each year as a policy dividend
• Dividends are NOT guaranteed.
• Divisible surplus is determined by Board of Directors each year
• Divisible surplus sources:
  • Mortality savings
  • Investment earnings
  • Expense savings

The Contribution Principle

• Divisible surplus returned to participating policyholders in the same proportion as contributed
• Treats all participating policyholders equitably
• Policy dividends can be used in a number of ways called dividend options

Dividend Options

• Whole Life Legacy 100
  • Premiums payable to age 100
• Whole Life Legacy 65
  • Premiums payable to age 65
• Whole Life Legacy 20 Pay
  • Premiums payable for 20 years
• Whole Life Legacy 10 Pay
  • Premiums payable for 10 years
• Whole Life Legacy High Early Cash Value
  • Early guaranteed cash value growth
  • Premiums payable to age 85

Premium Comparison

• Male - Age 40
• Ultra Preferred Non tobacco
• $500,000 Face Amount

Whole Life Legacy Riders

*Not available for qualified cases

Riders are available at an additional cost.