Life Insurance 06. Flashcards
- Can this policy be converted?
Yes. during the CONVERSION PERIOD shown on the Schedule of Benefits and Premiums (“The Schedule”).
- When does this policy end (as long as the premiums are paid)?
to age 95. CONVERTIBLE
- What does it mean that this policy is PARTICIPATING?
It is NONPARTICIPATING, meaning that it does not participate in the earnings or surplus of the company.
- What is the INITIAL MODAL PREMIUM?
$134.20 per month
- When you run your Term Life Insurance Quote, the rates normally reflected assume that you are paying your premium on an _____________basis.
Annual.
- You may have the option to pay the premiums over shorter durations such as monthly, quarterly, biannually, etc. This is what dictates the:
MODAL FACTOR.
- The Modal Factor is usually a percentage. For example, it may look something like this:
a. Semi-annual: .51 (8.2% APR)
b. Quarterly: .26 (10.8% APR)
c. Monthly: .0875 (10.8% APR), Pre-arranged withdrawals only.
- Different payment periods essentially means that you will:
Pay more per year if you pay at a smaller installment than annually.
- If your annual premium is $1000 and you choose to pay semi-annually (every 6 months), then we would apply
51% of the $1000 annual charge. In this case, you would pay $510 twice during the year. This means you are paying a total of $1020 for the year for an additional premium of $20.
- The MODAL FACTOR here is essentially a:
2% penalty for paying twice a year instead of annually. The penalty goes up for shorter durations.
- Taking the same example of $1000 annual premium, if you pay quarterly, then you would pay a _____penalty.
4% (26% +26% +26% +26%). In this case you are paying an additional $40 on the $1000 premium.
- The penalty on monthly is steeper, since if we multiply the 0.0875 MODAL FACTOR by 12, it amounts to an extra:
5% extra premium. This means you are paying $1050 versus the annual premium of $1000.
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