Nterest & Market Sensitive Life Insurance

hello we're going to discuss interest sensitive products and policies here today so I first want to get started on on the slide here that shows a modified endowment contract and you see there it says the cash value grows too fast and does not pass the seven paid test so any policy

 can become a MEC basically it's like these cash values are on steroids they're growing really big and what happens is there's too much premium going into the policies and Uncle Sam's figured that out said listen if you put too much money into these policies we're gonna clear it a modified endowment contract because it's endowing before age 100 and now there's going to be tax consequences on it okay so any policy

Taxable event

 can be that way it says this becomes a taxable event and the policy loses all its tax advantages and that's a real bummer if you're not expecting that to occur so you just want to know that in the first seven years there's only so much premium that can be put in any policy and they put too much in this is what occurs because that kind of sets us up for our 

next discussion on universal life so let's take a look at universal life it says at the top flexible premiums and adjustable death benefit well what does flexible premium mean flexible premium means you can skip a premium

 if you want you can put it says you're the premium is 125 a month maybe you want to put 150 maybe you want to put 100 so you can even skip a premium payment so when you see the word flexibility I want you to think about universal life and here it shows that 

there is every month there's a mortality charge being deducted from the cash value these are also the mortality charge here is annual renewable term and there's also monthly expenses deducted every month

 so if you want to remember annual renewable term every year I get older every year my Preem goes up so even though the premium is 125 a month the internal cost keeps going up now with Universal Life there's two interest rates that the cash value is earning it can earn the guaranteed interest rate declared by the company or the current rate it might even be a little bit higher so remember on the annual renewable term even though

 the 125 is the premium the internal cost keeps going up and there

could be a little problem with this because even though I'm paying 125 every single month those cost keeps getting higher and higher it can get to the point where the policy you either have to start making higher premium payments or it elapsed if there's not enough cash value to cover it through the length of time 

now the second it says adjustable death benefits and that takes us to our next slide adjustable death benefits remember 

the MEC we talked about when the cash value grows too large in the policy well the way the universe life handles it 

it adds a corridor on it corridors like hallway so you know add that space so it's going to increase the face amount if the cash gets too high and so it'll have a higher death benefit

 that's option number one an option number two is you the policy not the policy owner because the policy owner is dead but the beneficiary would receive the face amount and

the cash value 

see more:Donated cars for low income families

insurance policy

that's on option number two so two different adjustable death benefits kind of unique to Universal Life our next one we want to take a look as equity index universal life Naomi talked about this earlier equity index it's kind of like it the the slideshow says it's watching an index it's watching the S&P 500 it's not invested there but if that index goes up then the cash values go up there is a guaranteed interest rate on the policy

 but it is going to give the policy owner the opportunity to earn some higher returns based on that the next one is variable ah you got to do this I know you're sitting at home or sitting in the office or sitting somewhere but V V is variable and anytime you see variable you've got equity stocks bonds mutual funds and that V also means you need two licenses you need two licenses to sell any of those products whether it's variable life

 variable universal life variable annuities you need two licenses you need the license that you're getting with this class the life and annuity which is regulated by the Department of Financial Services and you need a securities license the FINRA license which is regulated by the SEC so this state really wants you to know that so if you see any of those two think 

women first off I need two licenses

 and then that answered the question so it says here the monies is in a separate account and it really is in a separate account

 account that you have picked that's available from the company stocks bonds or mutual funds that you would like the idea behind it is to get a higher rate of return is to do better than a cash value because the cash value is going to do a minimum rate

 maybe two to four percent cash value growth and the variable products you do have that opportunity for a higher return and then it says also you'll see on the slide that the separate account does affect the death benefit all right it may go down but there is a guaranteed death benefit under these here and variable 

universal life so that's a blend of universal life and variable life so again you've got the premium flexibility like a universal life the cash fat whoops the cash values in the separate account and it's composed again equity stocks bonds mutual funds and death benefit his flexibility like the universal life policy does all right but the premiums are fixed on this premiums are fixed and our last one here is intra sensitive whole life 

and as it says the premiums are based on the insurers experience with their investment

 so if the insurance company's investments are doing better all right then those cash value will grow 

but if the insurance company's interest has not done that well then they may ask you to pay a higher premium if you don't want to do that you can reduce the death benefit instead all right so the interest sensitive and obviously 

if the interest are doing lower for the company you don't want to pay that higher premium so you're offered option then would to be to reduce your death benefits to keep that within your budget okay that concludes our interest market sensitive policies thank you