April 20, 2018

Colony Term Universal Life Insurance

Affordable security for today, flexibility for tomorrow
You know the importance of life insurance to help protect your family, especially during those critical years when you have children at home, a mortgage to pay and college years to fund. Your income makes it possible for you to provide for your family and give them the life you want them to have. But, what would they do if the unexpected happened to you? If the day comes when you’re no longer there, life insurance can provide the safety net that means the difference between hardship for them and continuing their lives in their own home surrounded by family and friends.

Until now, purchasing life insurance for a temporary need meant buying term life insurance with fixed premiums for fixed periods. Colony Term UL is a flexible-premium adjustable life insurance policy that let’s you plan your premium payments to be similar to term insurance premiums. It also allows you the flexibility to vary the payments as long as they are sufficient to maintain coverage and allows you to continue coverage by paying higher planned premiums if you find yourself needing insurance longer than you thought.

Colony Term UL contains a death-benefit guarantee. You can choose to maintain this guarantee by paying premiums periodically that are comparable to term life insurance premiums. These premiums are sufficient to support the guarantee for the period you select, just like term life insurance, e.g., 10,15, 20 or 30 years. If you choose to pay your planned premiums in such a way, you must pay them timely as planned to keep your policy in effect.
You can extend coverage beyond your initially chosen period simply by paying higher premiums. The longer you want your death-benefit guarantee to continue the higher the premiums you need to pay. The chart below shows one such pattern of premiums if you want to extend the policy’s death- benefit guarantee to age 105. Remember, you will pay more in overall premium by extending the death- benefit guarantee beyond your chosen period than had you chosen a longer period initially.

Additionally, if you have cash value in an old life insurance policy that no longer meets your needs, you may elect to use that cash value to help pay for this policy. An initial lump sum payment into Colony Term UL can assist in reducing future premiums. Adding to this flexibility, you also have the option to reduce your Specified Amount of death benefit if your needs have changed. Reducing the Specified Amount can help reduce your premium outlay.

Review of Product Highlights

  • a. You can choose to pay affordable planned periodic premiums comparable to term insurance premiums sufficient to guarantee death benefit coverage for an initially chosen period and then, if you want to, extend the guarantee by paying higher premiums.
  • b. while most people buy this policy intending to pay planned periodic premiums sufficient to guarantee death-benefit coverage for an initial period, Colony Term UL’s premium-payment flexibility allows you to pay premiums in different amounts and at different times and maintain the death-benefit guarantee as long as the premiums paid are sufficient to do so.
  • c. You choose the length of time you want the death-benefit guarantee to last – whether that’s 10 years, as long as you live, or somewhere in between.
  • d. Customizable death-benefit amounts help you keep your policy affordable, by allowing you to reduce your Specified Amount of coverage over time if your need for insurance decreases.

The security you need, the flexibility you want.

Each Colony Term UL product has been priced to be most affordable for death-benefit guarantees lasting initially for the period specified in the product name. For instance, Colony Term UL 20 is most affordable for initial death-benefit guarantee periods lasting 20 years. For longer or shorter initial guar- antee periods, a different Colony Term UL product might be more appropriate. You will want to match your need to the product that is right for you. Remember, Colony Term UL is designed to address the need for affordable coverage today, while providing the flexibility you may need tomorrow. If you believe that when you decide to purchase Colony Term UL you intend to pay a consistent premium as long as you want your coverage to last and that the period of coverage you need is longer than 10, 15, 20 or 30 years, you should consider purchasing a genguardSm UL policy because your planned- premium outlay may be smaller by purchasing the genguard UL policy.

Making a life insurance product more flexible also makes it more complex. we’ve provided the brief explanation above to introduce you to Colony Term UL, but it is not a substitute for reading your policy.

Colony Term UL helps you put a plan in place without forcing you to choose between sticking to your budget and buying life insurance. Take the next step – work with your life insurance advisor to customize a Colony Term UL policy that’s right for you.

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Life Insurance Rates More

The insurer (the life insurance carrier) calculates the policy prices with intent to fund claims to be paid and administrative costs, and to make a profit. The cost of insurance is determined using mortality tables calculated by actuaries. Actuaries are professionals who employ actuarial science, which is based in mathematics (primarily probability and statistics). Mortality tables are statistically-based tables showing expected annual mortality rates. It is possible to derive life expectancy estimates from these mortality assumptions. Such estimates can be important in taxation regulation.

The three main variables in a mortality table have been age, gender, and use of tobacco. More recently in the US, preferred class specific tables were introduced. The mortality tables provide a baseline for the cost of insurance. In practice, these mortality tables are used in conjunction with the health and family history of the individual applying for a policy in order to determine premiums and insurability. Mortality tables currently in use by life insurance companies in the United States are individually modified by each company using pooled industry experience studies as a starting point. In the 1980s and 90′s the SOA 1975-80 Basic Select & Ultimate tables were the typical reference points, while the 2001 VBT and 2001 CSO tables were published more recently. The newer tables include separate mortality tables for smokers and non-smokers and the CSO tables include separate tables for preferred classes.

Recent US select mortality tables predict that roughly 0.35 in 1,000 non-smoking males aged 25 will die during the first year of coverage after underwriting. Mortality approximately doubles for every extra ten years of age so that the mortality rate in the first year for underwritten non-smoking men is about 2.5 in 1,000 people at age 65. Compare this with the US population male mortality rates of 1.3 per 1,000 at age 25 and 19.3 at age 65 (without regard to health or smoking status).

The mortality of underwritten persons rises much more quickly than the general population. At the end of 10 years the mortality of that 25 year-old, non-smoking male is 0.66/1000/year. Consequently, in a group of one thousand 25 year old males with a $100,000 policy, all of average health, a life insurance company would have to collect approximately $50 a year from each of a large group to cover the relatively few expected claims. (0.35 to 0.66 expected deaths in each year x $100,000 payout per death = $35 per policy). Administrative and sales commissions need to be accounted for in order for this to make business sense. A 10 year policy for a 25 year old non-smoking male person with preferred medical history may get offers as low as $90 per year for a $100,000 policy in the competitive US life insurance market.

The insurance company receives the premiums from the policy owner and invests them to create a pool of money from which it can pay claims and finance the insurance company’s operations. The majority of the money that insurance companies make comes directly from premiums paid, as money gained through investment of premiums can never, in even the most ideal market conditions, vest enough money per year to pay out claims. Rates charged for life insurance increase with the insurer’s age because, statistically, people are more likely to die as they get older.

Given that adverse selection can have a negative impact on the insurer’s financial situation, the insurer investigates each proposed insured individual unless the policy is below a company-established minimum amount, beginning with the application process. Group Insurance policies are an exception.

This investigation and resulting evaluation of the risk is termed underwriting. Health and lifestyle questions are asked. Certain responses or information received may merit further investigation. Life insurance companies in the United States support the Medical Information Bureau (MIB), which is a clearinghouse of information on persons who have applied for life insurance with participating companies in the last seven years. As part of the application, the insurer receives permission to obtain information from the proposed insured’s physicians.

Underwriters will determine the purpose of insurance. The most common is to protect the owner’s family or financial interests in the event of the insurer’s demise. Other purposes include estate planning or, in the case of cash-value contracts, investment for retirement planning. Bank loans or buy-sell provisions of business agreements are another acceptable purpose.

Life insurance companies are never required by law to underwrite or to provide coverage to anyone, with the exception of Civil Rights Act compliance requirements. Insurance companies alone determine insurability, and some people, for their own health or lifestyle reasons, are deemed uninsurable. The policy can be declined (turned down) or rated.[citation needed] Rating increases the premiums to provide for additional risks relative to the particular insured.[citation needed]

Many companies use four general health categories for those evaluated for a life insurance policy. These categories are Preferred Best, Preferred, Standard, and Tobacco.[citation needed] Preferred Best is reserved only for the healthiest individuals in the general population. This means, for instance, that the proposed insured has no adverse medical history, is not under medication for any condition, and his family (immediate and extended) have no history of early cancer, diabetes, or other conditions.[5] Preferred means that the proposed insured is currently under medication for a medical condition and has a family history of particular illnesses.[citation needed] Most people are in the Standard category.[citation needed] Profession, travel, and lifestyle factor into whether the proposed insured will be granted a policy, and which category the insured falls. For example, a person who would otherwise be classified as Preferred Best may be denied a policy if he or she travels to a high risk country.[citation needed] Underwriting practices can vary from insurer to insurer which provide for more competitive offers in certain circumstances.

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