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1. Cash value accrues, tax deferred, till surrendered.
2. Death Benefits - tax free
3. Premiums are bundled and fixed
4. Corridor... the space between the cash and face value. The corridor ends at age 100 when the policy endows, meaning, at that time, the cash value is equal to the death benefit and is paid to the owner.
Basic Features of Whole Life Insurance
1. Level of Fixed premiums payable for a specified # of years.
2. Level/fixed death benefit.
3. Fixed schedule of minimum cash surrender value that increases over time.
Limited Pay Whole Live
1. Substantial cash & loans, immediately.
2. Fully paid at policy inception
3. OVERFUNDED violates "7 Pay Test" aka "Modified Endowment Rule"
4. a 10% penalty on distributions taken before age 59½.
5. Any moneytaken out of the MEC is taxed the same as a "deferred annuity
Single Premium Whole Life
Basic Types of Traditional Whole Life Contracts
- a. Straight Life, a.k.a. Continuous-Premium Whole Life
- b. Limited-Pay Whole Life
- c. Adjustable Whole Life Policy
- d. Single-Premium Whole Life
1. Level premium
2. Payable at 100 or death of insured.
3. Bundled/fixed premium.
Straight Life, a.k.a. Continuous-Premium Whole Life
1. ⇅ in premium
2. ⇅ in the face amount
3. Longer/shorter premium payment period.
4. Change from Whole Life back to Term and then back again.
Adjustable Whole Life Policy
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