Variable Life Insurance
If you have faith that stock market prices will be increasing over your lifetime, you will be interested in the purchase of a variable life insurance policy that places the death benefit payment on your heirs in accordance with the market performance of the special account portfolio over the life of the policy.
A policy for a man aged 40 whose annual premium was $1,000 would have an initial face amount of $30, 747. The same annual premium would buy this man, $49,500 of ordinary life insurance.
During the ten-year period 1966-75, the Standard & Poors index of 500 common stocks rose 3.3 percent. Over the past 50 years, common stocks are traded at 9 percent annual rate of return, including dividends and capital growth. The variable life insurance policy will act as a hedge against inflation if your life span starts when the market is low and ends when it is high. Thats the gamble.
The policy is non-participating, and so it costs less than the usual fixed-benefit policies – but more than is usual for a policy that pays no dividends. The SEC regulates this policy because it considers the policy as a security than simply an insurance policy. Other insurance policies are state regulated. The policy can be withdrawn against the cash value. However, there is no guaranteed minimum cash value.
The policy can be replaced with a cash value policy within 18 months, without your having to meet medical standards or you can get a refund if you change your mind within 45 days.
Government insurance
Insurance sold by the government to the soldiers who fought during World War II and thereafter up until April 25, 1951, is known as National Service Life Insurance. NSLI was issued in any amount from $1,000 to $10,000 to the eligible. By an act of Congress in 1945, all five-year term policies applied for and issued before January 1, 1946, were automatically extended to an additional period of three years at the same premium rates. At present, the term insurance can be changed every five years for new terms, without a physical examination, at the premium rate for the attained age. It can be converted into any one of the following six permanent plans: ordinary life, 30-payment life, 20-payment life, 20-year endowment, endowment at age 60, or endowment at age 65.
NSLI insurance was one of the best insurance policies ever offered. Those who hold it should retain it. The cost was and is very low, for a variety of reasons. There was no loading charge involved. The government paid the costs of the insurance out of budgetary funds, with no premium charge. Veterans who died in service or because of disabilities got death benefits from government appropriations than from insurance reserves. The dividends were very generous. 67 cents were paid out in the form of dividends per dollar collected in National Service Life Insurance premiums. The dividend windfall resulted primarily because fewer World War II veterans died than experience had indicated. There are many favorable clauses and features, such as settlement option no. 4, that is, refund life income. It means no commercial insurance company can match at the low NSLI rate. The advantage of refund life income is that the beneficiary can choose to receive the proceeds of the policy in monthly installments during the life of the insured. Thereafter, if the amount paid in these monthly installments does not match with the face amount of the policy, the remainder shall be paid to the contingent beneficiary.
The Veterans of the Korean conflict were treated differently under the Servicemens Indemnity and Insurance Acts of 1951, which became effective on April 25, 1951. They were automatically covered by a free indemnity against death in active service for $10,000, less any NSLI or USGLI in force at the time of death. The free indemnity protection continued for 120 days after separation from service. The insurance was meant for only a surviving spouse, children, parents, brothers, or sisters; and the insured could give the names of one or more beneficiaries within the given class. The $10,000 indemnity was payable in 120 equal installments of $92.90 per month.
Within 120 days, the disabled veterans could apply for a five-year term policy that could be renewed in every five years at the premium rate for the attained age. Earlier this insurance was not convertible to any other form of government life insurance, and it did not shell out dividends. No physical examination was needed to obtain it except the payment of the first premium. A veteran was allowed to purchase from $1,000 to $10,000 of the term insurance, but no other government life insurance in force at the time of application. In 1958, the law was changed to permit conversion to any of a variety of permanent plans.
Servicemen group life insurance
Servicemens Group Life Insurance (SGLI) was first offered in 1965. SGLI is a group life insurance meant to cover service members going into a combat zone that would otherwise have been limited to commercial policies with war exclusion clauses. It is a type of term insurance policy with zero cash surrender values.
The Veterans Administration supervises the SGLI program, but it is operated under an arrangement with nearly 600 commercial insurance companies. Unless refusal to join is submitted in writing, all members of the armed services are automatically insured for $20,000, for which $3.40 a month is deducted from their pay.
The advantage of conversion is especially desirable for the service-disabled veteran who might otherwise have difficulty in getting commercial insurance at standard rates. A veteran separated after August 1, 1974, is automatically covered by SGLI, but he must make application for it and reimburse the first premium before 120 days are passed. SGLI is an insurance company that will exist for the next five years. Thereafter the group policy will be converted into an individual policy with any company participating in the SGLI program.
Checking your insurance company
Make sure your company holds a license to conduct business in your state. This is very important if you buy insurance via mail. It is not easy to file suit against a company which is not in its home state. Bests Insurance Reports publishes ratings for insurance companies. It comes in two volumes and should be available in your library. One volume lists life and health insurance companies as either “most substantial or “very substantial. The other volume lists the best property and liability insurers as “A or “A+. Ask the agent whether the company offers similar policies in New York or Pennsylvania. These states impose strict regulations on the advertisement and sale of insurance
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