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Insurance Abstract
In one aspect, the invention comprises a computer system for providing
a life insurance policy with an enhanced option rider, comprising:
an electronic database operable to store data related to policyholders
and policy terms; and an insurance administration computer, in communication
with the database, for administering the policy; wherein the enhanced
option rider allows each beneficiary of the life insurance policy
to apply all or part of eligible proceeds to one or more enhanced
payment options, and wherein the one or more enhanced payment options
comprise a guaranteed monthly payment through an annuitization process
for the life of the one or more beneficiaries.
Insurance Claims
1. A computer system for providing a life insurance policy with
an enhanced option rider, comprising: an electronic database operable
to store data related to policyholders and policy terms; and an
insurance administration computer, in communication with said database,
for administering said policy; wherein said enhanced option rider
allows each beneficiary of said life insurance policy to apply all
or part of eligible proceeds to one or more enhanced payment options,
and wherein said one or more enhanced payment options comprise a
guaranteed monthly payment through an annuitization process for
the life of said one or more beneficiaries.
2. The system of claim 1, wherein the enhanced option rider further
comprises a maximum allowable death benefit, and wherein the eligible
proceeds up to the maximum allowable death benefit are applied to
said one or more enhanced payment options.
3. The system of claim 1, wherein the guaranteed monthly payment
is guaranteed for a predetermined period of time.
4. The system of claim 3, wherein the one or more enhanced payment
options comprise an escalation feature such that the guaranteed
monthly payment increases during the life of said beneficiary.
5. The system of claim 1, wherein the enhanced option rider comprises
provisions stating that the enhanced option rider cannot be added
after the issuance of the life insurance policy and is not available
for group conversions or guaranteed issue.
6. The system of claim 1, wherein the cost of the enhanced option
rider may be calculated based on one or more of the following: a.
the death benefit of the life insurance policy on the policy date;
b. the death benefit of each requested increase in the face amount
of the life insurance policy; c. the death benefit of any riders
on the life of the insured attached to the life insurance policy
on the issue date of the policy; and d. the death benefit of any
rider on the life of the insured attached after the issue date of
the life insurance policy.
7. The system of claim 6, wherein the cost of enhanced option rider
does not include any death benefit paid under an accidental death
benefit rider or other comparable riders.
8. The system of claim 1, wherein the enhanced option rider is
terminated and the charges cease on the monthly anniversary following
the receipt of written request to terminate the rider by the policy
owner; or the life insurance policy being continued under a non-forfeiture
option; or the face of the life insurance policy decreasing below
certain predetermined dollar amount.
9. The system of claim 1, wherein the enhanced option rider provides
each beneficiary with a higher monthly death payment than the life
insurance policy without the enhanced option rider.
10. The system of claim 1, further comprising an annuity administration
module for processing the eligible proceeds in accordance with provisions
of the enhanced option rider.
11. A method of administering an enhanced option rider for a life
insurance policy, said life insurance policy providing eligible
proceeds to one or more beneficiaries upon the death of the policy
owner, said enhanced option rider allowing each beneficiary of the
life insurance policy to apply all or part of eligible proceeds
to one or more enhanced payment options, said one or more enhanced
payment options comprising a guaranteed monthly payment through
an annuitization process for the life of said beneficiary, the method
comprising the steps of: receiving an application for an enhanced
option rider; generating an enhanced option rider; and if the enhanced
option rider is exercised, then processing the proceeds of the life
insurance policy according to the enhanced option rider; or if the
enhanced option rider has not been exercised, then holding the proceeds
in an account until the enhanced option rider is exercised.
Insurance Description
CROSS REFERENCE TO RELATED APPLICATIONS
[0001] This application claims priority to U.S. provisional patent
application No. 60/601,368, filed Aug. 13, 2004. The entire contents
of this provisional application are incorporated herein by reference.
FIELD OF INVENTION
[0002] The present invention relates to system and method for providing
a life insurance policy, more particularly an insurance rider which
enhances the value of the life insurance policy by providing enhanced
settlement payout options to the beneficiary(ies) upon the death
of the insured.
BACKGROUND OF THE INVENTION
[0003] Currently, an insured has various options in purchasing
a life insurance policy, such as term, whole or universal. Additionally,
the insured can purchase term life insurance with level premiums
over a predetermined period of time, e.g., 20 or 30 years. Generally,
upon the death of the insured, these various types of life insurance
policies provide lump sum death benefit proceeds or a payout to
the beneficiary at rates which are declared by the insurer at the
time of payment and which are not less than minimum rates guaranteed
in the policy. However, the insured currently has no option of enhancing
the payout rate and/or term so that his/her beneficiary can elect
to receive enhanced settlement options, e.g., lifetime guaranteed
monthly payments, such as through an annuitization process. Currently,
the only available mechanism for improving the death settlement
payout is to increase the face amount of the policy, which can greatly
increase the premium of the life insurance policy. Therefore, it
is desirable to provide an enhanced option rider which provides
enhanced settlement payments that are guaranteed and at a lower
cost than currently available alternatives.
SUMMARY OF THE INVENTION
[0004] It is therefore one object of the present invention to provide
a system for enhancing a life insurance policy. The system comprises
an enhanced option rider that allows each beneficiary of the life
insurance policy to apply all or part of eligible proceeds to one
or more enhanced payment options. The one or more enhanced payment
options comprise a guaranteed monthly payment through an annuitization
process for the life of said one or more beneficiaries.
[0005] It is another object of the present invention to provide
a system for administering an enhanced option rider for a life insurance
policy. The system comprises an insurance administration unit for
storing information associated with the enhanced option rider and
an annuity administration module for processing the eligible proceeds
in accordance with provisions of the enhanced option rider.
[0006] It is another object of the present invention to provide
a method of administering an enhanced option rider for a life insurance
policy. The method comprises the steps of: receiving an application
for an enhanced option rider; generating an enhanced option rider;
and if the enhanced option rider is exercised, then processing the
proceeds of the life insurance policy according to the enhanced
option rider; or, if the enhanced option rider has not been exercised,
then holding the proceeds in an account until the enhanced option
rider is exercised.
[0007] In one aspect, the invention comprises a computer system
for providing a life insurance policy with an enhanced option rider,
comprising: an electronic database operable to store data related
to policyholders and policy terms; and an insurance administration
computer, in communication with the database, for administering
the policy; wherein the enhanced option rider allows each beneficiary
of the life insurance policy to apply all or part of eligible proceeds
to one or more enhanced payment options, and wherein the one or
more enhanced payment options comprise a guaranteed monthly payment
through an annuitization process for the life of the one or more
beneficiaries.
[0008] In various embodiments: (a) the enhanced option rider further
comprises a maximum allowable death benefit and the eligible proceeds
up to the maximum allowable death benefit are applied to the one
or more enhanced payment options; (b) the guaranteed monthly payment
is guaranteed for a predetermined period of time; (c) the one or
more enhanced payment options comprise an escalation feature such
that the guaranteed monthly payment increases during the life of
the beneficiary; (d) the enhanced option rider comprises provisions
stating that the enhanced option rider cannot be added after the
issuance of the life insurance policy and is not available for group
conversions or guaranteed issue; (e) the cost of the enhanced option
rider may be calculated based on one or more of the following: (i)
the death benefit of the life insurance policy on the policy date;
(ii) the death benefit of each requested increase in the face amount
of the life insurance policy; (iii) the death benefit of any riders
on the life of the insured attached to the life insurance policy
on the issue date of the policy; and (iv) the death benefit of any
rider on the life of the insured attached after the issue date of
the life insurance policy; (f) the cost of enhanced option rider
does not include any death benefit paid under an accidental death
benefit rider or other comparable riders; (g) the enhanced option
rider is terminated and the charges cease on the monthly anniversary
following the receipt of written request to terminate the rider
by the policy owner; or the life insurance policy being continued
under a non-forfeiture option; or the face of the life insurance
policy decreasing below certain predetermined dollar amount; (h)
the enhanced option rider provides each beneficiary with a higher
monthly death payment than the life insurance policy without the
enhanced option rider; and (i) the system further comprises an annuity
administration module for processing the eligible proceeds in accordance
with provisions of the enhanced option rider.
[0009] In another aspect, the invention comprises a method of administering
an enhanced option rider for a life insurance policy, the life insurance
policy providing eligible proceeds to one or more beneficiaries
upon the death of the policy owner, the enhanced option rider allowing
each beneficiary of the life insurance policy to apply all or part
of eligible proceeds to one or more enhanced payment options, the
one or more enhanced payment options comprising a guaranteed monthly
payment through an annuitization process for the life of the beneficiary,
the method comprising the steps of: (a) receiving an application
for an enhanced option rider; (b) generating an enhanced option
rider; and (c) if the enhanced option rider is exercised, then processing
the proceeds of the life insurance policy according to the enhanced
option rider; or, if the enhanced option rider has not been exercised,
then holding the proceeds in an account until the enhanced option
rider is exercised.
BRIEF DESCRIPTION OF DRAWINGS
[0010] FIG. 1 shows a method of administering the Enhanced Option
rider according to one embodiment of the present invention.
[0011] FIG. 2 shows a system for administering the Enhanced Option
rider according to one embodiment of the invention.
DETAILED DESCRIPTION OF EMBODIMENTS
[0012] One embodiment of the present invention comprises an enhanced
payment option rider that allows each beneficiary of the life insurance
policy ("Policy"), not an assignee, to apply all or part
of the eligible proceeds received upon the insured's death to one
or more enhanced payment options ("Enhanced Option"),
as described herein. The Enhanced Option rider, such as the Guaranteed
Survivor Income Benefit (GSIB) or Enhanced Life Income Options,
is subject to all applicable terms and provisions of Policy, except
as modified by the enhanced payment option rider.
[0013] In one embodiment, the Enhanced Option rider provides the
beneficiary with an option of exchanging all or part of the lump
sum death benefit proceeds of a life policy for enhanced lifetime
guaranteed monthly payments through an annuitization process. The
Enhanced Option rider premium is paid by the policy owner or the
insured, but provides enhanced payment options to the beneficiary
that are exercisable upon the death of the insured. For example,
the enhanced payment options include but are not limited to guaranteed
monthly payments, hedge against rising interest rates, annuity payout
at a higher rate, and higher monthly death payments at a lower cost.
Preferably, the Enhanced Option rider is exercisable only at the
time of death of the insured and not at a partial or full surrender.
[0014] The Enhanced Option rider may provide each beneficiary with
a higher monthly death payment than the standard life insurance
policy without the Enhanced Option rider. To obtain the higher monthly
death payment without this rider, the insured could increase the
face amount of the policy. However, such an increase would significantly
increase the premium of the policy because the premium is directly
related to the amount of the death benefit. For example, if the
total premium on the life insurance policy with the Enhanced Option
rider increases by 3-4%, the life insurance policy (without the
Enhanced Option rider) premium will increase by 40% to achieve the
same level of monthly death payment as the life insurance policy
having a lower face amount and the Enhanced Option rider of the
present invention. The Enhanced Option rider enables the policy
owner and insured to provide his/her beneficiary with enhanced death
payment at the fraction of the cost.
[0015] Additionally, an Enhanced Option rider provider, such as
the issuer of the Policy, may establish various terms and conditions
for offering the Enhanced Option rider. These terms and conditions
may include, for example, provisions stating that the Enhanced Option
rider cannot be added after the issuance of the Policy and is not
available for group conversions or guaranteed issue. The issuer
may also restrict the availability of the Enhanced Option rider,
e.g., it may not be available if the base coverage of the Policy
was issued in certain substandard underwriting classes, for example
if it has a Table rating greater than F (150%) or a flat extra.
Additionally, it can be made available only on policies with face
amounts of $100,000 and above. Further, the Enhanced Option rider
may have a maximum allowable death benefit to which it can be applied,
which may be less than or the same as the death benefit of the underlying
Policy. That is, the Enhanced Option rider may apply to the full
or a portion of the Policy's death benefit, e.g., the first $2 million
of death benefit. Policies with death benefits exceeding the maximum
allowable death benefit of the Enhanced Option rider may be still
issued with the Enhanced Option rider, but both the benefit and
premium charges for the rider will be based on the maximum allowable
death benefit, e.g., $2 million.
[0016] As used herein, Eligible Proceeds are equal to the portion
of the life insurance policy proceeds payable to a beneficiary at
the death of the insured under the Policy to which the Enhanced
Option rider is attached, less the portion of any proceeds payable
under any accidental death benefit rider or other comparable riders
attached to the Policy.
[0017] In accordance with one embodiment of the present invention,
the cost of the Enhanced Option rider may be calculated from the
Eligible Death Benefits. The amount available for option exercise
may be the Eligible Death Benefits, net of indebtedness (any existing
loans, collateral assignments, uncollected charges, etc.) at the
time of death of the insured. The Eligible Death Benefits may include
one or more of the following:
[0018] 1. The death benefit of the Policy on the Policy Date, including
the death benefit of any automatic increases in the face amount
of the Policy under a death benefit option and including any death
benefit provided by policy dividends.
[0019] 2. The death benefit of each requested increase in the face
amount of the Policy.
[0020] 3. The death benefit of any riders on the life of the insured
attached to the Policy on the issue date of the Policy.
[0021] 4. The death benefit of any rider on the life of the insured
attached after the issue date of the Policy.
[0022] However, preferably, Eligible Death Benefits do not include
any death benefit paid under an accidental death benefit rider or
other comparable riders. In accordance with an aspect of the present
invention, the Enhanced Option charge or premium for the base policy's
death benefit may be based on each segment's Discounted Face Amount,
rather than each segment's death benefit (with the maximum allowable
death benefit cap applied before the discounting). For example,
the Discounted Face Amount may be used in processing universal life
secondary guarantee (ULSG) policies to simplify the calculations
since ULSG currently has only a fixed death benefit and no option
for an increasing death benefit. However, this exception may be
temporary for ULSG policies and the segmented Death Benefit may
have to be used in the future. This simplification, which may produce
a charge/premium that is less than or equal to the charge/premium
produced without the simplification, may not be reflected in the
Enhanced Option rider contract.
[0023] The monthly charge or cost of the Enhanced Option rider
may be charged as a part of the monthly deduction on the Policy.
In accordance with one embodiment of the present invention, the
monthly cost may be based on the per thousand dollars of Eligible
Death Benefits in force, up to the maximum allowable death benefit
of the selected Enhanced Option rider. These charges associated
with the Enhanced Option rider may be payable for the life of the
Policy, as long as the Enhanced Option rider is in force. In accordance
with an aspect of the present invention, the appropriate monthly
rates per thousand of Eligible Death Benefit may be multiplied by
the Eligible Death Benefit divided by 1,000 (by segment), and the
resulting Enhanced Option rider charges, such as the monthly cost
of rider rate shown on the specification page of the Policy, by
segment can each be rounded to 2 decimal places. Preferably, the
monthly charges may vary by band and sex, issue age, rating class,
and smoking class of the insured. For example, target premiums and
monthly charges may vary by base policy band, as follows: $100,000-$249,999;
$250,000-$999,999; and $1,000,000-$2,000,000.
[0024] In accordance with another embodiment of the present invention,
all or part of each beneficiary's Eligible Proceeds may be applied
to one or more Enhanced Options, subject to the following:
[0025] 1. Total proceeds applied to the Enhanced Options upon the
death of the insured of the Policy may not exceed the maximum allowable
death benefit of the Enhanced Option rider. If there is more than
one beneficiary under the Policy and the proceeds of the Policy
are greater than the maximum allowable death benefit, each beneficiary
may only apply a pro-rata portion of his/her share to one or more
Enhanced Option. The pro-rata share may be based on the same ratios
under which the proceeds of the Policy were payable.
[0026] 2. The Enhanced Option rider may only be available if the
monthly Enhanced Option payments (or benefits payment or installments)
are at least some predetermined monthly minimum payout amount, e.g.,
$50.
[0027] 3. The beneficiary must provide a written notice of his/her
election to receive the Enhanced Option (or a particular Enhanced
Option if more than one is offered) within a certain period, such
as 60 days, after the notification of the availability of the Enhanced
Option is sent by the issuer to the beneficiary and/or within a
predetermined period, such as 9 months from the date of death of
the insured.
[0028] 4. Once payments begin under the Enhanced Option rider,
future payments may not be assigned and the beneficiary cannot change
the selected Enhanced Option.
[0029] 5. In accordance with an embodiment of the present invention,
if the beneficiary is a trust with one natural person as beneficiary,
the beneficiary may select an Enhanced Option from all available
Enhanced Options. Otherwise, if the trust has no beneficiary as
a natural person or if the beneficiary is a corporation or other
non-natural person, the beneficiary may have a limited selection
and may be limited for example to the 10 Year Certain option.
[0030] In accordance with yet another embodiment of the present
invention, if there is more than one beneficiary in the Policy,
the Enhanced Option may be selected by one or more beneficiaries.
That is, the Enhanced Option may not need to be selected by all
of the beneficiaries of the Policy. The Enhanced Option is available
to all the beneficiaries, but may not require election by all of
the beneficiaries. In accordance with an aspect of the present invention,
the beneficiaries named by the Policy owner may choose whether or
not to exercise the Enhanced Option at the insured's death. Each
of the multiple primary beneficiaries may independently elect one
of the Enhanced Options available under the Enhanced Option rider.
[0031] In accordance with yet another embodiment of the present
invention, a beneficiary may choose to select more than one Enhanced
Option (i.e., more than one Enhanced Option payment method) by designating
the percentage of the proceeds for each Enhanced Option, totaling
not more than 100%, and providing that the resulting payout for
each selected Enhanced Option produces at least the predetermined
monthly minimum payout amounts, e.g., $50. The various Enhanced
Option payments can provide sex distinct benefits on sex distinct
base policies and unisex benefits where required to comply with
local laws and/or regulations.
[0032] When an Enhanced Option starts, the issuer or its affiliate
generally issues a contract describing the terms and conditions
of the Enhanced Option which will be delivered to the beneficiary(ies).
Each beneficiary shall receive a notification of his/her rights
under the selected Enhanced Option rider from the issuer or its
designated agent at the time the Policy proceeds become payable.
[0033] The monthly Enhanced Option payments after the death of
a beneficiary (if provided under the option selected) will be paid
as due to that beneficiary's successor beneficiary. If there is
no successor beneficiary, total remaining payments will be paid
in one lump sum to the estate of the last beneficiary to die. If
a beneficiary dies within a predetermined period, such as 30 days,
after the Option Date (the effective date of the Enhanced Option),
in accordance with an embodiment of the present invention, the amount
of the proceeds to be distributed under the selected Enhanced Option,
less any payments made, will be paid in one lump sum.
[0034] In accordance with yet another embodiment of the present
invention, the benefits or payments under the selected Enhanced
Option, such as the Enhanced Life Income Options, are based on the
age and sex of the beneficiary on the Option Date. Benefits for
this rider are paid based upon the age and sex (where unisex benefits
are not required) of the beneficiary (and choice of payout option)
at the death of the insured. For example, the current annuity rules
and provisions for determining the age of the beneficiary may be
followed when an enhanced payout option is elected. The Enhanced
Option or Life Income payments may be the maximum of the Enhanced
Option payment rates specified in the Enhanced Option rider for
the selected Enhanced Option, e.g., 10 Year Certain, 15 Year Certain,
etc., based on beneficiary's age and sex or the Enhanced Option
payments may be based on certain percentage, such as 105%, of the
current or predetermined Payment Option rates of the issue on the
Option Date. Preferably, if the rates at a given age are the same
for different periods certain, the longest period certain will be
deemed to have been chosen.
[0035] In accordance with yet another embodiment of the present
invention, the Enhanced Option may provide equal monthly payments
that include both principal and interest. For example, the Enhanced
Option payments start on the Option Date and will continue for 10
years. In accordance with one aspect of the present invention, the
Enhanced Option monthly payment or the guaranteed monthly payment
per $1,000 of proceeds of the Policy may not be less than the monthly
payment specified in the Enhanced Option rider based on the age
and sex of the beneficiary or 105% of the 10 Year Certain Payment
Option rates on the Option Date.
[0036] In accordance with yet another embodiment of the present
invention, the Enhanced Option rider may comprise, but not be limited
to, one or more following Enhanced Options: 10-year certain; Life
only; 10-year, 15-year, 20-year certain and life; Life only with
1%, 2%, or 3% escalation feature; and 10-year certain and life with
a 1%, 2%, or 3% escalation feature.
[0037] In accordance with yet another embodiment of the present
invention, the Enhanced Option rider may provide Enhanced Life Income
wherein the monthly Enhanced Option payments start on the Option
Date and continue: [0038] 1. During the life of the beneficiary,
with no payment after the death of the beneficiary, called "Enhanced
Life Income, No Refund"; or [0039] 2. During the life of the
beneficiary, but for at least 10 years, called "Enhanced Life
Income, 10 Years Certain"; or [0040] 3. During the life of
the beneficiary, but for at least 15 years, called "Enhanced
Life Income, 15 Years Certain"; or [0041] 4. During the life
of the beneficiary, but for at least 20 years, called "Enhanced
Life Income, 20 Years Certain."
[0042] In accordance with yet another embodiment of the present
invention, the Enhanced Option rider may provide an Enhanced Increasing
Life Income wherein the monthly Enhanced Option payments start on
the Option Date and increase over time during the life of the beneficiary
(i.e., an escalation feature), with no payment after the death of
the beneficiary. For example, the monthly Enhanced Option payments
can increase at: [0043] 1.1% per year called "1% Enhanced Increasing
Life Income"; or [0044] 2.2% per year called "2% Enhanced
Increasing Life Income"; or [0045] 3.3% per year called "3%
Enhanced Increasing Life Income."
[0046] In accordance with yet another embodiment of the present
invention, the Enhanced Option rider may provide Enhanced Increasing
Life Income--10 Year Certain wherein the monthly Enhanced Option
payments start on the Option Date and increase over time during
the life of the beneficiary (i.e., an escalation feature). The monthly
Enhanced Option payments are guaranteed for at least 10 years. For
example, the monthly Enhanced Option payments can increase at: [0047]
1. 1% per year, called "1% Enhanced Increasing Life Income,
10 Year Certain"; or [0048] 2. 2% per year, called "2%
Enhanced Increasing Life Income, 10 Year Certain"; or [0049]
3. 3% per year, called "3% Enhanced Increasing Life Income,
10 Year Certain."
[0050] Other Enhanced Payment Options and payment frequencies are
contemplated and are within the scope of this invention.
[0051] The Enhanced Option rider may be terminated and the charges
cease on the monthly anniversary following: the receipt of a written
request to terminate the rider by the policy owner; the Policy being
continued under a non-forfeiture option; or the face of the Policy
decreasing below a certain predetermined dollar amount, e.g., $25,000.
[0052] In accordance with one embodiment of the present invention,
if a policy face amount is subsequently increased, the Enhanced
Option premium charged for the new segment may be based upon the
age and rating class of the beneficiary at the time of the increase.
In the determination of death benefit and band by segment, preferably,
the Enhanced Option rider may follow the rules of the base policy.
If the death benefit for a policy with more than one segment exceeds
the maximum allowable death benefit, e.g., a cap of $2,000,000,
the death benefit up to the maximum allowable death benefit cap
may be allocated first to the original segment, and then to each
subsequent segment until the maximum allowable death benefit cap
is reached.
[0053] If a policy face decreases below the predetermined threshold
minimum amount, e.g., $100,000, the Enhanced Option rider may continue
in force, applying the rates for the $100,000 band. If, however,
the policy face decreases below the predetermined minimum amount,
e.g., $25,000, the Enhanced Option rider may terminate.
[0054] Preferably, when there is a partial surrender of face amount,
the premium reduction may be processed in the same manner as for
the base policy (e.g., LIFO, by segment). The Enhanced Option rider
premium and benefits may not vary by death benefit option. In accordance
with one aspect of the present invention, when a death benefit option
changes, the premium charged per thousand of death benefit may follow
the rules of the base policy (e.g., if the base policy takes a change
in band into account, so will the Enhanced Option rider).
[0055] If the Policy with the Enhanced Option rider as of the time
of lapse or time of moving to a non-forfeiture option is subsequently
reinstated (or returned to premium-paying status), the issuer may
reinstate the Enhanced Option rider along with the Policy. However,
if the Enhanced Option rider is terminated separately from the base
policy (other than due to the policy moving to non-forfeiture status),
the issuer may not be obligated to reinstate the Enhanced Option
rider.
[0056] The benefit provided under the Enhanced Option rider is
generally not considered a Qualified Additional Benefit for tax
purposes. Additionally, the Enhanced Option rider is not generally
considered an additional benefit in the calculation of guideline
premium limits or seven-pay TAMRA Technical and Miscellaneous Revenue
Act (TAMRA) premium limits, and any premium for the Enhanced Option
rider will be added to other premium payments and tested against
such limits. TAMRA is a 1988 federal law that created a new class
of life insurance contracts, Modified Endowment Contracts. Unlike
other life insurance policies, these contracts' policy loans and
surrender payments are subject to taxation rules similar to deferred
annuities.
[0057] In accordance with an embodiment of the present invention,
the Enhanced Option rider can be commissionable (i.e., it will increase
the Commissionable Target Premium, No-Lapse Guarantee premium, and
the Minimum Premium to Issue). The Enhanced Option rider of the
present invention follows the current practice for commissions on
settlement options with regard to commissions paid upon annuitization.
[0058] In accordance with an embodiment of the present invention,
if the Enhanced Option rider is attached to a convertible term policy
that is converted to a permanent policy, the Enhanced Option rider
will be issued on the new permanent policy without underwriting,
assuming the Enhanced Option rider is available on the new policy
for the age and amount being issued.
[0059] In accordance with an embodiment of the present invention,
once an enhanced payout option is elected, the payment stream may
not be assigned to any other individual or entity. Payments will
end upon the death of the beneficiary unless a period certain option
is chosen. In that case the current payment will continue, without
change, to the named recipient for the balance of the stated period.
[0060] Appendices A and B are two exemplary Enhanced Option riders
generated according to one or more embodiments of the present invention.
[0061] FIG. 1 is a flow chart showing a method of administering
the Enhanced Option rider according to one embodiment of the present
invention. In this embodiment, an application for Enhanced Option
is from a beneficiary at step 110. At step 120 the system processes
the application and generates the terms and conditions of the Enhanced
Option rider. In generating the Enhanced Option rider, computer
means may be used to calculate the Eligible Proceeds, the Eligible
Death benefits, the cost of the rider and the Enhanced monthly payment
of the rider. At step 130 the system tests whether the Enhanced
Option rider is exercised by the beneficiary. If the Enhanced Option
rider is exercised, at step 140 the system processes the death proceeds
according to the terms and conditions of the rider. If the Enhanced
Option rider has not been exercised, at step 150 the system places
the death proceeds into a total control account or some other comparable
interest bearing account, typically while the beneficiary is deciding
whether to elect the Enhanced Option rider of the present invention.
[0062] FIG. 2 shows a system for administrating the Enhanced Option
rider according to one embodiment of the invention. The system comprises
an insurance administration unit 210 that comprises one or more
computers and databases storing information associated with the
Enhanced Option rider, e.g., beneficiary, the selected Enhanced
Option, etc., and funds (i.e., death proceeds). When the Enhanced
Option rider is exercised, the insurance administration unit 210
transfers the information data to an Annuity Administration module
220. The Annuity Administration module 220 comprises one or more
computers for processing the death proceeds in accordance with the
Enhanced Benefit Option(s) selection made by the beneficiary. If
the Enhanced Option rider is not exercised, the Annuity Administration
module 220 places the death proceeds into a total control account
or some other comparable interest bearing account, typically while
the beneficiary is deciding whether to elect the Enhanced Option
rider of the present invention.
[0063] Although the present invention and its advantages have been
described in detail, it should be understood that various changes,
substitutions and alterations can be made herein without departing
from the spirit and scope of the invention as defined by the appended
claims. Moreover, the scope of the present application is not intended
to be limited to the particular embodiments of the process, machine,
manufacture, composition of matter, means, methods and steps described
in the specification. As one of ordinary skill in the art will readily
appreciate from the disclosure of the present invention, processes,
machines, manufacture, compositions of matter, means, methods, or
steps, presently existing or later to be developed that perform
substantially the same function or achieve substantially the same
result as the corresponding embodiments described herein map be
utilized according to the present invention. Accordingly, the appended
claims are intended to include within their scope such processes,
machines, manufacture, compositions of matter, means, methods, or
steps.
[0064] Embodiments of the present invention comprise computer components
and computer-implemented steps that will be apparent to those skilled
in the art. For ease of exposition, not every step or element of
the present invention is described herein as part of a computer
system, but those skilled in the art will recognize that each step
or element may have a corresponding computer system or software
component. Such computer system and/or software components are therefore
enabled by describing their corresponding steps or elements (that
is, their functionality), and are within the scope of the present
invention.
[0065] For example, all calculations preferably are performed by
one or more computers. Moreover, all notifications and other communications,
as well as all data transfers, to the extent allowed by law, may
be transmitted electronically over a computer network. Further,
all data preferably is stored in one or more electronic databases.
APPENDIX A
Enhanced Payment Option Rider
[0066] This Rider allows each Beneficiary of this Policy, who is
not an assignee, to apply all or part of the Eligible Proceeds received
upon the Insured's death to one or more Enhanced Payment Option
(called "Enhanced Option") as described and limited below.
This Rider is subject to all applicable terms and provisions of
the Policy, except as modified herein. This Rider is a part of the
Policy if it is listed on the Policy Specifications page. [0067]
Eligible Proceeds. Eligible Proceeds equal: the portion of the policy
proceeds payable to a Beneficiary at the death of the Insured under
the Policy to which this rider is attached; less the portion of
any proceeds payable under any Accidental Death Benefit Rider. The
Eligible Proceeds that can be applied to an Enhanced Option are
subject to the Conditions below. [0068] Eligible Death Benefits.
Eligible Death Benefits are used to calculate the cost of this Rider.
Each of the following will be an Eligible Death Benefit: [0069]
1. The Death Benefit of the Policy on the Policy Date; plus the
Death Benefit of any automatic increases in Face Amount under a
Death Benefit Option. [0070] 2. The Death Benefit of each requested
increase in Face Amount. [0071] 3. The Death Benefit of any riders
on the life of the Insured attached to this Policy on the Issue
Date of the Policy. [0072] 4. The Death Benefit of any rider on
the life of the Insured attached after the Issue Date of the Policy
[0073] However, any Death Benefit paid under an Accidental Death
Benefit rider will not be an Eligible Death Benefit. [0074] Option
Date. The Option Date is the effective date of the Enhanced Option
as chosen.
[0075] Monthly Cost of Rider The Monthly Cost of Rider for the
following month is charged as part of the Monthly Deduction. The
Monthly Cost of Rider is the total of: each Eligible Death Benefit
as described above; divided by $1,000; times the Monthly Cost of
Rider Rate shown on the Policy Specifications page for that Eligible
Death Benefit. [0076] The Monthly Cost of Rider will be determined
based on each Eligible Death Benefit in the order in which they
became effective, up to $2,000,000 of Eligible Death Benefit. We
reserve the right to charge a lower Monthly Cost of Rider.
[0077] Conditions All or part of each Beneficiary's Eligible Proceeds
can be applied to one or more Enhanced Option, subject to the following:
[0078] 1. Total proceeds applied to the Enhanced Options upon the
death of the Insured of the Policy cannot exceed $2,000,000. If
there is more than one Beneficiary under the Policy and the policy
proceeds of the Policy are greater than $2,000,000, each Beneficiary
can only apply a pro-rated portion of his/her share to one or more
Enhanced Option. The pro-rated share will be based on the same ratios
under which the proceeds of the Policy were payable. [0079] 2. If
monthly instalments under an Enhanced Option would be less than
$50, proceeds car be applied to the Enhanced Option only with our
consent. [0080] 3. We must receive the choice of an Enhanced Option
from the Beneficiary in written form satisfactory to us at our Designated
Office within the later of: 60 days from the date we send the Beneficiary
the Notification described in this Rider; and 9 months from the
date of death of the insured. [0081] 4. Once payments begin under
this Rider, future payments cannot be assigned and the Enhanced
Options chosen cannot be changed. [0082] 5. If the Beneficiary is
a trust with one natural person as Beneficiary, all Enhanced Options
are available to be chosen. Otherwise, if the Beneficiary is not
a natural person, the choice of an Enhanced Option will be limited
to the 10 Year Certain option. [0083] When an Enhanced Option starts,
a contract will be issued by us or an affiliate designated by us
that will describe the terms of the Option.
[0084] Death of Beneficiary Amounts to be paid after the death
of a Beneficiary under an Enhanced Option will be paid as due to
that Beneficiary's successor Beneficiary. If there is no successor
Beneficiary, amounts will be paid in one sum to the estate of the
last Beneficiary to die. If a Beneficiary dies within 30 days after
the Option Date, the amount applied to the Enhanced Option, less
any payments made, will be paid in one sum.
[0085] Notification We will send each Beneficiary a Notification
of his/her rights under this Rider at the time the policy proceeds
become payable.
[0086] Enhanced Life Income Enhanced Life Income Options are based
on the age and sex of the Options Beneficiary on the Option Date.
We will require proof of age. The Enhanced Life Income payments
will be based on; the rates shown in the Tables below; or, if greater,
105% of our Payment Option rates on the Option Date. If the rates
at a given age are the same for different periods certain, the longest
period certain will be deemed to have been chosen.
[0087] Enhanced 10 Years Equal monthly payments will be made that
will include both Certain OPEN: WHAT principal and interest. Payments
will start on the Option Date and IS THE MAXIMUM will continue for
10 years. The guaranteed monthly payment per AMOUNT TO BE USED $1,000
of proceeds will not be less than $X.XX; or 105% of the 10 HERE?
Year Certain Payment Option rates on the Option Date
[0088] Enhanced Life Income Equal monthly payments will start on
the Option Date and will continue: [0089] 1. During the life of
the Beneficiary, with no payment after the death of the Beneficiary,
called "Enhanced Life Income, No Refund"; or [0090] 2.
During the life of the Beneficiary, but for at least 10 years, called
"Enhanced Life Income, 10 Years Certain"; or [0091] 3.
During the life of the Beneficiary, but for at least 15 years, called
"Enhanced Life Income, 15 Years Certain"; or [0092] 4.
During the life of the Beneficiary, but for at least 20 years, called
"Enhanced Life Income, 20 Years Certain."
[0093] Enhanced Increasing Life Increasing monthly payments will
start on the Option Date and will Income continue during the life
of the Beneficiary, with no payment after the death of the Beneficiary.
Payments will increase at: [0094] 1. 1% per year called "1%
Enhanced Increasing Life Income"; or [0095] 2. 2% per year
called "2% Enhanced Increasing Life Income"; or [0096]
3. 3% per year called "3% Enhanced Increasing Life Income."
[0097] Enhanced Increasing Life Increasing monthly payments will
start on the Option Date and will Income--10 Year continue during
the life of the Beneficiary, but for at least 10 years. Certain
Payments will increase at: [0098] 1. 1% per year called "1%
Enhanced Increasing Life Income, 10 Year Certain"; or [0099]
2. 2% per year called "2% Enhanced Increasing Life Income,
10 Year Certain", or [0100] 3. 3% per year called "3%
Enhanced Increasing Life Income, 10 Year Certain."
[0101] Other Frequencies and Other Enhanced Payment Options and
payment frequencies may be Enhanced Options available upon request.
We reserve the right to substitute comparable Enhanced Payment Options
for those shown below.
[0102] Minimum Payments Guaranteed monthly payments for each $1,000
applied will not be under Enhanced less than the amounts shown in
the following Tables. On request, Payment Options we will provide
additional information about amounts of minimum payments. TABLE-US-00001
Enhanced Life Income OPEN: WHAT NUMBERS SHOULD BE USED HERE AND
IN THE FOLLOWING SECTIONS? Payees' 10 Year 15 Year 20 Year Age No
Refund Certain Certain Certain 50 55 60 65 70 75 80 85 90 &
over
[0103] TABLE-US-00002 Enhanced Increasing Life Income Payee's Age
1% 2% 3% 50 55 60 65 70 75 80 85 90 & over
[0104] TABLE-US-00003 Enhanced Increasing Life Income - 10-Years
Certain Payee's Age 1% 2% 3% 50 55 60 65 70 75 80 85 90 & over
[0105] Termination This Rider will terminate upon the first of
the following events to occur: [0106] 1. The monthly anniversary
on or following receipt by us at our Designated Office of your written
request to terminate this Rider; [0107] 2. The date the Policy terminates
for reasons other than the death of the Insured; and [0108] 3. The
date the Face Amount of the Policy is decreased to less than $25,000.
[0109] The Issue Date and effective date of this Rider and the
Policy are trio same unless another Issue Date is shown below.
[0110] Issue Date:
Insurance Company
APPENDIX B
Record of Decision MLI USA/First MLI/MetLife Affiliated and Independent
Distribution Portfolio
[0111] The Guaranteed Survivor Income Benefit (GSIB) is a rider
available on life insurance policies and is designed to provide
enhanced settlement payout options to the beneficiary(ies) upon
the death of the insured. This rider will be available on policies
introduced on or after Sep. 13, 2004 beginning with the ULSG (04)
contract and will be available on MetLife, MetLife Investors USA
(MLI-USA) and First MetLife Investors (FMLI) paper.
Rider Features:
[0112] This rider is designed so that the beneficiary will have
the option of exchanging the lump sum death benefit proceeds of
a life policy for enhanced lifetime guaranteed monthly payments
through an annuitization process. Partial annuitization of the death
benefit is available at the time of death of the insured. The rider
is exercisable only at the time of death of the insured and NOT
at a partial or full surrender.
Availability:
[0113] GSIB is available for insureds ages 20-80. GSIB is not available
if the base coverage has a Table rating greater than F (150%) or
a flat extra. It cannot be added after issue, and is not available
for group conversions or guaranteed issue. It is available on policies
of $100,000 and above, but applies only to the first $2 million
of death benefit (see the sections on Maximum Benefit and Eligible
Death Benefit for more details).
Rider Charges and Target Premiums:
[0114] There is a monthly charge for this rider per thousand dollars
of Eligible Death Benefit in force, up to the maximum allowable
death benefit. See the section on Eligible Death Benefit for more
details. These rider charges are payable for the life of the policy,
as long as the rider is in force. Monthly charges vary by band and
insured sex, issue age, rating class, and smoking class.
[0115] The appropriate monthly rates per thousand of Eligible Death
Benefit are multiplied by the Eligible Death Benefit divided by
1,000 (by segment), and the resulting rider charges by segment will
each be rounded to 2 decimal places.
Banding:
[0116] Target premiums and charges vary by base policy band, as
follows:
[0117] $100,000-5249,999, $250,000-$999,999, and $1,000,000-$2,000,000.
(For ease of administration, separate tables containing the same
rates will be provided for the $250,000-$499,999, and $500,000-$999,999
bands of ULSG (04).)
Underwriting:
[0118] Sex and risk class follow those of the base policy to which
the rider is attached.
Termination:
[0119] The rider can be terminated. The charges will cease on the
monthly anniversary following: [0120] the receipt of written request
by the policyowner at the Home Office. [0121] a policy being continued
under a nonforfeiture option [0122] a policy s face decreasing below
$25,000 Reinstatement:
[0123] If a policy with this rider as of the time of lapse or time
of moving to a nonforfeiture option is subsequently reinstated (or
returned to premium-paying status), the rider may be reinstated
along with the policy.
[0124] If, however, the rider is terminated separately from the
base policy (other than due to the policy moving to nonforfeiture
status), the rider may not be reinstated.
Beneficiary:
[0125] The beneficiary(ies) named by the policy owner choose(s)
whether or not to exercise the GSIB at the insured's death. Multiple
primary beneficiaries are allowed and each can elect an enhanced
settlement option available under the GSIB independently.
[0126] The beneficiary(ies) will have the later of: 9 months from
the date of death or 60 days following the date that the notification
is sent to the beneficiary(ies), to exercise the GSIB; otherwise
it is lost.
[0127] If the beneficiary is changed to a corporation, a partnership,
a fiduciary, or any other legal entity the rider and rider charges
will continue but the ONLY payment option to be available will be
the 10-Year Certain Option. If a trust is the beneficiary with a
single specified "natural," living person stated as the
beneficiary of the trust at the time of death of the insured, then
all options will be available to the trust.
Beneficiary Age:
[0128] Benefits for this rider are paid based upon the age and
sex of the beneficiary (and choice of payout option) at the death
of the insured. All current annuity rules and provisions for determining
the age of the beneficiary will be followed when an enhanced payout
option is elected.
[0129] There are no age restrictions on beneficiary. The upper
limit of the payment rates shown in the rider contract will be age
95.
Maximum Benefit:
[0130] The maximum death benefit that can be subject to GSIB enhanced
settlement options is $2,000,000. Policies with death benefits exceeding
this amount may still be issued with this rider, but both the benefit
and premium charged will be based on a maximum of $2,000,000 of
death benefit. The minimum policy size (SFA) to which GSIB may be
added is $100,000.
Nonforfeiture & Loans:
[0131] This rider does not have any cash or other nonforfeiture
value and it does not provide for any loan value.
Taxation:
[0132] This benefit is not considered a Qualified Additional Benefit
for tax purposes. This rider is NOT considered in the calculation
of guideline premium limits or seven-pay TAMRA premium limits, and
any premium for the rider will be added to other premium payments
and tested against such limits.
Compensation:
[0133] The rider will be commissionable (i.e. it will increase
the Commissionable Target Premium, No-Lapse Guarantee premium, and
the Minimum Premium to Issue on ULSG (04) policies), This rider
will follow current practice for commissions on settlement options
with regard to commissions paid upon annuitization.
Beneficiary Notification:
[0134] We will send the beneficiary notification of the benefit
at the time the policy proceeds become available; and include the
amounts of the payment options in, the letter. The notification
will also contain instructions on how to elect benefit payments
under the GSIB and the time limit within which an election must
be made.
Payment Rates:
[0135] The Payment Rates will be the maximum of: [0136] 1) Enhanced
guaranteed life settlement option payment rates specified it the
rider [0137] 2) 105% of the current life settlement option payouts
at the time of option exercise
[0138] The payment rates for Part 1) of the payment calculation
above will be provided in table format which will vary based on
sex, age, and payment option.
Payment Options:
[0139] The following settlement options will be available through
the GSIB: [0140] 1) 10-year certain [0141] 2) Life only [0142] 3)
10-year, 15-year, 20-year certain and life [0143] 4) Life only with
1%, 2%, or 3% escalation feature [0144] 5) 10-year certain and life
with 1%, 2%, or 3% escalation feature; Payments are Monthly.
[0145] Other Enhanced Payment Options and payment frequencies may
be available upon request. We reserve the right to substitute comparable
Enhanced Payment Options for those listed above.
[0146] An option is only available if it produces a monthly benefit
payment of at least $50.
[0147] A beneficiary may choose to have more than one payment option
by designating the percentage of the proceeds for each option, totaling
not more than 100%, and providing that the resulting payout for
each option selected produces at least $50 of monthly income.
[0148] Payment options will be sex distinct on sex distinct base
policies and unisex where required. This benefit is not available
on Group Conversion or Guaranteed Issue versions.
Eligible Death Benefit:
[0149] The amount of eligible death benefit for purposes of this
rider includes the base policy and any lump sum death benefits on
the life of the insured payable upon the death of the insured under
attached riders, other than the Accidental Death Benefit rider.
[0150] Note: For ULSG only, the rider charge for the base policy's
death benefit will be based on each segment's Discounted Face Amount,
rather than each segments death benefit (with the $2,000,000 cap
applied before the discounting). This simplification is due to the
fact that for ULSG, as there is no Option B and the policy is not
likely to enter the 7702 corridor, the result will most likely be
the same. Therefore, to avoid unnecessary complexity in the calculations,
the Discounted Face Amount will be used in the processing. This
is an exception, which may be temporary, and other products will
use the segmented Death Benefit. This simplification, which will
produce a charge that is less than or equal to the charge produced
without the simplification, will not be reflected in the contract.
[0151] The amount available for option exercise is the Eligible
Death Benefit, net of indebtedness any existing loans, collateral
assignments, uncollected charges, etc.) at the time of death of
the insured.
Changes in Base Policy Face Amount and Death Benefit Option Changes:
[0152] If a policy face amount is subsequently increased, the GSIB
premium charged for the new segment will be based upon the age and
rating class at increase. In the determination of death benefit
and band by segment, the rider will follow the rules of the base
policy. If the death benefit for a policy with more than one segment
exceeds the $2,000,000 cap. the $2,000,000 will be allocated first
to the original segment, and then to each subsequent segment until
the $2,000,000 is reached.
[0153] If a policy face decreases below the GS IB minimum ($100,000),
the rider will continue, applying the rates for the $100,000 band.
If, however, the policy face decreases below $25,000, the rider
will terminate.
[0154] When there is a partial surrender of face, the premium reduction
will need to be processed in the same manner as for the base policy
(e.g. LIFO, by segment).
[0155] GSIB premium and benefits do not vary by death benefit option.
In the case of a death benefit option change, the premium charged
per thousand of death benefit follow the rules of the base policy
(e.g. if the base policy takes a change in band into account, so
will the rider).
Convertibility:
[0156] If this rider is attached to a convertible term policy that
is converted to a permanent policy, the rider will be allowed to
be issued on the new permanent policy without underwriting assuming
the rider is available on the new policy for the age and amount
being issued.
Assignability:
[0157] Once an enhanced payout option is elected the payment stream
may not be assigned to any other individual or entity. Payments
will end upon the death of the beneficiary unless a period certain
option is chosen. In that case the current payment will continue,
without change, to the named recipient for the balance of the stated
period.
Benefit Administration:
[0158] We will need to be able to transfer data and funds to the
Annuity Administration area when the rider is exercised, similar
to the process where data for LTC GPO riders is transferred to the
Long-Term Care area when an insured elects to purchase the LTC policy
under the provisions of his or her LTC-GPO rider.
[0159] The death proceeds will be deposited into the Total Control
Account or some other interest bearing account while the beneficiary
is deciding whether to elect an enhanced settlement payout under
this rider.
Illustrations for GSIB:
[0160] New business illustration support for the GSIB is required.
UI inputs and report output formats will support sales and marketing
concepts with appropriate disclosures.
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