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Insurance Abstract
A method of providing deferred life insurance through a life insurance
option. The deferred life insurance becomes effective later in the
life of an insured after the option matures. The insured pays at
least one payment during a first period for the deferred life insurance
policy option. The deferred life insurance policy is inactive during
the first period, and becomes effective at the beginning of the
second period when the option matures. The insured pays at least
one payment during a second period, which follows the first period,
for the deferred life insurance policy, assuming the insured lives
this long. The insured is entitled to a benefit based on the deferred
term life insurance policy only in the event of death of the insured
occurs during the second period. Payments for the life insurance
option can be made by a person who is the insured or on behalf of
another person who is the insured, such as a child or other third
party. The individual payments and sum of payments can be structured
to suit the insured's financial objectives, while providing incoming
funds to an insurance company. The deferred life insurance policy
can be used in conjunction with a conventional life insurance policy,
such as conventional term and whole life insurance policies.
Insurance Claims
1. A method of providing deferred life insurance that becomes effective
later in life, comprising: receiving at least one payment from an
insured during a first period for an option of a deferred life insurance
policy, wherein the insured is not entitled to a benefit under the
deferred life insurance policy in the event of death of the insured
during the first period; and if the insured lives beyond the first
period and into a second period that follows the first period, the
option maturing into the deferred life insurance policy, the deferred
life insurance policy being effective at the beginning of the second
period, and the insured being entitled to a benefit based on the
deferred life insurance policy in the event of death of the insured
during the second period.
2. The method of claim 1, the second period having a pre-determined
expiration date, wherein the option matures into a deferred term
life insurance policy that is effective at the beginning of the
second period through the pre-determined expiration date.
3. The method of claim 1, the second period having an expiration
date coinciding with death of the insured, wherein the option matures
into a deferred whole life insurance policy that is effective at
the beginning of the second period.
4. The method of claim 1, wherein the first period is about one
year to about forty years.
5. The method of claim 1, wherein the second period is about one
year to about forty years.
6. The method of claim 1, wherein payments are made periodically
during the first period.
7. The method of claim 1, further comprising receiving at least
one payment from the insured during the second period.
8. The method of claim 7, wherein payments are made periodically
during the second period.
9. The method of claim 7, wherein the sum of payments made during
the first period is greater than the sum of payments made during
the second period.
10. The method of claim 7, wherein the sum of payments made during
the second period is greater than the sum of payments made during
the first period.
11. The method of claim 7, wherein the payments made during the
first period are greater than the payments made during the second
period.
12. The method of claim 7, wherein the payments made during the
second period are greater than the payments made during the first
period.
13. The method of claim 1, wherein the deferred life insurance
policy is based on medical examination information of the insured
obtained prior to the first period.
14. The method of claim 1, further comprising receiving at least
one payment from the insured during the first period for a conventional
life insurance policy.
15. The method of claim 14, the conventional life insurance policy
comprising a conventional term life insurance policy, further comprising
receiving at least one payment from the insured during the first
period for the conventional term life insurance policy.
16. The method of claim 14, wherein the conventional term life
insurance policy expires at the end of the first period, and the
insured is covered under the conventional term life insurance policy
during the first period and covered under the deferred term life
insurance policy during the second period.
17. The method of claim 16, wherein death of the insured occurs
during the first period, further comprising paying a benefit under
the conventional term life insurance policy but not paying a benefit
under the deferred term life insurance policy.
18. The method of claim 16, wherein death of the insured occurs
during the second period, further comprising paying a benefit under
the deferred term life insurance policy but not paying a benefit
under the conventional term life insurance policy.
19. The method of claim 14, the conventional life insurance policy
comprising a conventional whole life insurance policy, further comprising
receiving at least one payment from the insured during the first
period for the conventional whole life insurance policy.
20. The method of claim 19, further comprising paying a benefit
under the conventional whole life insurance policy but not paying
a benefit under the deferred life insurance policy if death of the
insured occurs during the first period.
21. The method of claim 19, further comprising paying a benefit
under both the whole life insurance policy and the deferred term
life insurance policy if death of the insured occurs during the
second period.
22. A method of providing deferred term life insurance that becomes
effective later in life of an insured, comprising: receiving at
least one payment from an insured during a first period of about
one year to about forty years for an option of a deferred term life
insurance policy, wherein the insured is not entitled to a benefit
under the deferred term life insurance policy in the event of death
of the insured during the first period; and if the insured lives
beyond the first period and into a second period of about one year
to about forty years that follows the first period, the option maturing
into the deferred term life insurance policy, the deferred term
life insurance policy being effective at the beginning of the second
period, and the insured being entitled to a benefit based on the
deferred term life insurance policy only in the event of death of
the insured during the second period.
23. The method of claim 22, wherein payments are made periodically
during the first period.
24. The method of claim 22, further comprising receiving at least
one payment from the insured during the second period.
25. The method of claim 24, wherein payments are made periodically
during the second period.
26. The method of claim 24, wherein the sum of payments made during
the first period is greater than the sum of payments made during
the second period.
27. The method of claim 24, wherein the sum of payments made during
the second period is greater than the sum of payments made during
the first period.
28. The method of claim 24, wherein the payments made during the
first period are greater than the payments made during the second
period.
29. The method of claim 24, wherein the payments made during the
second period are greater than the payments made during the first
period.
30. The method of claim 22, wherein the deferred term life insurance
policy is based on medical examination information of the insured
obtained prior to the first period.
31. The method of claim 22, further comprising receiving at least
one payment from an insured during the first period for a conventional
life insurance policy.
32. The method of claim 31, the conventional life insurance policy
comprising a conventional term life insurance policy, further comprising
receiving at least one payment from the insured during the first
period for the conventional term life insurance policy.
33. The method of claim 31, wherein the conventional term life
insurance policy expires at the end of the first period, and the
insured is covered under the conventional term life insurance policy
during the first period and covered under the deferred term life
insurance policy during the second period.
34. The method of claim 33, wherein death of the insured occurs
during the first period, further comprising paying a benefit under
the conventional term life insurance policy but not paying a benefit
under the deferred term life insurance policy.
35. The method of claim 33, wherein death of the insured occurs
during the second period, further comprising paying a benefit under
the deferred term life insurance policy but not paying a benefit
under the conventional term life insurance policy.
36. The method of claim 31, the conventional life insurance policy
comprising a conventional whole life insurance policy, further comprising
receiving at least one payment from the insured during the first
period for the conventional whole life insurance policy.
37. The method of claim 36, further comprising paying a benefit
under the conventional whole life insurance policy but not paying
a benefit under the deferred life insurance policy if death of the
insured occurs during the first period.
38. The method of claim 36, further comprising paying a benefit
under both the whole life insurance policy and the deferred term
life insurance policy if death of the insured occurs during the
second period.
39. A method of providing deferred term life insurance that becomes
effective later in life, comprising: receiving at least one payment
from an insured during a first period of about one year to about
forty years for an option of a deferred term life insurance policy,
wherein the insured is not entitled to a benefit under the deferred
term life insurance policy in the event of death of the insured
during the first period; and receiving at least one payment from
the insured during a second period of about one year to about forty
years, the second period following the first period, if the insured
lives beyond the first period and into a second period, the option
maturing into the deferred term life insurance policy, the deferred
term life insurance policy being effective at the beginning of the
second period and being based on medical examination information
of the insured prior to the first period, and the insured being
entitled to a benefit based on the deferred term life insurance
policy only in the event of death of the insured during the second
period.
40. The method of claim 39, further comprising receiving at least
one payment from the insured during the first period for a conventional
life insurance policy.
41. The method of claim 40, the conventional life insurance policy
comprising a conventional term life insurance policy, further comprising
receiving at least one payment from the insured during the first
period for the conventional term life insurance policy.
42. The method of claim 41, wherein the conventional term life
insurance policy expires at the end of the first period, and the
insured is covered under the conventional term life insurance policy
during the first period and covered under the deferred term life
insurance policy during the second period.
43. The method of claim 42, wherein death of the insured occurs
during the first period, further comprising paying a benefit under
the conventional term life insurance policy but not paying a benefit
under the deferred term life insurance policy.
44. The method of claim 42, wherein death of the insured occurs
during the second period, further comprising paying a benefit under
the deferred term life insurance policy but not paying a benefit
under the conventional term life insurance policy.
45. An article of manufacture comprising a program storage device
readable by a computer and tangibly embodying one or more programs
of instructions executable by the computer to perform method steps
for providing deferred life insurance that becomes effective later
in life, the method comprising the steps of: receiving at least
one payment from an insured during a first period for an option
of a deferred life insurance policy, wherein the insured is not
entitled to a benefit under the deferred life insurance policy in
the event of death of the insured during the first period, and if
the insured lives beyond the first period and into a second period
that follows the first period, the option maturing into the deferred
life insurance policy, the deferred life insurance policy being
effective at the beginning of the second period, and the insured
being entitled to a benefit based on the deferred life insurance
policy only in the event of death of the insured during the second
period.
Insurance Description
FIELD OF THE INVENTION
[0001] The present invention relates generally to life insurance
policies, and more particularly, to a life insurance option that
matures into a deferred life insurance policy later in life.
BACKGROUND
[0002] Various life insurance policies are known today, including
permanent life insurance, such as whole life, universal life and
variable universal life insurance, and term life insurance. Whole
life insurance guarantees that a benefit will be paid by an insurance
company, underwriter or other issuer (generally, "insurance
company") to a beneficiary upon the death of the insured or
policyholder (generally, the "insured"). With a whole
life policy, a benefit is paid by the insurance company regardless
of when death of the insured occurs. Whole life also allows the
insured to accumulate cash value so that the insured can draw upon
the cash value. Also, whole life policy premiums generally do not
increase with age and, instead, are usually stable over time. Term
life insurance, on the other hand, involves payment of a benefit
to a beneficiary of an insured in the event of the insured's death
during a specified period of time. For example, term policies are
often prepared for periods of one to thirty years, e.g., one, ten,
twenty, twenty-five and thirty years. Thus, a term life insurance
policy is temporary and covers only a specified period of time,
and builds no cash value.
[0003] For example, if an insured has a 25 year term life insurance
policy, the insurance company would pay out the specified benefit
to a beneficiary in the event of death of the insured during that
25 year term. However, in the event of death of the insured after
expiration of the 25 year term, e.g., 25 years and six months, then
no benefit would be paid. Term insurance policies are often desirable
over whole life policies since they provide benefits at a lower
cost compared to whole life insurance. However, a term life insurance
policy holder who was fortunate to have outlived the term policy
paid premiums to the insurance company without any benefit disbursement
and no accrued cash value in exchange for this comfort of limited
duration. Further, the insured is placed in a difficult position
upon expiration of the term policy, particularly if the insured
has no other life insurance policies in place. It may be difficult
for a person to obtain a second policy after the first policy expires
due to the health and age of the person after the term policy expires.
[0004] More particularly, the original term life insurance policy
was likely acquired following an initial medical examination. The
medical examination may not be an issue for the insured at that
time, particularly when the insured is young and in good health.
Over time, however, a person's health generally declines, and obtaining
a second term policy (or a whole life policy) after expiration of
an initial policy typically requires a second medical examination.
The second medical examination will likely result in substantially
higher premiums since the insurance company is assuming greater
risk of death of the insured during the duration of the second term
policy, particularly if the second policy is obtained substantially
later in life, e.g., 20-30 years later.
[0005] Thus, a person is placed in the difficult position of obtaining
a second policy at substantially higher premiums or, alternatively,
declining to obtain a second policy. This is not a desirable situation,
particularly for elderly persons, retired persons who may be on
a fixed income, and persons who have developed various health conditions
since the initial examination that was used to underwrite the initial
insurance policy.
[0006] Accordingly, there exists a need for a life insurance policy
option that matures as a deferred policy later in life, e.g., at
the expiration of a conventional term life insurance policy. Such
an option and deferred policy would provide persons with life insurance
that would otherwise be unattainable or substantially more expensive
if obtained later in life and, at the same time, provide additional
premiums to an insurance company which may or may not be required
to pay a benefit.
SUMMARY
[0007] In accordance with one embodiment is a method of providing
deferred life insurance that becomes effective later in life. The
method includes receiving at least one payment from an insured during
a first period for an option of a deferred life insurance policy.
The insured is not entitled to a benefit under the deferred life
insurance policy in the event of death of the insured during the
first period. The option matures into a deferred life insurance
policy if the insured lives beyond the first period and into a second
period. The deferred policy is effective at the beginning of the
second period, and the insured is entitled to a benefit based on
the deferred policy in the event of death of the insured during
the second period.
[0008] In accordance with another embodiment is a method of providing
deferred term life insurance that becomes effective later in life
of an insured and that includes receiving at least one payment from
an insured during a first period, which can be about one year to
about forty years, for an option of a deferred term life insurance
policy. The insured is not entitled to a benefit under the deferred
policy in the event of death of the insured during the first period.
The option matures into the deferred term life insurance policy
if the insured lives beyond the first period and into a second period,
which can be about one year to about forty years and which follows
the first period. The deferred policy is effective at the beginning
of the second period, and the insured is entitled to a benefit based
on the deferred term life insurance policy in the event of death
of the insured during the second period.
[0009] In accordance with yet another embodiment is a method of
providing deferred term life insurance that becomes effective later
in life that includes receiving at least one payment from an insured
during a first period for an option of a deferred term life insurance
policy, and receiving at least one payment from the insured during
a second period. The first and second periods can be about one year
to about forty years. The insured is not entitled to a benefit under
the deferred term life insurance policy in the event of death of
the insured during the first period. The option matures into the
deferred term life insurance policy and is effective at the beginning
of the second period if the insured lives beyond the first period
and into a second period. The deferred policy is based on medical
examination information of the insured prior to the first period.
The insured is entitled to a benefit based on the deferred policy
in the event of death of the insured during the second period.
[0010] According to another embodiment, an article of manufacture,
such as magnetic and/or optical and other storage media, including
a diskette, a Compact Disc (CD), a Digital Video Disc (DVD), or
other program storage device readable by a computer or other processing
device, embodies one or more programs of instructions executable
by the computer to perform method steps for providing deferred life
insurance that becomes effective later in life. The method includes
receiving at least one payment from an insured during a first period
for an option of a deferred life insurance policy. The insured is
not entitled to a benefit under the deferred life insurance policy
in the event of death of the insured during the first period, but
if the insured lives beyond the first period and into a second period,
an option matures into a deferred life insurance policy that is
effective at the beginning of the second period. The insured is
entitled to a benefit based on the deferred life insurance policy
only in the event of death of the insured during the second period.
[0011] In various embodiments, the first and second periods can
be various durations, e.g., about one to about forty years. Further,
the duration of the second period can end on a pre-determined date
or with death of the insured.
[0012] Payments made during the first and second periods can be
structured to suit various needs. For example, payments can be made
during the first and/or second periods on a periodic or non-periodic
basis. Depending on the lifespan of the insured, the insured may
or may not live beyond the end of the first period and into the
second period. Thus, the option may or may not mature, and the insured
may or may not make one or more payments during the second period.
The payment structure can also be weighted as needed. For example,
the payment(s) made during the first period can be greater or less
than the payment(s) made during the second period. Additionally,
the sum of payment(s) made during the first period can be greater
or less than the sum of payment(s) made during the second period.
[0013] The deferred life insurance policy can also be based on
medical examination information of the insured obtained prior to
the first period. Thus, an insured is not required to be subjected
to a medical examination later in life when the health of the insured
may not be as good as in earlier in life.
[0014] The option for a deferred life insurance policy can also
be concurrent with another known or conventional policy. For example,
according to one embodiment, payments can be made during the first
period for a known life insurance policy, such as a known term life
insurance policy, a known whole life insurance policy, or other
known policies that suit the needs of the insured.
[0015] A conventional term life insurance policy can expire at
the end of the first period so that the insured is covered under
the known term life insurance policy during the first period, and
covered under the deferred term life insurance policy during the
second period (assuming the insured lives beyond the first period).
Thus, if death of the insured occurs during the first period, then
a benefit would be paid under the conventional term life insurance
policy but not the deferred policy. If death of the insured occurs
during the second period, then a benefit would be paid under the
deferred policy, but not the conventional term life insurance policy.
When the conventional policy is a whole life policy, then a benefit
under the conventional whole life insurance policy can be paid in
the event of death of the insured during the first or second periods,
and a benefit under the deferred policy would also be paid if death
occurs during the second period.
[0016] Other objects and features of embodiments will become apparent
from consideration of the following description taken in conjunction
with the accompanying drawings.
BRIEF DESCRIPTION OF THE DRAWINGS
[0017] FIG. 1 is a flow chart generally illustrating a method of
implementing a life insurance option that matures as a deferred
term life insurance policy according to one embodiment;
[0018] FIG. 2 is a flow chart generally illustrating a method of
implementing a life insurance option that matures as a deferred
whole life insurance policy according to another embodiment;
[0019] FIG. 3 is a timeline illustrating payment of premiums and
benefits according to one embodiment;
[0020] FIG. 4 is a timeline illustrating payment of premiums according
to one embodiment;
[0021] FIG. 5 is a timeline illustrating concurrent conventional
term life and deferred life insurance policies in which death of
the insured occurs during a first period before the deferred life
insurance option matures according to one embodiment;
[0022] FIG. 6 is a timeline illustrating concurrent conventional
term life and deferred life insurance policies in which death of
the insured occurs during a second period after the deferred life
insurance policy option matures according to one embodiment;
[0023] FIG. 7 is a timeline illustrating concurrent conventional
whole life and deferred life insurance policies in which death of
the insured occurs during a first period before the deferred life
insurance policy option matures according to one embodiment; and
[0024] FIG. 8 is a timeline illustrating concurrent conventional
whole life insurance and deferred life insurance policies in which
death of the insured occurs during a second period after the deferred
life insurance policy option matures according to one embodiment.
[0025] In the following description, reference is made to the accompanying
drawings which form a part hereof, and which show by way of illustration
specific embodiments. It is to be understood that changes may be
made without departing from the scope of embodiments.
DETAILED DESCRIPTION OF ILLUSTRATED EMBODIMENTS
[0026] Embodiments of the invention provide a life insurance policy
option that matures as a deferred life insurance policy, such as
a term or whole life policy, that provides life insurance coverage
in the future, e.g., after an initial life insurance policy expires,
in exchange for payment of premiums during a first period before
the option matures and during which time no benefit is payable.
More specifically, the policy holder pays a premium during a first
or inactive period. No benefit is paid by the insurance company
in the event of death of the insured during the first period. If
the insured lives beyond the expiration of the first period and
into the second period, then the option matures into a deferred
life insurance policy, which is effective as of the beginning of
the second period. The insured continues to pay premiums during
the second period according to the agreed upon schedule. An insurance
company pays a benefit under the deferred life insurance policy
only in the event of death of the insured during the second period,
i.e., after the option matures. The deferred life insurance policy
can be based on medical examination prior to the first period. Thus,
the insured is not required to submit to a second medical examination
later in life in order to obtain the deferred life insurance.
[0027] The life insurance structures according to embodiments of
the invention provide comfort to the insured knowing that if the
insured is fortunate to live beyond a certain date, e.g., an expiration
date of an initial term life insurance policy, there will be another
policy in place to provide benefits. Further, the option matures
into a deferred life insurance policy without requiring the insured
to undergo an additional medical examination. Accordingly, embodiments
provide life insurance coverage later in life at premiums that are
less than premiums of a second, separate policy that is obtained
later in life. Further details of various embodiments are described
below with reference to FIGS. 1-8.
[0028] Referring to FIG. 1, according to one embodiment, a life
insurance option matures later in life as a deferred term life insurance
policy, which has a specified duration or expiration date. In step
100, an insured typically undergoes a medical examination. A medical
examination may not be necessary in some cases, so step 100 is optional.
In step 105, an insurance company (or other issuer) determines the
premium to be paid during the first or inactive period and the premium
to be paid during the second or active period following maturation
of the life insurance policy option based on, for example, the medical
examination and other information, such as age, lifestyle habits,
etc. In step 110, after the life insurance option is effective,
the insured pays one or more premium payments to the insurance company
during the first period. The premiums can be periodic, for example,
monthly, bi-annual and annual, etc. Premiums can also follow a different
aperiodic schedule.
[0029] In the event of death of the insured during the first period
in step 115, the insurance company pays no benefit under the life
insurance policy option in step 120. Thus, the insured benefits
by having comfort knowing that a life insurance policy would have
matured in the future had the insured lived that long, and the insurance
company benefits by receiving premiums from the policyholder during
the first period without having to pay any benefit since the option
did not mature.
[0030] Otherwise, in step 125, the insured is alive and continues
to pay the insurance company one or more additional premiums during
the first period in step 130. In step 135, the insured lives beyond
the first or inactive period and into the second or active period.
As a result, in step 140, the life insurance option matures into
a deferred life insurance policy. The deferred life insurance policy
is effective as of the beginning of the second or active period.
The insured then pays the agreed upon premiums during the second
period in step 145. Thus, the insured further benefits by having
a life insurance policy that becomes active later in life, and the
insurance company also benefits by receiving premiums from the policyholder
during the first period and further premiums during the second period.
[0031] In the event of death of the insured during the second or
active period in step 150, the insurance company pays a benefit
to the beneficiary of the insured based on the deferred life insurance
policy in step 155. Thus, the insured benefits by having the insurance
company pay a benefit to the beneficiary. The insurance company's
payout, however, is mitigated by the previous premium payments made
during the first and/or second periods.
[0032] Otherwise, in step 160, the insured is alive and continues
to pay premiums to the insurance company during the second period
in step 165. In step 170, the insured outlives the second period
and, as a result, in step 175, the deferred life insurance policy
resulting from the matured option expires before death of the insured
180. In this case, the insured benefits from the policy by the comfort
provided during the first and second periods that deferred life
insurance would have been in place in the event of death of the
insured during the second period. The insurance company also benefits
by receiving premiums from the insured during the first and second
periods and not paying a benefit since the insured outlived both
the first and second periods.
[0033] Referring to FIG. 2, according to an alternative embodiment,
the second period does not have a pre-determined duration. Thus,
the life insurance option matures later in life as a deferred whole
life insurance policy, which expires upon the death of the insured
180 rather than at a pre-determined time. Accordingly, the insurance
company pays a benefit so long as the insured lives beyond the first
period so that the deferred life insurance policy matures. This
embodiment includes the same steps as shown in FIG. 1 except that
steps 160-180 are omitted since the second period does not have
a pre-determined expiration date.
[0034] Persons skilled in the art will appreciate that all of the
steps shown in FIGS. 1 and 2 may not occur during a person's lifetime.
Further, certain steps may occur in a different order. For example,
it is possible that no premium payments would be received during
the first period in the event that the insured passes shortly after
the life insurance option agreement is signed. Thus, it is possible
that death of the insured during the first period can occur before
or after the first premium payment during the first period, before
or after the second premium payment during the first period, and
so on. Accordingly, death of the insured may occur before or after
step 110, and before or after step 130. Further, once the insured
outlives the first period and enters the second period, it is possible
that death of the insured can occur before or after step 145 and
before or after step 165. Death of the insured may occur before
or after the first premium payment during the second period, before
or after the second premium payment during the second period, and
so on. The steps and sequence thereof shown in FIG. 1 are provided
for purposes of explanation and illustration, not limitation.
[0035] FIG. 3 further illustrates when benefits are payable according
to a life insurance option 300 according to one embodiment, which
corresponds to the method shown in FIG. 1. In the illustrated embodiment,
the policy begins at Time 1. A first period 310 is defined between
Time 1 and Time 2. Beginning at Time 1, the insured pays one or
more premiums (Premium 1) 320 during the first period. No benefit
330 is paid in the event of death of the insured during the first
period 310 despite the payments of one or more premiums 320 during
the first period 310. However, if the insured lives beyond Time
2 and into the second period 340, then the option 300 of deferred
life insurance matures. The insured then pays one or more premiums
(Premium 2) 350 during the second period. In the event of death
of the insured during the second period 340, the insurance company
pays a benefit 360. In the illustrated embodiment the second period
340 has a pre-determined duration. Thus, the insurance company is
not required to pay a benefit if the policyholder outlives the second
period 340, i.e., lives past Time 3.
[0036] In an alternative embodiment, the second period 340 extends
for the life of the insured, as discussed above with reference to
FIG. 2. Thus, the option 300 matures as a whole life policy later
in life, and the insurance company is required to pay a benefit
365 upon the death of the insured regardless of whether the insured
lives beyond Time 3, so long as the insured lives beyond Time 2.
[0037] Referring to FIG. 4, according to one embodiment the premiums
paid by the insured can be structured to be back-loaded, i.e., higher
during the second period 340. Payments may be structured in this
manner, for example, if the insured does not sufficient funds to
cover higher premiums early in life. This may be suitable if, for
example, the insured wants to pay lower premiums for the option
300 because he or she is required to pay premiums on another life
insurance policy or has other expenses during that period, e.g.,
housing, education, etc. The value and durations shown in FIG. 4
are provided for purposes of explanation and illustration, not limitation,
since various premium values and durations of first and second periods
can be utilized. According to an alternative embodiment, payments
can be front-loaded, i.e., higher during the first period 310.
[0038] Referring to FIG. 5, according to one embodiment, a deferred
life insurance option 300 can be used in conjunction with a conventional
term life insurance. Conventional term life insurance 500 is defined
as an insurance policy that provides coverage for a specified period
of time (which can be based on death of the insured) and only pays
a benefit in the event of death of the insured during that period
of time. Conventional insurance includes known term and whole life
policies.
[0039] As shown in FIG. 5, the deferred life insurance option 300
is a deferred term life insurance option that matures or becomes
active upon the expiration of the conventional term life insurance
policy 500. In the illustrated embodiment, the first period 310
of the deferred term life insurance option 300 is the same as the
duration of the conventional term life insurance policy 500, and
the second period 340 has a pre-determined duration. The insured
pays premiums (Premium T) 510 for the conventional term life insurance
500 and, in addition, pays premiums (Premium 1) 320 during the first
period 310 of the deferred life insurance option 300.
[0040] In an alternative embodiment, as illustrated in the dashed
arrow, the second period 340 may expire with the death of the insured,
thus resulting in an option for a whole life policy rather than
a term policy. For purposes of explanation and illustration, not
limitation, the second period 340 is shown as terminating at Time
3.
[0041] In the event of death during the first period 310 (during
the conventional term policy 500), the insurance company pays a
benefit only under that policy 500. Thus, the insurance company's
net payments out are reduced by the incoming premiums (Premium 1)
320 for the deferred policy option 300. The insured benefits from
this arrangement knowing that there would be a policy that would
come into effect upon expiration of the conventional term policy
500. Thus, such a policy is mutually beneficial to policyholders
and insurance companies.
[0042] Referring to FIG. 6, death of the insured is shown as occurring
during the second period 340, i.e., after expiration of the conventional
term life insurance policy 500 at Time 2. In this case, the insurance
company pays a benefit 340 under the deferred term life insurance
policy that matured from the option 300, but not the conventional
term life insurance policy 500. Thus, the insurance company receives
premiums under the conventional term policy 500 without any payout,
received premiums 320 and 350 during the first and second periods
310 and 340 for the deferred policy, and was then required to pay
a benefit.
[0043] Referring to FIG. 7, according to an alternative embodiment,
the deferred life insurance option 300 can be used with a conventional
whole life insurance policy 700. Conventional whole life insurance
700 is defined as a life insurance policy that provides permanent,
lifelong insurance coverage, under which a benefit is paid upon
the death of the insured. The insured pays premiums (Premium W)
710 for the conventional whole life insurance 700 and, in addition,
pays premiums (Premium 1) 320 during the first period 310 of the
deferred life insurance option 300. In an alternative embodiment,
as illustrated in the dashed arrow, the second period 340 may expire
with the death of the insured, thus resulting in an option for a
whole life policy rather than a term policy. The insured, therefore,
could be entitled to two separate whole life policies. For purposes
of explanation and illustration, not limitation, the second period
is shown as terminating at Time 3 and having a pre-determined expiration
date
[0044] In the event of death of the insured during the first period
310, the insurance company pays a benefit 720 only under the conventional
whole life insurance policy 700 and not the deferred policy since
the option 300 has not yet matured. Thus, the insurance company's
net payments out are reduced by the incoming premiums (Premium 1)
320. The insured also benefits knowing that there would be an additional
policy that would come into effect upon reaching a certain age.
Thus, such a policy is mutually beneficial to policyholders and
to insurance companies.
[0045] Referring to FIG. 8, in the event of death of the insured
during the second period 340, the insurance company pays a benefit
720 under the conventional whole life insurance policy 700 and,
in addition, pays a benefit 360 under the deferred policy since
the option 300 matured.
[0046] In various embodiments described above, payments made by
the policyholder can be front-loaded, or higher during the first
period. Alternatively, they can be back-loaded, or higher during
the second period. Thus, the dollar amount of Premium 1 320 can
be greater or less than the dollar amount of Premium 2 350. For
example, death of the insured may occur shortly after the second
period 340 has begun, thus resulting in very few, if any, premiums
350 being paid during the second period while the beneficiary is
nevertheless entitled to a benefit. Further, depending on the timing
of death of the insured, the sum total of premiums 320 paid during
the first period 310 can be greater or less than the sum total of
premiums paid during the second period 340.
[0047] Additionally, the duration of the first and second periods
310 and 340 of the deferred policy can vary depending on the needs
of the policy holder. For example, a deferred policy can be structured
so that the durations of the first and second periods 310 and 340
are the same. The duration of the first period 310 can exceed the
duration of the second period 340 or the duration of the second
period 340 can exceed that of the first period 310. The durations
of the first and second periods 310 and 340 can be, for example,
between about one and forty years or other suitable durations.
[0048] Further, embodiments advantageously allow the deferred insurance
policy to be based on initial medical examination, e.g., prior to
Time 1, rather than a subsequent medical examination, e.g., after
Time 2. Thus, the insured party is able to obtain life insurance
coverage later in life (beginning at Time 2) when the option 300
matures. Such coverage would be unattainable or substantially more
expensive if the same person were to attempt to obtain a separate
second life insurance policy at Time 2 since the person may have
health conditions that affect whether a policy could be issued and
the premiums of subsequent policy, particularly with extended first
periods.
[0049] Embodiments provide significant improvements over known
life insurance policies by providing a safety net for policyholders
that outlive their original policies rather than being left without
any life insurance coverage later in life. Further, premiums can
be structured to be mutually beneficial to both policyholders and
to insurance companies.
[0050] It should be understood that the embodiments described herein
are not limited to the particular timelines and methods disclosed,
but cover all modifications, equivalents and alternatives falling
within the scope of the appended claims. For example, a deferred
life insurance policy or option can be used alone or in conjunction
with other types of life insurance, including various types of temporary
and permanent life insurance policies, including known whole, term,
universal life and variable universal life insurance. Further, embodiments
are not intended to be limited to only a person making one or more
payments for a life insurance option for him or herself. Thus, one
person may make one or more payments for a life insurance option
for another person, e.g., a family member, such as a child, or another
third party.
[0051] Accordingly, it will be understood that FIGS. 5-8, which
illustrate examples involving conventional term and conventional
whole life insurance, are not intended to be limiting and that payments
for a life insurance option can be paid to the insurance/option
provider for oneself or for another. Thus, references in this specification
to receiving one or more payments from an insured are defined to
include receiving one or more payments from an insured for the benefit
of the insured and, in addition, receiving one or more payments
from a person on behalf of another person who is the insured, such
as a family member or other third party. Thus, the person making
the payments may be a parent, guardian or agent of the insured.
[0052] Moreover, persons skilled in the art will appreciate that
embodiments of the invention can be implemented within a single
computer and over a network, such as the Internet. Further, software
that is used to carry out or enable the steps described above can
be embodied in, or readable from, a computer-readable medium or
carrier, e.g., such as magnetic media, a Compact Disc (CD) and other
storage media. |