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Insurance Abstract
The present invention provides a life insurance product known as
longevity insurance. Longevity insurance mitigates longevity risk,
the risk that an individual will outlive his or her assets. More
specifically, the purchase of longevity insurance guarantees an
individual a predetermined, periodic income payment for the life
of the purchaser. The guaranteed stream of monthly income commences
at a later date, which may be utilized to supplement an existing
income level or provide income in the event that the individual
outlives his or her accumulated assets.
Insurance Claims
1. Longevity insurance comprising: an individual fixed deferred
annuity comprising: a premium payment; an annuity commencement date;
a periodic annuity payment; and a facility care benefit; wherein
said longevity insurance is utilized to mitigate longevity risk.
2. The longevity insurance of claim 1, wherein said premium payments
comprise at least one selected from the group consisting of: a single
payment, a flexible payment, and a modal payment.
3. The longevity insurance of claim 1, wherein said annuity commencement
date is selected to coincide with a purchaser's approximate life
expectancy.
4. The longevity insurance of claim 1, wherein said periodic annuity
payment is selected from the group consisting of a single life annuity
payment or a joint life annuity payment.
5. The longevity insurance of claim 1, further comprising a death
benefit selected from the group consisting of: a single life with
cash refund payments, payments for a period certain, joint and survivor
life with cash refund payments, and joint life annuity with cash
refund payments.
6. The longevity insurance of claim 1, wherein said periodic annuity
payment is selected from the group consisting of: monthly payments,
quarterly payments, semi-annual payments, and annual payments.
7. The longevity insurance of claim 1, further comprising an annuity
payment increase feature.
8. The longevity insurance of claim 1, wherein said facility care
benefit comprises a pre-annuity commencement date benefit.
9. The longevity insurance of claim 1, wherein said facility care
benefit comprises a post-annuity commencement date benefit.
10. The longevity insurance of claim 1, wherein said facility care
benefit is triggered upon a facility care event.
11. The longevity insurance of claim 10, wherein said facility
care event comprises being confined to a nursing home or an assisted
living facility.
12. A method for mitigating longevity risk comprising: evaluating
one or more guaranteed income sources to generate a periodic guaranteed
income amount; determining a desired periodic spending amount; utilizing
said determined desired periodic spending amount and said generated
current periodic income amount to calculate a base amount; calculating
an asset draw down rate by estimating a life expectancy; and purchasing
longevity insurance to mitigate the risk of an individual outliving
said estimated life expectancy.
13. The method of claim 12, wherein said longevity insurance comprises:
an individual fixed deferred annuity comprising: a premium payment;
an annuity commencement date; a periodic annuity payment; and a
facility care benefit; wherein said longevity insurance is utilized
to mitigate longevity risk.
14. The method of claim 13, wherein said premium payments comprise
at least one selected from the group consisting of: a single payment,
a flexible payment, and a modal payment.
15. The method of claim 13, wherein said annuity commencement date
is selected to coincide with a purchaser's approximate life expectancy.
16. The method of claim 13, wherein said periodic annuity payment
is selected from the group consisting of a single life annuity payment,
payments for a period certain, and a joint life annuity payment.
17. The method of claim 13, further comprising a death benefit
selected from the group consisting of: a single life with cash refund
payments, joint and survivor life with cash refund payments, and
joint life annuity with cash refund payments.
18. The method of claim 13, wherein said periodic annuity payment
is selected from the group consisting of: monthly payments, quarterly
payments, semi-annual payments, and annual payments.
19. The method of claim 13, wherein said facility care benefit
comprises a pre-annuity commencement date benefit.
20. The method of claim 13, wherein said facility care benefit
comprises a post-annuity commencement date benefit.
21. The method of claim 13, wherein said facility care benefit
is triggered upon a facility care event.
22. The method of claim 21, wherein said facility care event comprises
being confined to a nursing home or an assisted living facility.
23. A system for generating a longevity insurance contract comprising:
at least one user computer associated with a user of the system;
a server computer in communication with said user computer comprising:
a database comprising data related to at least one longevity insurance
contract; a means for accessing said data; a means for transmitting
said accessed data to a display interface, said interface comprising:
a plurality of integrated applications which is accessed by a user;
wherein said integrated applications allow a user to construct said
longevity insurance contract.
24. The system of claim 23, wherein said data related to at least
one longevity insurance contract comprises data related to an individual
fixed deferred annuity comprising: a premium payment; an annuity
commencement date; a periodic annuity payment; a facility care benefit;
and a death benefit.
25. The system of claim 24, wherein said premium payments comprise
at least one selected from the group consisting of: a single payment,
a flexible payment, and a modal payment.
26. The system of claim 24, wherein said annuity commencement date
is selected to coincide with a purchaser's approximate life expectancy.
27. The system of claim 24, wherein said periodic annuity payment
is selected from the group consisting of a single life annuity payment,
payments for a period certain, and a joint life annuity payment.
28. The system of claim 24, further comprising a death benefit
selected from the group consisting of: a single life with cash refund
payments, joint and survivor life with cash refund payments, and
joint life annuity with cash refund payments.
29. The system of claim 24, wherein said periodic annuity payment
is selected from the group consisting of: monthly payments, quarterly
payments, semi-annual payments, and annual payments.
30. The system of claim 24, wherein said facility care benefit
comprises a pre-annuity commencement date benefit.
31. The system of claim 24, wherein said facility care benefit
comprises a post-annuity commencement date benefit.
32. The system of claim 24, wherein said facility care benefit
is triggered upon a facility care event.
33. The system of claim 24, wherein said facility care event comprises
being confined to a nursing home or an assisted living facility.
34. The system of claim 23, wherein said display interface is located
on said at least one user computer.
Insurance Description
CROSS-REFERENCE TO RELATED APPLICATION
[0001] This application claims priority to U.S. Provisional Application
Ser. No. 60/778,477, filed Mar. 2, 2006, the entire contents of
which is herein incorporated by reference.
FIELD OF THE INVENTION
[0002] The present invention generally relates to the field of
insurance. More specifically, the present invention discloses a
novel fixed individual deferred annuity which guarantees an individual
(or individuals) a predetermined income starting at a specified
time in the future. The annuity further comprises a facility care
benefit rider, which can be utilized to accelerate a purchaser's
access and/or enhance the predetermined income upon the occurrence
of one or more specified events.
BACKGROUND OF THE INVENTION
[0003] One of the distinguishing characteristics of human beings
from other species is our ability to think and plan ahead. Nevertheless,
most people have great trouble preparing for long term future events
such as retirement. Thinking and acting on thoughts in advance are
keys to preparing for the future when it turns inexorably into the
present. The younger a person is, the more time he or she has to
plan for retirement. In addition, earlier planning and investing
provides an individual with more flexibility and a greater probability
of an increased "nest egg" because many investments provide
compound returns over time.
[0004] Most individuals work at least 40 years with the goal of
retiring at approximately 65. After retiring, a typical individual
utilizes a predetermined percentage of his or her accumulated assets
each year to maintain the lifestyle to which he or she is accustomed.
The individual may no longer work to increase the sum total of assets,
in which case the individual's income sources are limited to investments,
employer's pensions, and government support, if applicable. Furthermore,
individuals in their later years can be subject to substantial health
care expenses, with the potential of nursing home or assisted living
confinement being the most prominent cause for concern. In addition,
the average life expectancy is currently approximately 85, and has
increased significantly over the last 10 years. As a result of all
of these factors, there is a substantial risk that an individual
may expend the sum total of his or her accumulated assets before
passing away, leaving the individual without independent financial
support. This risk, known as "longevity risk," is especially
difficult to plan for because of the variety of factors which contribute
to it.
[0005] Accordingly, retirement planning consists of more than picking
an age to retire and a beachfront property on which to retire. In
stark contrast, retirement planning requires analysis of an individual's
lifestyle, resources, health, marital status, retirement benefits
(e.g., health insurance, pensions, etc.) and a myriad of factors
that are often taken for granted while an individual is working.
Most, but not all such factors, relate to financial issues.
[0006] For example, most experts agree that an individual needs
about 60% to 85% of his or her current gross household income to
sustain a similar lifestyle during his or her post-retirement years.
In theory, individuals having a higher current income are closer
to the lower end of that scale. In short, current retirement income
should approximately equal the individual's gross income less savings
and applicable taxes. However, it is widely understood that predicting
retirement income is not an easy task. In general, the process of
determining an individual's retirement income entails the steps
of: (1) deciding on the desired annual income in today's dollars
over a period of thirty years or more; (2) establishing a retirement
date; (3) contemplating additional, unexpected lifestyle changes;
(4) determining a lifetime average inflation rate; (5) determining
the average rate of return on investments before and after retirement;
and (6) determining the current market value of all current investments
(e.g., regular accounts, IRAs, and company tax-deferred savings
plans like 401(k) plans). However, many of the variables associated
with the above analysis, such as inflation, spending habits, and
investment rate of return, are difficult or impossible to predict.
In addition, other variables such as the probability of increased
expenses due to health problems are nearly impossible to predict.
As a result, planning for retirement is extremely difficult and
is an inexact science at least.
[0007] There have been several attempts to alleviate the difficulties
associated with retirement planning and more specifically, to mitigate
longevity risk. For example, one simple commonly known method is
investing at an early age. For example, if an individual puts $1,000
per year for 25 years into an investment earning 10% annually, the
investment will be worth $108,182 after 25 years. Comparatively,
by starting that same investment five years later, the net worth
of the investment of that same $1,000 per year is only $63,002.
However, many people are either not motivated or not financially
able to invest early. In addition, there is no guarantee that an
investment will yield a net positive return. Finally, although this
method allows an individual to accumulate more wealth before retiring,
thus putting him or her in a better position, it does not address
the situation where an individual lives longer than his or her expected
lifespan. As a result, merely planning for retirement earlier is
largely ineffective at reducing longevity risk.
[0008] Another well-known tool sometimes used to reduce longevity
risk is the use of employer retirement plans. Many mid-size and
large employers offer various retirement plans to their employees.
Indeed, many have two or more. There are several types of retirement
plans.
[0009] With respect to one such retirement plan, a "defined
benefit plan" or a "company pension," employers typically
fund a pension account without any financial contributions from
the employees. An employee's final benefit (i.e., payment upon retiring)
is determined by a formula often based on years of service, an average
wage, and a percent of pay. For example, the plan could set a final
benefit of a "joint and 50% annuity calculated as 1.5% times
years of credited service times the average of an individual's last
three years' base annual wage." With 30 years of service, at
retirement a pension can replace roughly 45% of an individual's
final annual wage.
[0010] However, increasingly defined benefit plans are no longer
being provided by many employers. This is part of a long-term trend,
which virtually all experts agree will continue, and may even accelerate.
As a result, defined benefit plans are either unavailable, or, when
available, do not provide income levels that adequately alleviate
longevity risk.
[0011] Another type of investment plan typically offered by employers,
a "defined contribution plan," provides an individual
account for each participant. The benefits (i.e., the amounts available
to the employee in retirement) are based on the amount of funds
contributed to the individual's account and are affected by such
factors as income, expenses, and investment returns. Some examples
of defined contribution plans include 401(k) plans, 403(b) plans,
employee stock ownership plans and profit sharing plans.
[0012] Often, an employer will make contributions to an employee's
account in addition to an individual's contribution. While these
contributions vary by employer, employers typically match an individual's
contribution from 50% to 100% up to 6% of an individual's pay. In
short, if an individual contributes 6% of his or her paycheck to
the retirement account, an employer contributes between 3% and 6%
as well. While defined contribution plans have certain advantages,
defined contribution plans place virtually all of the investment
risk on the employee and typically provide no efficient means of
converting the accumulated assets into an income stream. As a result,
defined contribution plans are largely ineffective as a vehicle
for reducing longevity risk.
[0013] Another commonly utilized retirement planning vehicle is
known as an Individual Retirement Account ("IRA"). An
IRA is tax-deferred, so the current tax burdens on an individual
are greatly reduced. Once an individual has deposited funds into
an IRA, it is subject to IRA rules. A typical IRA, for purposes
of this discussion, functions largely as an individual defined contribution
plan, but without any employer support. A traditional IRA suffers
from all of the deficiencies of a defined contribution plan, when
evaluated with respect to longevity risk. Another problem with the
IRA is that it limits the contribution amount, which provides less
income over time.
[0014] Further, it is well known that government subsidized programs
exist which alleviate longevity risk. Social Security is one well
known example. The Social Security system purports to provide three
things: income at retirement, income for survivors, and disability
income. Generally, to qualify for full benefits an individual needs
to work at least ten years, while contributing a percentage of his
or her wages to the Social Security fund. The size of an individual's
benefit at retirement is based on earnings and the number of years
an individual has paid into the system. An individual may receive
retirement benefits on or after age 62. A spouse and, in some cases,
dependent children may also receive a benefit.
[0015] However, the system was designed to provide for minimum
income needs during retirement, and not to provide for all of an
individual's income needs. Social Security benefits were designed
to supplement an individual's own savings to allow the individual
to maintain his or her desired living standard. In addition, it
is expected that that the Social Security system will provide future
recipients less than it does today, if anything at all. Therefore,
although the Social Security system is designed to continue to provide
funds to retired individuals even if they live longer than their
life expectancy, it is an imperfect system at best for reducing
longevity risk.
[0016] Finally, the simplest method for mitigating longevity risk
is to accumulate a large amount of assets comprised of a diversified
portfolio of assets. Then, when an individual retires, he or she
simply withdraws a predetermined amount of his or her assets to
compensate for any deficiency between the individual's guaranteed
income (e.g., defined benefit plans and social security) and his
or her lifestyle. This practice, which is currently the most widely
used practice, is known as taking systematic withdrawals. However,
there are three principal problems with merely taking systematic
withdrawals. First, it is impossible to predict an individual's
lifespan. As a result, the amount (as a percentage of total assets-withdrawn)
may be too high, leaving an individual with no asset to draw down
from. Alternatively, the individual may be too conservative, withdrawing
too little of an amount, compromising his or her lifestyle. In addition,
an individual may simply have an insufficient asset pool to draw
from. Finally, systematic withdraws do not account for any volatility
associated with the asset pool from which the funds are withdrawn.
Accordingly, merely taking systematic withdrawals is insufficient
for mitigating against longevity risk.
[0017] Because current retirement plans and programs have limited
success in mitigating longevity risk, there is a clear need in the
art for a system and method to more effectively manage the risk
associated with outliving one's accumulated assets. The present
invention overcomes the various deficiencies associated with traditional
longevity risk management techniques by creating a novel system
and method that allows an individual to eliminate longevity risk
by purchasing longevity insurance.
SUMMARY OF THE INVENTION
[0018] The present invention comprises a fixed individual deferred
payout annuity. Unlike other individual deferred annuities, the
present invention does not have an account value or account balance.
It also does not have any surrender value. Further, it need not
have any death benefit. As a result, it will not have any explicit
guaranteed return and will not have any market value adjustment
or other investment gains or losses.
[0019] Rather than having an investment account, an individual
purchases at an issue date an annuity which provides for the right
to receive a specified amount of monthly income starting at a later
date (i.e., the "issue date"). The issue date comprises
any age that corresponds to a purchaser's age in a range from about
40 years old to 83 years old. For a non-qualified contract the maximum
commencement age is 83. While it is contemplated that any earlier
date can be chosen, the preferred embodiment of present invention
is particularly suited to an annuity start date that corresponds
to a date that is at least 20 years later than the date of purchase
and that the annuitant's age at commencement is in excess of 70.
In other words, the preferred embodiment utilizes an annuity start
date that corresponds to the purchaser's approximate life expectancy.
However, the income start date could be any date in relation to
the purchase date. Further, it is possible that the individual may
or may not have the ability to select another start date post purchase.
[0020] The commencement date for qualified retirement plans must
be in accordance with minimum distribution standards.
[0021] After the income start date, the monthly income is payable
for the life of the individual. In addition, the present invention
contemplates that an individual may purchase the future monthly
income for the life of more than one individual, such as a spouse
(i.e., a joint purchase). The only prerequisite to receiving the
periodic payments is the survival of the individual on the date
that payments begin (i.e., the annuitization date). For joint purchases,
only one of the named individuals must be alive on the annuitization
date for payments to commence.
[0022] The present invention provides for a fixed monthly income
of normal periodic payments beginning after a deferral period selected
at the time of purchase. For example, a customer who has reached
the age of 65 can purchase the product and elect for benefits (i.e.,
guaranteed monthly payments) to begin at age 85. Once commenced,
payments would continue for the lifetime of the annuitant. In the
preferred embodiment, the minimum deferral period is thirteen months
from the last premium deposit, as described in greater detail below.
[0023] The present invention also addresses the risk of increased
need for additional income due to an unexpected increase in expenses
through an optional facility care benefit rider. This enhancement
would provide periodic income at an earlier date and, potentially,
in an enhanced amount. This additional income is tied to the occurrence
of certain defined health care events, including, confinements in
a nursing home or similar facility.
[0024] Further, the present invention contemplates that an individual
may purchase optional riders to further mitigate longevity risk,
including but not limited to: a death benefit rider, a CPI indexed
income benefit, and an alternative income commencement date rider.
It is also contemplated that any other insurance or annuity rider
known in the art can be utilized in accordance with the present
invention.
[0025] The present invention also comprises a method of mitigating
longevity risk. Initially, an individual's likely initial retirement
asset pool is calculated by determining the individual's feasible
retirement income level, and calculating the average monthly income
available for his or her lifetime after retirement, as well as any
deficiency associated therewith. To compensate for any deficiency
or to increase his or her monthly income level, and to ensure that
the individual does not outlive his or her accumulated assets, it
is contemplated that the individual may utilize existing accumulated
assets to generate a guaranteed stream of monthly income at a later
date, which may be utilized to supplement an existing income level
or provide income in the event that the individual outlives his
or her accumulated assets.
[0026] After determining a likely initial retirement asset pool,
an individual's asset pool spending is determined by estimating
the life expectancy of the individual and determining a rate of
asset depletion based on the same.
[0027] After determining the asset pool spending, the individual
mitigates the risk of outliving his or her assets by purchasing
the deferred annuity in accordance with the present invention. By
purchasing the annuity, the purchaser ensures that he or she will
receive a periodic payment to supplement his or her asset pool.
Because the payments are guaranteed for the purchaser's life, the
purchaser cannot outlive the income provided by the annuity, even
if the initial retirement asset pool is totally depleted.
[0028] The present invention also comprises a method of offering
longevity insurance. The method comprises determining an initial
premium payment based on various factors, such as the applicant's
sex, age, the periodic income amount that the applicant desires,
and the desired annuity date. Of course, it is contemplated that
any other known factors can be utilized in accordance with the present
invention. In addition, the costs associated with any desired optional
riders are added to the premium payment.
[0029] After determining the initial premium payment, longevity
insurance is offered to the applicant. The terms of the insurance
may indicate the annuity date and the periodic payment.
[0030] On the annuity date, the offeror of longevity insurance
in accordance with the present invention begins to disburse the
payments as dictated by the terms of the contract. Payments continue
for the life of the applicant.
[0031] In light of the foregoing, it is an object of the present
invention to mitigate longevity risk.
[0032] Further, it is an object of the present invention to provide
a financial retirement planning tool or tools which reduce longevity
risk.
[0033] Yet another object of the present invention is to provide
an annuity which reduces longevity risk.
[0034] Still another object of the present invention is to provide
a method whereby an individual reduces his or her longevity risk.
[0035] Another object of the present invention is to provide a
method of mitigating longevity risk which accounts for an individual's
volatile asset pool.
[0036] Still a further object of the present invention is to mitigate
longevity risk without utilizing an existing individual's accumulated
assets.
[0037] Further still, an object of the present invention is to
provide the opportunity to combine the ability to mitigate the risk
to an individual's asset pool from additional facility care expenses
with the ability to mitigate the longevity risk to that same asset
pool within the confines of the same product.
[0038] Lastly, an additional object of the present invention is
to have the benefits provided by the facility care benefit rider
be a specified percentage of the base annuity benefit amount, with
the specified percentage chosen by the individual.
BRIEF DESCRIPTION OF THE DRAWINGS
[0039] A further understanding of the present invention can be
obtained by reference to a preferred embodiment set forth in the
illustrations of the accompanying drawings. Although the illustrated
embodiment is merely exemplary of systems for carrying out the present
invention, both the organization and method of operation of the
invention, in general, together with further objectives and advantages
thereof, may be more easily understood by reference to the drawings
and the following description. The drawings are not intended to
limit the scope of this invention, which is set forth with particularity
in the claims as appended or as subsequently amended, but merely
to clarify and exemplify the invention.
[0040] FIG. 1A is a sample contract of an annuity product in accordance
with the preferred embodiment of the present invention.
[0041] FIG. 1B is a continuation thereof of FIG. 1A, depicting
a sample contract in accordance with the preferred embodiment of
the present invention.
[0042] FIG. 2 is a depiction of the sequence of steps of the method
for mitigating longevity risk in accordance with the preferred embodiment
of the present invention.
[0043] FIG. 3 is a screenshot depicting the source page of a web-based
interface for creating and maintaining a sample contract in accordance
with the preferred embodiment of the present invention.
[0044] FIG. 4 is a screenshot of the general page of a web-based
interface for creating and maintaining a sample contract in accordance
with the preferred embodiment of the present invention.
[0045] FIG. 5 is a screenshot of the annuitant page of a web-based
interface for creating and maintaining a sample contract in accordance
with the preferred embodiment of the present invention.
[0046] FIG. 6A is a screenshot of the product page of a web-based
interface depicting a single purchase payment of a sample contract
in accordance with the preferred embodiment of the present invention.
[0047] FIG. 6B is a screenshot of the product page of a web-based
interface depicting a multiple purchase payment of a sample contract
in accordance with the preferred embodiment of the present invention.
[0048] FIG. 7 is a screenshot of the product page of a web-based
interface depicting the annuity payout option of a sample contract
in accordance with the preferred embodiment of the present invention.
[0049] FIG. 8A is a screenshot of the quick quote page of a web-based
interface depicting the quote information of a sample contract in
accordance with the preferred embodiment of the present invention.
[0050] FIG. 8B is a screenshot of the quick quote page of a web-based
interface depicting the expected payout of a sample contract in
accordance with the preferred embodiment of the present invention.
[0051] FIG. 9A is a screenshot of the application page of a web-based
interface depicting the annuitant information of a sample contract
in accordance with the preferred embodiment of the present invention.
[0052] FIG. 9B is a screenshot of the application page of a web-based
interface depicting the beneficiary information of a sample contract
in accordance with the preferred embodiment of the present invention.
[0053] FIG. 9C is a screenshot of the application page of a web-based
interface depicting the miscellaneous information of a sample contract
in accordance with the preferred embodiment of the present invention.
[0054] FIG. 10 is a screenshot of the report page of a web-based
interface depicting the overall information of a sample contract
in accordance with the preferred embodiment of the present invention.
[0055] FIG. 11 is a flow diagram depicting the administration of
a newly applied for longevity insurance contract in accordance with
the present invention.
[0056] FIG. 12 depicts a flow chart of the administrative process
of a rejected contract in accordance with the present invention.
[0057] FIG. 13 depicts a flow chart of several of the contract
parameters which can be updated using an administrative system in
accordance with the present invention.
[0058] FIG. 14 depicts a flow chart for the management of modal
premium payments and the generation of associated premium notices
and or reports.
[0059] FIG. 15 depicts a flow chart of the process of administering
the facility care portion of a longevity insurance contract in accordance
with the present invention.
[0060] FIG. 16 depicts a flow chart of a process for administering
annuity payouts in accordance with the present invention.
[0061] FIG. 17 depicts a flow chart of a process for administering
facility care benefit payouts in accordance with the present invention.
[0062] FIG. 18 depicts a flow chart depicting the administration
of a longevity contract with respect to the death of a party named
in the longevity contract.
[0063] FIG. 19 depicts a flow chart of a process of administering
benefits associated with a longevity insurance contract that are
contingent upon a party's death such as a death benefit or a facility
care benefit rider.
DETAILED DESCRIPTION OF THE PREFERRED EMBODIMENT
[0064] A detailed illustrative embodiment of the present invention
is disclosed herein. However, techniques, systems and operating
structures in accordance with the present invention may be embodied
in a wide variety of forms and modes, some of which may be quite
different from those in the disclosed embodiment. Consequently,
the specific functional details disclosed herein are merely representative,
yet in that regard, they are deemed to afford the best embodiment
for purposes of disclosure and to provide a basis for the claims
herein which define the scope of the present invention.
[0065] Moreover, well known methods and procedures for both carrying
out the objectives of the present invention and illustrating the
preferred embodiment are incorporated herein but have not been described
in detail as not to unnecessarily obscure novel aspects of the present
invention.
[0066] None of the terms used herein, including "annuity",
"deferred annuity", "fixed annuity", "fixed
deferred annuity", and the like are meant to limit the application
of the invention. The terms are used interchangeably for convenience
and are not intended to limit the scope of the invention. Similarly,
the use of the term "company", "purchaser",
or "individual" is not meant to limit the scope of the
invention to one type of entity, as any entity or individual can
utilize the present invention. The following presents a detailed
description of a preferred embodiment of the present invention.
[0067] Referring to FIG. 1A, shown is sample longevity insurance
contract 100 of an annuity product in accordance with the preferred
embodiment of the present invention. Contract 100 generally comprises
specifications 101 and description of benefits 131.
[0068] Contract specifications 101 represent general identifying
indicia of the annuity product in accordance with the present invention.
In this example, contract specifications comprise contract owner
103, contract number 105, contract issue date 107, specifications
date 109, annuitant name 111, annuitant date of birth 113, annuitant
gender 115, joint annuitant 117, joint annuitant date of birth 119,
and joint annuitant gender 121.
[0069] Contract owner 103 is the purchaser of the annuity product
of the present invention. Annuitant 111 is the individual on whose
life the contract is issued. In the preferred embodiment, annuitant
111 cannot be changed. It is also contemplated that non-annuitant
natural owners can purchase the longevity insurance contract 100
in accordance with the present invention. Further, in the preferred
embodiment of the present invention, contract owner 103 and annuitant
111 is the same individual. In addition, annuity contract 100 is
assignable. Annuitant gender 115 represents whether the annuitant
is male or female.
[0070] As is known in the art, contract number 105 is an internal
identifying number for use by the issuer.
[0071] Contract issue date 107 represents the date as of which
the contract is established (i.e., entered into). Similarly, specifications
date 109 represents the date of the most current specifications
of the contents of annuity contract 100.
[0072] As shown in this example, contract 100 has the potential
to comprise joint annuitant 117. Joint annuitant 117 is a person
in addition to annuitant 111 on whose continuation of life annuity
payments may be made. In order to determine the period of payments,
if any, contract specifications 101 include joint annuitant date
of birth 119. Joint annuitant gender 121 represents whether joint
annuitant 117 is male or female. As described in greater detail
below, the inclusion of joint annuitant 117 provides several additional
annuity payment options.
[0073] In this example, description of benefits 131 comprises information
relating to premium payments 135, annuity commencement date 137,
annuity amount 139, annuity frequency 141, Annuity payment increase
143, annuity description 145, facility care benefit 147, and facility
care benefit eligibility period 149.
[0074] As shown in 133, the preferred embodiment of the present
invention comprises a fixed individual deferred annuity. In contrast
to traditional annuities, it does not maintain an account value
or account balance and does not have any surrender value. Advantageously,
it will not have an explicit total guaranteed return and will not
have any market value adjustment or other investment gains or losses.
Accordingly, the present invention insulates an individual from
market return fluctuations inherent in other retirement planning
vehicles. In other embodiments, any other type of annuity can be
used.
[0075] Premium payments 135 represent the total purchase price
of contract 100. Premium payments can be paid in a single sum. Alternatively,
as shown in this example, premium payments 135 can be paid in periodic
installments (e.g., annually or any other modal payment). Other
payment options include payment over a fixed period (e.g., 10 years)
or to a specified age (e.g., age 65). It is also contemplated that
flexible premium payments can be utilized as is known in the art.
[0076] If the course of installment premiums is not completed,
the income amounts will be reduced, using appropriate actuarial
calculations, and that reduced income benefit will be deemed fully
paid.
[0077] Premium payment 135 can vary from individual to individual,
and can be based on such factors as the individual's age, sex, desired
periodic income payment, and the date income payments start. It
is contemplated that other variables known in the art can be utilized
to determine the premium price of the present invention.
[0078] Advantageously, the premium required to purchase future
income can be relatively small because of the long deferral period
and the late start age. Investment returns during the deferral period
allow the provider of the present invention to provide a higher
income benefit at the income start date. In addition, the advanced
age at which income starts means that there are substantial mortality
gains that further enhance the income benefits that the surviving
individuals enjoy.
[0079] Annuity contract 100 will provide predetermined periodic
income payments beginning on annuity commencement date 137. Annuity
commencement date 137 is a future date selected by the purchaser
within permitted limits. While any date can be chosen, it is contemplated
that annuity commencement date 137 corresponds to the purchaser's
approximate life expectancy. Preferably, contract 100 comprises
a minimum age at which payments can begin (i.e., a minimum issue
age and a maximum deferral period) and a maximum age at which payments
begin. In the preferred embodiment, the minimum issue age is forty,
the maximum commencement age is eighty-three, and the maximum commencement
age is eighty-five. Further, annuity commencement date 137 is able
to be deferred for a period of time. While this deferral period
can be for any period of time, preferably the minimum deferral period
is 13 months from the last (or final) premium deposit. As described
in greater detail below, payments begin on annuity commencement
date 137 and end on the date of annuitant's death. In addition,
it is contemplated that annuity commencement date can be changed
by mutual agreement of the parties.
[0080] Annuity amount 139 represents the periodic income payments
purchased by an individual. The frequency of payments is selected
by the purchaser and represented by 141. In this example, annuity
frequency 141 is monthly. However, any other periodic payment frequency,
such as quarterly, semi-annually, or annually can be utilized in
accordance with the present invention.
[0081] As shown in FIG. 1B, the specific payment option of annuity
amount 139 is described by annuity description 145. In this example,
annuity description 145 depicts a single life annuity. In other
words, contract 100 pays out an annuity during the lifetime of annuitant
111, ceasing when annuitant 111 dies.
[0082] Other annuity payment options can be utilized in accordance
with the present invention. Non-limiting examples include joint
life annuity payments, joint and survivor life payments, single
life with cash refund payments, joint and survivor life with cash
refund payments, single life income with period certain payments,
joint life with a period certain, joint and last survivor with period
certain, period certain, and joint life annuity with cash refund
payments. However, due to tax law constraints, some annuity payment
options may not be available for certain qualified contracts.
[0083] Under a joint and survivor life payment plan, payments are
made to annuitant 111 as long as he or she is alive after annuity
commencement date 137. Upon the death of the annuitant 111, payments
continue to the surviving joint annuitant 117, at 50%, 75% or 100%
of the original payment amount, as chosen at issue, as long as they
are alive after annuity commencement date 137. Upon death of both
annuitants, payments cease.
[0084] Under a joint life annuity payment option, payments are
made to annuitant 111 and joint annuitant 117 as long as either
is alive after annuity commencement date 137. Upon the death of
either annuitant 111 or joint annuitant 117, payments continue to
the survivor at 50%, 75% or 100% of the original payment amount,
as chosen at issue. Upon death of both annuitants, payments cease.
[0085] Under a single life with cash refund payment option, periodic
payments are made as long as annuitant 111 is alive after annuity
commencement date 137. Upon death of annuitant 111, a lump sum may
be payable to a designated beneficiary equal to premium payment
135 paid out less the sum of all payments made. The cash refund
benefit reduces to zero over time.
[0086] A joint and survivor life with cash refund payment option
provides payments to annuitant 111 as long as he or she is alive
after annuity commencement date 137. Upon the death of annuitant
111, payments continue to joint annuitant 117 at 50%, 75% or 100%
of the original payment amount, as chosen at issue, as long as he
or she is alive after annuity commencement date 137. Upon death
of both annuitants 111 and 117, payments cease. A lump sum may be
payable to their designated beneficiary equal to premium payment
135 paid out less the sum of all payments made. The cash refund
benefit reduces to zero over time.
[0087] Under a single life income with period certain plan, periodic
payments are made as long as annuitant 111 is alive. In addition,
payments are guaranteed to continue for period of 5 to 30 years.
In other words, if annuitant 111 dies within the fixed period, payments
continue to the named beneficiary until the end of the period.
[0088] Similarly, a joint and last survivor with period certain
makes periodic payments to annuitants 111 and 117 as long as either
is alive. Upon the death of the primary annuitant, payments to the
surviving secondary annuitant will continue at 100% for the lifetime
of the surviving secondary annuitant. However, if neither annuitant
111 or 117 is alive for the full period (set from a range of 5 to
30 years), the remaining payments are guaranteed to a named beneficiary.
[0089] A payment for a period certain payment option guarantees
payments to annuitant 111 during the specified period (i.e., generally
in the 5 to 30 year range, or individual payments at specific points
in time). If annuitant 111 dies during that time, payments are paid
to a named beneficiary.
[0090] Under a joint life annuity with cash refund payment option,
payments are made to annuitants 111 and 117 as long as either is
alive after annuity commencement date 137. Upon the death of either
annuitant 111 or 117, payments continue to the survivor at 50%,
75% or 100% of the original payment amount, as chosen at issue,
as long as either is alive. Upon death of both annuitants 111 and
117 payments cease and a lump sum may be payable to their designated
beneficiary equal to premium payment 135 paid out less the sum of
all payments made. The cash refund benefit reduces to zero over
time.
[0091] The income payments are fully guaranteed. That is, as long
as one of the named individuals survives, he or she will continue
to receive payments. However, in the case of annuity with a guaranteed
number of payments, no such contingency is needed. Further, it is
contemplated that the payments can be transferred, assigned, or
commuted based on a specific event, such as divorce or the death
of contract owner 103 during the deferral phase.
[0092] Contract 100 also comprises optional annuity payment increase
143. This option allows a purchaser to have payments increased by
a specified percentage periodically after benefit commencement.
In accordance with the preferred embodiment of the present invention,
increases in payment can comprise a range from about 0% to about
6% of annuity amount 139.
[0093] In the preferred embodiment of the present invention additional
income needed to cover certain additional expenses associated with
longevity risk is addressed through use of an enhancement known
as facility care benefit rider 147. Under this rider, an additional
income payment (e.g., 100% of the purchased income amount) would
be paid once a specific trigger (i.e., a "facility care event")
has occurred. For example, such an event can involve being confined
in a convalescent home or similar care facility for a stated period,
such as six months.
[0094] In the preferred embodiment, the amount paid under facility
benefit rider 147 varies based on the election of the annuitant
and on whether the event occurs before or after annuity commencement
date 137. The differences are highlighted below:
Pre-Annuity Commencement Date Facility Care Benefit
[0095] A fixed percentage of annuity amount 139 is paid upon verification
of a facility care event before the annuity commencement date 137.
The pre-annuity commencement date facility care benefit ceases on
the earlier of insufficient proof of an ongoing facility care event
or annuity commencement date 137.
Post-Annuity Commencement Date Facility Care Benefit
[0096] A fixed percentage of annuity amount 139 is paid upon verification
of a facility care event on or after annuity commencement date 137.
This amount is paid in addition to annuity amount 139. The post-annuity
commencement date facility care benefit ceases upon insufficient
proof of an ongoing facility care event.
[0097] A facility care event is the event which triggers facility
benefit rider 147. In the preferred embodiment, the facility benefit
is paid as long as annuitant 111 (or joint annuitant 117 if applicable)
offers sufficient proof that: [0098] 1) Annuitant 111 is currently
confined or has been confined to a nursing home or assisted living
facility for the entire elimination period (described below); and
[0099] 2) During this confinement the facility has provided assistance
to annuitant 111 for two or more of the activities of daily living
(described below); and [0100] 3) Contract 100 has been in force
for at least the duration of the eligibility period.
[0101] The elimination period is a period of time that needs to
elapse from the first occurrence of a facility care event until
facility care benefits will commence. In the preferred embodiment
this duration is 180 days, however, it is contemplated that any
period can be utilized in accordance with the present invention.
[0102] While any activity or combination of activities which requires
assistance can be chosen to trigger the facility care event, preferably,
the activities are two of the six selected from the group consisting
of bathing, dressing, continence, eating, movement, and toileting
(i.e., getting to and from the restroom).
[0103] In the preferred embodiment, facility care benefit 147 is
not immediately available upon the purchase of contract 100. Rather,
it would become effective at the end of a stated period or the attainment
of a stated age (e.g., 10 years or age 65) as depicted by facility
care benefit eligibility care period 149. If confinement started
during this period, enhanced income payments can start at the completion
of the period.
[0104] Facility care benefit 147 is also available for joint annuitants.
For joint annuitant contracts, the event is triggered by either
life. In other words, if both lives have a facility care benefit
event, both lives would be entitled to the independent benefits
associated with facility care benefit 147. In short, each covered
annuitant is entitled to the full amount guaranteed by facility
care benefit 147. Further, facility care benefit 147 does not reduce
in amount because of survivorship issues. In other words, if one
of the joint annuitants passes away, the independent benefits associated
with the surviving joint annuitant are not affected in any way.
[0105] In the preferred embodiment, facility care benefit rider
147 is incorporated into annuity contract 100 which has a grace
period for a late or missed premium payment. In the preferred embodiment,
this period is 65 days, however, any time period can be chosen.
More specifically, if the owner of the contract is in default after
30 days, the issuer of contract 100 will provide written notification
and give the contract owner 35 days to respond.
[0106] If the payment is not made, the issuer calculates a reduced
annuity amount paid in lieu of original annuity payment 139. Annuity
commencement date 137 and annuity frequency 141 remain the same.
In short, failure to complete a required course of premium payments
will result in an actuarial reduction in benefits, not a total loss
of coverage.
[0107] Importantly, facility care benefit 147 contains numerous
distinctions from traditional long term insurance care coverage.
In the preferred embodiment, facility care benefit rider 147 does
not require underwriting. As such, it is guaranteed to issue. However,
it is contemplated that future embodiments will be underwritten.
In addition, premium payment 137 never increases, and as described
above, never lapses upon non-payment. Further, facility care benefit
147 has a simple claim verification process as opposed to costly
assessments and plans of care as required by long term care health
insurance. In short, facility care benefit 147 provides predetermined
additional income. Payment of this additional income is unrelated
to the actual costs of the facility and are payable regardless of
whether the specific facility care expenses are covered by other
sources such as Medicaid, Veteran's benefits, or long term health
care insurance. In short, even if annuitant 111 has no out-of-pocket
costs, the benefits associated with facility care benefit 147 are
payable in full.
[0108] It is also contemplated that facility care benefit 147 can
continue to provide enhanced payments even after the original income
start date is reached. For example, it is contemplated that the
enhanced benefit would continue in certain circumstances even if
the insured is no longer confined in a facility that would qualify
under a facility care event. It is also contemplated other health
care events, other than confinement in a defined facility, could
result in triggering facility care benefit rider 147.
[0109] In practical terms, an individual will spend a relatively
small portion of his or her nest egg to purchase the longevity insurance
of the present invention. With an individual's income stream after
the income start date assured, the individual is free to deploy
his or her remaining assets to provide retirement income exclusively
for the period between the individual's current age and the annuity
date. Use of the longevity insurance may also enable an individual
to retire earlier or, alternatively, enjoy a higher annual income
in retirement. The present invention also allows an individual to
better assure that he or she has an estate to pass on to heirs.
[0110] The present invention can contain optional riders to further
mitigate longevity risk, including a death benefit rider, a Consumer
Price Indexed income benefit, and an alternative income commencement
date rider, each of which is described in greater detail below.
[0111] A death benefit rider can be incorporated into the present
invention. If annuitant 111 dies before annuity payment 139 begins,
premiums paid for annuity contract, plus some amount of interest,
is paid to a named beneficiary as is known in the art. Any other
death benefit variation can be utilized in accordance with the present
invention.
[0112] In addition, the present invention can comprise a Consumer
Price Index income benefit rider. This rider provides income benefits
that are indexed to reflect increases in the CPI. Increases may
commence when income payments start or they may reflect CPI increases
from an earlier date, such as the purchase date. Adjustments are
made at a predetermined time, such as annually, although it is contemplated
that any time period can be used.
[0113] It is contemplated that an individual may be allowed to
elect to accelerate or postpone when income payments will start
with the purchase of an optional alternative commencement date rider.
If this option is exercised, there is an actuarial reduction or
increase in the amount of the monthly income payment.
[0114] It is also contemplated that any other insurance or annuity
rider known in the art can be utilized in accordance with the present
invention.
[0115] Referring next to FIG. 2, depicted is as method of mitigating
longevity risk utilizing a longevity insurance contract 100 in accordance
with the present invention. Initially, an individual's likely initial
guaranteed income sources are evaluated as depicted by step 201.
This can be done in any well known manner. For example, guaranteed
sources, such as social security, employer's pension plans and the
like can be examined to determine an aggregate guaranteed periodic
income amount. It is contemplated that any other guaranteed income
source can be utilized in this manner. Further, any manner of determining
a guaranteed periodic income amount can be utilized, however, in
the preferred embodiment, the periodic income sources are added
together to determine the guaranteed periodic income amount. It
is contemplated that the individual may utilize existing accumulated
assets to generate a guaranteed stream of periodic income at a later
date, which may be utilized to supplement an existing income level.
[0116] Concurrently, an individual's periodic spending level 203
is determined. Typically, this is accomplished by determining an
appropriate rate which corresponds to the individual's lifestyle.
[0117] By determining the guaranteed income sources 201 and the
periodic spending amount 203, an individual's base periodic income
deficiency (or surplus) is calculated as represented by 205. Determining
the base amount can be done in any manner. For example, the determination
can be can be accomplished by subtracting the desired spending amount
from the guaranteed sources of income available. For example, assume
an individual can determine that his or her guaranteed periodic
income is $2,500.00 per period. Further, assume that the individual
desires to spend $4,500 per period. By simply subtracting the desired
spending amount from the guaranteed amount, a deficiency of $2,000.00
is calculated.
[0118] In order to compensate for any deficiency, an individual
typically withdraws some portion of his or her accumulated assets.
Because an individual's assets are accumulated, the individual may
be loath to withdraw the entire deficiency amount. In other words,
an individual may fear that he or she will deplete the entire amount
of the accumulated assets. At this point, the individual may decide
to mitigate longevity risk by purchasing longevity insurance 211
(not shown). More frequently however, an individual will determine
an appropriate draw down rate as depicted in 207. Any manner can
be utilized to determine an appropriate draw down rate. The individual
can estimate his or her life expectancy 209 and calculate the appropriate
draw down rate. For example, assume that the individual estimates
that he or she will live 20 more years. A simple draw down rate
could then be calculated as: (1/estimated life expectancy)*100%.
In this case, the draw down rate would be 5%. It is contemplated,
however, that any means of determining an appropriate draw down
rate can be utilized in accordance with the present invention. Indeed,
any draw down rate (as a percentage of accumulated assets) can be
utilized.
[0119] Of course, there is a risk that the individual will outlive
his or her estimated life expectancy. To mitigate this risk, the
individual purchases a longevity insurance contract 100 in accordance
with the present invention as depicted by step 211. By purchasing
the annuity, the purchaser ensures that he or she will receive a
periodic payment to supplement his or her guaranteed periodic payment
amount. Because the payments are guaranteed for the purchaser's
life, the purchaser maintains a steady periodic income flow, even
if the accumulated asset pool is totally depleted.
[0120] Further, annuity contract 100 comprising facility care benefit
rider can be utilized to mitigate the risk of increased periodic
expenses due to, for example, confinement to a nursing home or assisted
living facility. As an individual ages, the probability of an adverse
health related event increases (e.g., heart attack) which may require
additional uncontemplated expenses. As a result, the individual's
estimated periodic spending amount 203 may be too low. This in turn,
leads to an erroneous calculated base amount 205 (i.e., there is
more of a deficiency) and a corresponding deficiency in the estimated
amount drawn down 207 from accumulated assets. As a result, there
is a real risk that an individual suffering an adverse health risk
can quickly deplete his or her assets. Since the guaranteed sources
of income may not be enough to cover the increased expenses, there
is a risk that the individual will not have enough income to pay
for his or her unexpected health expenses. To mitigate this risk,
the individual purchases a longevity insurance contract 100 in accordance
with the present invention as depicted by step 211. By purchasing
the annuity, the purchaser ensures that he or she will receive a
periodic payment to supplement his or her guaranteed periodic payment
amount. Because the payments are guaranteed for the purchaser's
life, the purchaser maintains a steady periodic income flow, even
if the accumulated asset pool is totally depleted.
[0121] The following example highlights the benefits of the present
invention.
EXAMPLE
[0122] A male age 62 is approaching retirement. Between Social
Security and a small pension, he already has $2,000 of monthly income.
Assume that he also has $500,000 in investments. Also assume that
he needs a minimum of $3,500 in monthly income, but would prefer
to have $4,500 or $5,000 of monthly income. If he draws down on
his investments at the rate of 4% per year, a conservative rate,
he can just make his $3,500 minimum. If he draws down on his investments
at an 8% rate, he can reach his $5,000 goal. However, at that rate
longevity risk is very high.
[0123] Assume that the individual spends $50,000 to buy income
security insurance that will pay him $3,000 per month if he lives
to age 85, plus facility care benefit rider 147. Rider 147 provides
an acceleration of 50% of the annuity benefits after an elimination
period if the individual submits proof of a facility care event
prior to age 85. Additionally, if the facility care event occurs
after age 85, the annuity benefits will increase by 50% and continue
for life. The individual can then draw down on his remaining $450,000
of investments at the aggressive 8% rate with the confidence that
he will never run out of income.
[0124] The present invention preferably uses a web-based system
to create and manage a contract 100 of the present invention. After
logging on to the Internet in an appropriate manner, a system user
accesses a webpage through an IP address as is known in the art.
The user can be a sales representative, a contract manager, or any
other party. The webpage is an interactive portal allowing comprehensive
creation and management of a contract 100.
[0125] FIG. 3 is a screenshot of the preferred web-based portal
300 of the present invention. Web-based portal 300 comprises source
information window 301 and product selection window 307.
[0126] Source information window 301 comprises state drop down
box 303 and product type dropdown box 305. These drop down boxes
allow a user to search for particular products by region and type.
In this example, the search criteria selected is "Colorado"
and "Annuity."
[0127] The system searches an associated database (not shown) and
displays matching results in product selection window 307. Product
selection window 307 displays a list of all products meeting the
search criteria and displays relevant information about the product(s)
such as product name 309, description 311 and additional information
313. The relevant information is accessed by selecting the appropriate
hyperlink. In this example, product selection window shows contract
100 of the present invention.
[0128] Web-based portal 300 also comprises a series of hyperlinked
tabs which allow a user to access other parts of the web-based system.
These tabs include activities tab 315 and untitled case tab 319.
By selecting an appropriate tab, a user can access various other
features of the web-based system. In this example, selecting activities
tab 315 allows a user to access create illustration tab 317. This
tab allows a user to create a hypothetical contract and analyze
the features, terms, and various returns of a hypothetical contract.
It is contemplated that any other management tabs can be placed
on web-paced portal 300 which can aid a user in contract 100 creation
and/or management.
[0129] After clicking on create illustration tab 319, a user is
directed to general web-page interface 400 as shown in FIG. 4. This
interface allows a user to create a contract, or case. General web-page
interface comprises activities tab 315 and untitled case tab 319
as previously described. In addition, general web page interface
400 comprises case information window 401.
[0130] Web information window 401 allows a user to create a contract
100 by selecting various criteria. After selecting a displayed contract
from product selection window 307, case information window 401 displays
the product in product text box 309. A user then enters the name
of the contract to be created in case name text box 403. The user
also provides other general information related to the creation
of a contract by inputting additional information in case information
window 401. In this example, case window 401 allows a user to provide
information via a series of drop boxes. The drop boxes include owner
resident state drop box 405, contract issue state drop box 407,
qualification type drop box 411, and effective date drop box 413.
When the information is entered, a user can access the next phase
of the system by selecting scroll button 415. Scroll button 415
also validates the entries on page 400 and saves the data in the
aforementioned database.
[0131] After selecting scroll button 415, a user is directed to
annuitant web-interface 500 as shown in FIG. 5. Annuitant web interface
500 allows a user to select the type of annuity contract (i.e.,
single or joint) and allows a user to enter pertinent data relevant
to the annuitant via annuitant information window 525. Annuitant
window 525 is a series of text boxes and drop boxes designed to
provide all of the information necessary to create a contract 100
in accordance with the present invention. More specifically, annuitant
window 525 comprises annuitant type drop box 501 which allows a
user to select the type of annuity. In this example, a user has
selected a joint annuity.
[0132] After selecting the type of annuity, annuitant information
window displays additional text and/or drop boxes related to the
annuitant type selected. The drop boxes include first name text
box 503 and last name text box 505, which allow a user to enter
the annuitant's name. Annuitant information window 525 also comprises
gender drop box 507, annuitant birth date text box 509, and annuitant
age text box 511. The user enters the pertinent information in each
of these boxes.
[0133] Because annuitant type 501 is a joint annuitant, annuitant
information window 525 comprises a series of drop boxes and text
boxes so that the user can provide information related to the joint
annuitant 513. Annuitant window 525 includes joint annuitant first
name text box 515 and joint annuitant last name text box 517 which
allow a user to input the joint annuitant's name. Annuitant information
window 525 also comprises joint annuitant gender drop box 519, joint
annuitant birth date text box 521, and joint annuitant age text
box 523. The user enters the pertinent information in each of these
boxes. As previously discussed, annuitant web-based interface 500
comprises scroll button 415, which validates the entries on page
500, saves the data in the aforementioned database, and allows a
user to access the next phase of the system.
[0134] After selecting scroll button 415, a user is directed to
purchase information webpage 600 as depicted in FIG. 6A. Purchase
information webpage 600 comprises purchase information window 625.
Purchase information window 625 allows a user to select purchase
payment information 601 through purchase payment option drop box
603. If the user selects "single purchase payment" as
in this example, a user has the option to input the desired annuity
income amount or to input the single purchase amount by selecting
either annuity income amount toggle button 605 or single purchase
payment amount toggle button 607. After selecting the appropriate
toggle button, the user enters the amount in the accompanying text
box. The user also has the option to enter any information related
to cost bases by inputting an appropriate amount in cost basis amount
text box 609. As previously discussed, purchase information web-based
interface 600 comprises scroll button 415, which validates the entries
on page 600, saves the data in the aforementioned database, and
allows a user to access the next phase of the system.
[0135] Alternatively, a user can enter different purchase payment
information 601 by choosing multiple purchase payments in purchase
payment option drop box 603 as depicted in FIG. 6B. In this instance,
the information displayed in purchase information window 625 changes.
More specifically, a user inputs information related to the multiple
purchase payments such a frequency and number of payments via frequency
drop box 611 and number of payments textbox 613. The frequency of
payments can be any frequency which is compatible with contract
100 (e.g., monthly, quarterly, semi-annually, or annually). The
number of payments can be limited to a maximum amount. For instance,
if a user selects a monthly frequency of payments from frequency
drop box 611, the number of payments can be set to a maximum of
120. Similarly, as is shown in this example, by selecting annual
from frequency drop box, the maximum number of payments is displayed
in number of payments textbox 613 (i.e., 10).
[0136] A user also can select to input the desired annuity income
amount or to input the single purchase amount by selecting either
annuity income amount toggle button 615 or payment amount toggle
button 617. After selecting the appropriate toggle button, the user
enters the amount in the accompanying text box.
[0137] As previously discussed, purchase information web-based
interface 600 comprises scroll button 415, which validates the entries
on page 600, saves the data in the aforementioned database, and
allows a user to access the next phase of the system.
[0138] After selecting scroll button 415, a user is directed to
annuity payout webpage 700 as depicted in FIG. 7. Annuity payout
webpage 700 allows a user to select the type of annuity payment
option 701 he or she will receive at the maturity date of contract
100. Annuity payout webpage 700 comprises annuity payout information
window 725 and optional benefit window 721.
[0139] Annuity payout information window 725 first allows a user
to select the type of payment option through income payable drop
box 703. The drop box comprises one or more payout options related
to contract 100. After selecting a particular payout option, the
user selects additional information related to the payout option
through a series of drop boxes. The drop boxes pertain information
related to the annuity payment options. A user simply selects the
appropriate choice from among the available options. In this example,
annuity payout option information 701 comprises annuity payment
frequency drop box 705, premium deposit date drop box 707 annuity
commencement date drop box 709, annuity commencement age drop box
711, and annual increase in payment drop box 719. Other features,
such as joint survivor percentage drop box 713 and the joint survivor
trigger drop box 715 are contingent upon the type of annuity payment
option chosen. That is, if the payment option does not have a joint
option, it is "grayed out" and becomes unavailable for
selection. Additionally, as shown in this example, a user can opt
to select a death benefit from death benefit drop box 717.
[0140] Optional benefit window 721 comprises a list of optional
riders which are available for the contract. In this example, no
optional riders were chosen.
[0141] As previously discussed, annuity payout information web-based
interface 700 comprises scroll button 415, which validates the entries
on page 700, saves the data in the aforementioned database, and
allows a user to access the next phase of the system.
[0142] After selecting scroll button 415, a user is directed to
quote information webpage 800 as depicted in FIG. 8A. Quote information
webpage 800 allows a user to run iterative illustrations related
to the information already entered into the system. That is, the
information entered in the previous web pages of the present system
is displayed in pre-populated text boxes located in quote information
window 825. Specifically, quote information window 825 summarizes
the payout option chosen through payout option display 801, the
premium deposit date via deposit date display 803, the income start
date via income start date display 805, the purchase payment type
via purchase payment display 807, death benefit chosen via death
benefit display 809, and optional riders chosen via optional rider
display 811.
[0143] A user the selects the rate of the quote via quote drop
down box 813 and selects a viewing option via drop box 817. After
the information is verified, the user calculates the results by
clicking on recalculate button 815. After clicking on this button,
a report is displayed in conformance with the option chosen in drop
box 817.
[0144] In this example, the user has selected to view payout quote
875, an example of which is shown in FIG. 8B.
[0145] Payout quote 875 is displayed on web page interface 850
as in previous elements of the system. The report details various
payout options over the course of time and succinctly and conveniently
displays the payout options in table form. The table provides information
related to the number of years from annuity commencement date 851,
the annuitant's age 853, any joint annuitant's age 855, monthly
income payments 857, aggregate income payments 859, death benefit
payout 861, and optional rider payout 863.
[0146] If a user of the system is satisfied with the results of
the report, he or she is able to fill out an online application
and apply for the hypothetical contract constructed. This is done
by accessing an application by selecting untitled case tab 319 from
the web-based interface of the present invention. When a user opts
to apply online, he or she is directed to an application web page
interface 900 as depicted by FIGS. 9A-C. Application interface 900
comprises annuitant information window 925, beneficiary window 927,
non-natural owner window 950, miscellaneous window 970, owner acknowledgement
window 980, and agent acknowledgement window 990.
[0147] Annuitant window 925 is an interactive window that allows
a user to enter application information related to the annuitants,
whether they be single annuitants or joint annuitants. A user enters
an annuitant's personal information through various fields, including
title toggle button 901, address text field 903 and 905, and phone
number text field 907. Similarly, a user can enter any data related
to a joint annuitant's personal information through title toggle
button 909, address text field 911 and 913, and phone number text
field 915. Other information such as whether the joint annuitant
is also the owner and whether the joint annuitant is the annuitant's
spouse can be verified through the use of toggle buttons 917 and
919 respectively.
[0148] As shown in FIG. 9B, beneficiary window 927 comprises information
related to any beneficiary elected by the user. It contains a series
of interactive text fields that provide useful identification information
through name textbox 933, birth date text box 935, and relationship
to owner text box 931. Beneficiary window also allows a user to
elect more than one beneficiary by allowing a user to designate
a primary and secondary beneficiary, along with a corresponding
distribution percentage, by utilizing text boxes 929 and 937, respectively.
If a user elects more than one beneficiary, he or she can enter
personal identification information regarding the second beneficiary
through relationship to owner text box 939, name text box 941, and
birth date text box 943.
[0149] Non-natural owner window 950 comprises information related
to a non-natural owner of a contract such as a trust fund, a corporation,
etc. Window 950 comprises interactive fields allowing an applicant
to provide identifying information in a series of text boxes. The
text boxes include name text box 951, trustee textbox 953, tax identification
text box 955, address text boxes 957 and 959, and phone textbox
961.
[0150] As shown in FIG. 9C, application interface 900 provides
miscellaneous information window 970. Window 970 allows a user to
provide information related to payment methods via a series of toggle
boxes and text boxes. The boxes include payment method toggle box
971, special payment toggle box 973 and remarks text box 975.
[0151] Owner acknowledgement window 980 and agent acknowledgement
window 990 allow an applicant and agent to verify that the information
provided in the various previous application windows is accurate.
Owner acknowledgement window 980 provides signature verification
textboxes 981, 983, and 985 to verify the city, state, and date
of the owner's signature.
[0152] Similarly, agent acknowledgment window 990 provides a series
of interactive fields from which an agent can provide information
and verify that he or she has provided accurate information. The
interactive fields include agent name text box 991, address text
boxes 992 and 993, telephone number text box 994, email address
text box 995, fax number text box 998, broker name text box 996,
and agent social security number text box 997.
[0153] As previously discussed, application interface 900 comprises
scroll button 415, which validates the entries on page 900, saves
the data in the aforementioned database, and allows a user to access
the next phase of the system.
[0154] After the system verifies the data from application interface
900, it directs the user to report interface 1000 as depicted in
FIG. 10. Report interface 1000 comprises report option window 1025
and report selection window 1007. The windows allow a user to print
out the final application and report based on the data previously
entered. Report option window 1007 provides information related
to the report producer 1001 such as producer name 1003. It also
allows the system to select and/or modify the producer by clicking
on modify producer button 1005.
[0155] As shown in report selection window 1007, a user can select
to print out one or more reports such as quote sheet 1009, application
1011, product summary 1013, and tax disclosure 1015 by clicking
on the appropriate checkbox. Alternatively, a user can click select
all button 1017 and elect to print out all of the reports.
[0156] Future embodiments of the present web based system will
provide integration of products available on the system with industry
clearing house data providers, including a data feed to brokers
into customer statements and websites.
[0157] In addition, it is contemplated that future embodiments
of the web based system will be integrated into third party online
bill payment systems. This will allows the payments due on the contract
to be directly paid online by the third party.
[0158] It is also contemplated that the web-based interface will
be integrated directly with an administration system, allowing a
client to purchase new or additional contracts as needed. FIGS.
11-19 detail the general parameters of such a process.
[0159] Referring now to FIG. 11, shown is a flow diagram depicting
the administration of a newly applied for longevity insurance contract
in accordance with the present invention. A user first applies for
a longevity insurance contract either directly, through an authorized
agent, or an employer (not shown). In the preferred embodiment,
the contract is created utilizing web-based portal 300.
[0160] After the information is entered into portal 300, it is
validated by an integrated software system associated with portal
300 as depicted by 1101. In the preferred embodiment, a software
application associated with portal 300 utilizes an algorithm based
on business, product and state guidelines as depicted in 1103. However,
as is known in the art, any other method for validating a contract
can be utilized in accordance with the present invention. If the
contract is not validated, it is rejected as depicted in FIG. 12.
In addition, a user determines whether a premium is received. If
no premium is received, the contract is rejected automatically as
depicted in FIG. 12.
[0161] Turning now to FIG. 12, depicted is a flow chart depicting
the administrative process of a rejected contract in accordance
with the present invention. After the contract is rejected as depicted
by 1201, the administrative system determines whether premium refund
is due 1205 by utilizing a software algorithm based on business,
product and state guidelines as depicted in 1203. If no refund is
due, the contract is closed and the process is ended. If the administrative
system determines that a refund is due, it initially processes the
amount due and clears the balance remaining on the contract as depicted
by 1207. A check is then automatically generated which corresponds
to the amount owed as shown in 1209. When the check clears, the
system is updated and the record of the contract is deleted from
the administrative system as depicted by 1211.
[0162] Referring now back to FIG. 11, the administrative system
applies any payment received on a valid contract and converts it
to a premium payment as depicted by 1107. The premium payment, in
turn, is allotted to initial premium 1109 and modal premium 1111
(if necessary). The administrative system then records payments
1109 and 1111 into a file associated with the appropriate contract
as depicted by 1113.
[0163] When the payments are recorded, the administrative system
automatically calculates any associated commission fees 1115 and
determines whether a modal premium payment was deposited 1117. If
a modal payment was made, the administrative system automatically
generates the date on which the next premium payment is due 1119
and saves the data in the aforementioned contract file. If no premium
payment is due, the administrative system updates and saves the
contract file. In either case, the updated contract file is utilized
to issue the stored contract 1121 by utilizing a software algorithm
based on business, product and state guidelines as depicted in 1123.
[0164] The administrative system then extracts the relevant data
to a separate file 1125, where it is archived 1127. The data is
then used to print and mail a copy of the contract to the relevant
party as depicted by 1129.
[0165] Advantageously, the administration system of the present
invention allows a user to quickly and accurately update relevant
information related to a longevity insurance contract as depicted
in FIG. 13. FIG. 13 depicts a flow chart of several of the contract
parameters which can be updated using an administrative system in
accordance with the present invention. For example, a user can update
the file information related to a contract file for a change to
such parameters as ownership 1301, beneficiary 1303, payor 1305,
payee 1307, and address 1309. It is contemplated that any other
contract parameter can be updated utilizing an administrative system
in accordance with the present invention.
[0166] After changing one or more parameters stored in a file,
the administrative system utilizes a software algorithm based on
business, product and state guidelines as depicted in 1311 to update
and save the file. The administrative system then extracts the relevant
data to a separate file 1313, where it is archived 1315. The data
is then used to print and mail a copy of the contract to the relevant
party as depicted by 1317.
[0167] Optionally, the administrative system can monitor the tax
consequences of a contract and store the relevant information in
the contract file as depicted by 1325. In practice, the system determines
the market value of the longevity insurance contract 1327, generates
one or more annual statements 1329 which are sent to the extracted
file for archival and printing. Optionally, the generated annual
statements can be sent to a separate tax administration system as
depicted by 1331.
[0168] The administrative system of the present invention also
provides for the management of modal premium payments and the generation
of associated premium notices and or reports, as depicted in FIG.
14.
[0169] After a user opts to utilize the modal premium feature as
depicted by 1401, the administrative system can directly withdraw
the modal premium amount from an account or automatically generate
a premium due notice.
[0170] In order to automatically withdraw a modal premium from
an associated account, the administrative system first authorizes
the option and gathers the appropriate information as depicted in
1405. The appropriate information is saved in the contract file
and sent to the appropriate financial institution as depicted in
1407. The financial institution automatically debits the appropriate
account 1409 and notifies the administrative system as depicted
in 1411, which verifies that the premium is received. Upon verification,
the premium payments are allotted as described with reference to
1107 of FIG. 11.
[0171] Alternatively, the administrative system can generate premium
payments due automatically as depicted in 1415. The administrative
system then verifies whether a user responds to the notice in the
form of a premium payment as indicated by 1417. If the premium is
received and verified 1427, the premium payments are allotted as
described with reference to 1107 of FIG. 11. If the premium payment
is not received, a delinquency notice is generated 1419 and sent
to the appropriate party. If the premium is paid in response to
the delinquent notice 1421, the system responds as indicated with
respect to step 1427. If no premium is paid in response to the delinquency
notice, the administrative system automatically updates the contract
by calculating the reduced pay-up amount 1423 and updating the contract
file 1425.
[0172] The administrative system of the present invention also
allows a user to manage the facility care benefit portion of a longevity
insurance contract. FIG. 15 depicts a flow chart of the process
of administering the facility care portion of a longevity insurance
contract in accordance with the present invention.
[0173] After the system verifies that a file contract contains
the facility care benefit rider as depicted in 1501, the system
processes the specific triggering events associated with the benefit
1503. The system then determines whether eligibility is met 1505
or not 1507. If it is, the system updates the file to indicate that
the appropriate status of the facility care benefit rider as depicted
in 1509. In response to this action, the system automatically generates
an eligibility letter 1511, saves the file, and extracts it to a
secondary file for printing 1513. The system then monitors whether
the letter was received as depicted in 1515. If the eligibility
is confirmed, the process is periodically continued as depicted
by 1517. If eligibility is not confirmed, the facility care benefit
status is changed and updated in the associated file as depicted
in 1519.
[0174] The present invention also provides for efficient administration
of annuity payouts. FIG. 16 depicts a flow chart of a process for
administering annuity payouts in accordance with the present invention.
[0175] The administrative system first stores information related
to an annuity payout in a file as depicted in 1601. The system automatically
monitors whether the underlying annuity of the longevity insurance
contract has reached the payout status as depicted in 1603. If the
contract is in the payout phase, it extracts the due date from the
file 1605 and calculates the amount due 1607. The system then updates
the file by modifying the next payout due date as depicted in 1609.
[0176] The system then sends the calculated payment amount to an
associated general disbursement file, where it is saved 1611 and
sent to an associated check writing system, which issues the payment
1613. The system monitors when and if the payment is received (i.e.,
when the check clears) and updates the contract file 1615.
[0177] The present invention also provides for efficient administration
of facility care benefit payouts. FIG. 17 depicts a flow chart of
a process for administering facility care benefit payouts in accordance
with the present invention.
[0178] The administrative system first stores information related
to a facility care benefit payment in a file as depicted in 1701.
The system monitors whether the underlying facility care benefit
rider of the longevity insurance contract has been triggered as
depicted in 1703. The system then verifies whether the provision
is active as depicted in 1705. If the provision has been triggered
and is active, it extracts the due date from the file 1707 and calculates
the amount due. The system then updates the file by modifying the
next payout due date as depicted in 1709.
[0179] The system then sends the calculated payment amount to an
associated general disbursement file, where it is saved 1711 and
sent to an associated check writing system, which issues the payment
1713. The system monitors when and if the payment is received (i.e.,
when the check clears) and updates the contract file 1715.
[0180] The administrative system of the present invention also
manages the death provisions of the underlying longevity contract.
FIG. 18 depicts a flow chart depicting the administration of a longevity
contract with respect to the death of a party named in the longevity
contract. The administrative system first stores information related
to the death of a party in a file as depicted in 1801, where the
information is processed 1803.
[0181] The system then determines if the deceased party is an annuitant
1805. If so, it updates the file with respect to the claimant 1807
and processes any request by a claimant 1809. If the deceased is
not an annuitant, the system determines in what way the deceased
was associated with the contract, creates a notification letter
1813, updates the file 1815, and sends the letter to the appropriate
party (not shown).
[0182] The administrative system of the present invention is also
capable of automatically processing associated benefits related
to a deceased party such as a death benefit or the expiration of
a facility care benefit rider as depicted in FIG. 19. FIG. 19 depicts
a flow chart of a process of administering benefits associated with
a longevity insurance contract that are contingent upon a party's
death such as a death benefit or a facility care benefit rider.
The administrative system first stores information related to the
death of a party in a file as depicted in 1901, where the information
is processed 1903.
[0183] The system then updates any information related to an associated
facility care benefit rider as depicted in 1905. Thereafter, the
system updates the contract, and saves it in a secondary file as
shown in 1909.
[0184] Next, the administrative system determines whether a death
benefit is due on the associated longevity insurance contract as
depicted in 1911. The system then sends the death benefit payment
amount to an associated general disbursement file 1913, where it
is saved and sent to an associated check writing system 1915, which
issues the payment. The system monitors when and if the payment
is received (i.e., when the check clears) and updates the contract
file 1917. |