Let’s Understand The Ledger Statement Of A Term Life Insurance Policy

Potential buyers are generally shown policy illustrations or ledger statements that outline the financial elements of the policy under various assumptions about credited interest rates, dividend payments, and premium payment schemes. A sample ledger statement for yearly renewable and convertible reissue term is shown at the bottom of this page. Although the market for annual renewable and convertible term life insurance has fallen in recent years in favour of 5-year, 10-year, or longer term policies, the workings of the foundational original yearly-renewable term policy are probably best illustrated. The following notes correspond to each of the numbers in the ledger:

 1.The death benefit is set at $100,000 in this circumstance.

2. The term insurance plan is renewable every year until you reach the age of 95.

3. The issue age is 45 and the gender is male.

4. The insurability status (smoking or nonsmoker, for example), or the rating (extra charge because the insured is a higher risk for medical or occupational reasons). This life insurance company’s ideal risk is a nonsmoker, nonrated policyholder, who falls into the company’s best insurability group.

5. Life insurance has a face value of $100,000.

6. Rather than showing values at the conclusion of each year, the ledger statement shows values at the beginning of each year.

7. On a non-reissue basis, the gross premium charged (not including dividends).

8. The anticipated dividend at the conclusion of the previous year (i.e., at the beginning of the following year). The first predicted dividend in this situation will be paid at the start of year 6.

9. The annual net premium (gross premium charged on a non-reissue basis taking projected dividends into consideration).

10. A column that shows premiums for the first reissue period on a reissue basis. The reissue premiums for each consecutive reissue date are shown in the following columns.

11. The insured may apply for reissue rates at the start of year 5. The premium for year 5 will be $286, not $568, if the insured meets the insurance company’s underwriting conditions (as if applying for new policy). The net predicted premiums in column 9 will apply if underwriting standards are not fulfilled.

12. Those who qualified for reissue rates at the start of year 5 apply again at the start of year 9. If their application is denied, they will be charged a $738 year 9 premium, and the non-reissue charges (column 9) will apply. Their premium in year 9 will be $378 if they qualify for reprint rates.

13. The net expected premium for those who did not qualify for reprint in year 10 is $902.

14. For those who did qualify for reissue in year 9, the cost is $378.

15. Those who qualified for reissue rates at the start of year 9 apply again at the start of year.

13. If they are refused, their premium will be $900 in year 13, and the non-reissue rates (column 9) will apply. In year 13, assuming they qualify for reprint rates, their premium will be $498.

16. For individuals who do not qualify for reprint in year 14, the net expected premium is $1,154.

17. For those who qualify for reissue in year 13, the premium is $498.

18. Those who qualified for reissue rates at the start of year 13 apply again at the start of year 17. If they are refused, their year 17 premium will be $1,164, and they will be subject to the non-reissue rates (column 9). In year 17, if they qualify for reprint rates, their premium will be $700. For individuals who do not qualify for renewal in year 18. 

19. For individuals who do not qualify for renewal in year 18, the net anticipated premium is $1,610.  

20. For those who do qualify for reissue in year 17, the fee is $700.

21. Those who qualified for reprint rates at the start of year 17 apply again at the start of year 21. If they are refused, their year 21 premium will be $1,665, and they will be subject to the non-reissue rates (column 9). Their premium in year 21 will be $1,034 if they qualify for reprint rates.

22. For individuals who do not qualify for reprint in year 22, the net anticipated premium is $2,339. 23.

23. For those who do qualify for reissue in year 21, the cost is $1,034.

24. Those who qualified for reissue rates at the start of year 21 apply again at the start of year 25. If they are rejected, their year 25 premium will be $2,380, and they will be subject to the non-reissue rates (column 9) thereafter. In year 25, if they qualify for reissue rates, their premium will be $1,580.

25. For people who do not qualify for reprint in year 26, the net expected premium is $3,049.

26.  For those who qualify for reprint in year 25, the fee is $1,580.

27. The premium for those who qualify for reissue rates at the start of year 25 in year 29. Reissue rates are no longer available in year 29 because the insured has reached the age of 69.

28. For individuals who do not qualify for reissue, the net anticipated premium in year 29 is $4,067 (based on a 45-year-old male’s life expectancy). If you are still alive after the age of 74 and want your insurance to continue, use the net projected premiums in column 9.

29. This is a page that summarises the information.

30. Without adjusting for dividends, the total gross non-reissue premiums for the years shown. The time worth of money or the opportunity cost of money are not taken into account in these calculations.

31. Dividends totaled over the years indicated. Dividends forecasted are not guaranteed. The time worth of money or the opportunity cost of money are not taken into account in these calculations.

32. For the years depicted, the total net projected premiums (gross premium minus anticipated dividends) on a non-reissue basis. The figures do not take into account the time worth of money or the opportunity cost of money.

33. On a renewal basis, the total premiums are 33. The time worth of money or the opportunity cost of money are not taken into account in these calculations.

34. The non-reissued interest-adjusted indices for the years are shown.

35. A declaration about term insurance renewability and non-term plan convertibility.

36. The reissue rules are described.

37. The dividend statement, which states that dividends are not guaranteed.

38. A statement stating that dividends are determined by the company’s investment performance and that illustrations with various anticipated dividend interest rates are provided.

39. A statement concerning summary figures calculated at the end of the year rather than in the beginning.

40. A statement stating that the shown values are only valid if the insured complies with the company’s underwriting guidelines.

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