Withdrawals, surrenders and lapses
Partial withdrawals Policyowners may make partial withdrawals at any time except during the grace period by submitting written notice to the company. The minimum partial withdrawal amount is $100. Each partial withdrawal will be deducted from the account value of the policy. The death benefit will be reduced by the amount of the partial withdrawal, but cannot be reduced to less than $25,000. The policy must maintain enough cash surrender value to provide for three monthly deductions. Full cash surrenders If policyowners surrender their policy, they will receive the cash surrender value, which is the account value minus the surrender charge minus any loan balance, minus any lien balance. The surrender charge varies by issue age, rate classification, sex and duration. It is a per $1,000 of initial specified amount charge and is in effect for 14 years from issue and/or from the date of any increase. There is no pro rata surrender charge for partial withdrawals that are less than the cash surrender value. Lapse and grace period If the policyholder does not give notice of termination to the company and further premiums are not paid, insurance on the primary insured and that provided by riders remains in force for as long as there is sufficient cash surrender value from which to deduct insurance costs and expenses. Starting on the monthly date when the cash surrender value is less than the monthly deduction for the policy month to follow, a grace period of 61 days is given for the payment of enough premium to cover the monthly deduction plus the next three monthly deductions. If the premium is not paid within the grace period, all insurance stops. If the insured dies during the grace period, the death benefit is paid but reduced by the past due monthly deductions. Minimum no-lapse period During the first 20 years, the policy will remain inforce and will not begin the grace period if the sum of the premiums paid to date— less any withdrawals, loans and loan interest—equals or exceeds the minimum monthly premium multiplied by the number of policy months since the date of issue. Reinstatement If the policy terminates without value, it can be reinstated with evidence of insurability. At reinstatement, charges for the grace period and current month will be deducted from the account value, and underwriting is required. Policies cannot be reinstated after 5 years past the termination date. Income tax considerations When values are removed from an in-force policy through partial withdrawals, reductions in the specified amount may result. Potentially, distributions may be subject to income tax to the extent of the gain involved (especially on a fully funded policy within the first seven policy years). The rules for determining any applicable tax are complex and depend on how long the policy has been in force. Certain sales illustrations call for surrenders of policy values at various times. A partial withdrawal may involve the possibility that some portion of the surrender is subject to tax. While this possibility usually is a minor consideration in these illustrations, it should not be ignored. The product software is designed to give the agent a warning if the proposed withdrawals would result in taxation. A policyholder should be advised to seek competent legal or tax counsel.
For financial professional use only. Not for use with clients.
IUL-AG-0723
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