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Life Insurance Coverage
Life Insurance Coverage

You may change the strategy of which dictate how your cash will grow within an IUL or VUL policy, i.e. whether it's based on the S&P 500 or another index fund. Typically there are various options within each of these policy types. Interest is fixed on a whole life policy. IUL policyholders can change their crediting strategy. VUL policyholders can change their fund choice in their sub or separate accounts.

Yes, you may be the owner of a life insurance policy that insures someone else. Typically, there are three parties in a life insurance contract: (1) owner, who has the right to make decisions, (2) insured, who’s life is covered, and (3) payor, the individual or entity that is paying for the policy. However, you will need three items to be able to buy life insurance on another party: Insurable interest - there needs to be reasonable financial risk for the owner if the insured passes away Medical exam - most often, there is a medical exam required for the insured to complete Consent forms - the insured will need to sign the application and policy approval form to acknowledge their consent Some examples of individuals you can purchase policies on are: business partners, children (the one instance where you do not need their consent as long as they are under 18 years old), spouse, and parents.

Yes. Many of our customers own a combination of term and permanent life insurance for the different purposes that they serve. Term life insurance offers affordable coverage for a period of time when you have high liabilities while permanent insurance offers living benefits such as long term care and tax efficient savings.

It depends on what you need and many people do have multiple life insurance policies. Here are some of the most typical reasons for having multiple life insurance policies: You need additional coverage - sometimes there are life changes that bring forth the need for additional coverage, such as taking on an additional mortgage or having another child. Often, people add more coverage when such life events occur. You have different purposes for each life insurance policy - many individuals who own multiple policies own them for different reasons, such as one is used as a tax-free wealth transfer to beneficiaries while another is used for accumulating cash value (with each having very different structures to maximize the purpose and intent for purchasing the policy). You are looking to get additional coverage for a specific rider, such as long term care or critical illness - each life insurance company will only insure you up to a certain amount for long term care or critical illness. If you wanted additional coverage for these specific healthcare riders, you may need to purchase additional coverage through another life insurance company or purchase a stand alone policy. You want to mitigate risk in the case of a life insurance company’s bankruptcy - some individuals choose to purchase life insurance through multiple life insurance companies in fear of one going bankrupt. However, life insurance companies rarely go bankrupt and even if they do, they have multiple layers of protection (read “What if my life insurance company goes bankrupt?” for more information). Amplify only works with A-rated companies in the U.S. Make sure to check the rating of the life insurance company you purchase before accepting the policy.

Life and health insurance provided by the majority of employers offer temporary coverage while you are employed. However, if you are no longer with your current employer you will no longer be covered for life insurance or disability. In the case of a debilitating disease or a critical injury, you will most often only be offered a period of disability through work, after which your benefits will cease to exist.

Yes, there are two types of life insurance policies that allow for spouses to purchase a joint life insurance policy: First-to-die: this means that 100% of the life insurance coverage will be paid out to the first spouse that passes away to be given to the second spouse. Typically, first-to-die policies are more expensive than a normal life insurance policy. Since the life insurance company is insuring 2 lives vs. 1. Second-to-die: this means that 100% of your life insurance coverage will be paid out only after both spouses pass away and be given to their beneficiaries. Normally, we recommend that each spouse get their own life insurance policy, that way they can protect each other in the case of a life emergency and maximize their coverage amount overall for what they are paying in premiums.

Types of Insurance

No, whole life is not synonymous with permanent life insurance. It is a type of permanent insurance and has been around for over 175 years. It offers savings at conservative, guaranteed rate of return, such as 3-5%. With whole life, you typically cannot change your premiums or your coverage amount throughout your life. In addition, average whole life insurance premiums could cost 1.5-3x higher than other permanent life insurance product types for the same coverage amount. There are other types of permanent life insurance products designed to cover you for your entire life and that offer more flexibility and higher cash accumulation returns.

Permanent insurance is for individuals and families who have disposable income and are looking to solve one of the below problems in their financial plan:

  • Looking for tax-advantaged accounts to accumulate their savings in. For most people, there is a limit to savings in 401K, Roth IRA, etc.
  • Don’t want their entire portfolio to be subject to market volatility and are looking for an account for steady growth and principal protection.
  • Looking to transfer wealth to their family in a tax-efficient manner.
  • Worried about saving for long-term care.
  • Looking for lifetime life insurance coverage beyond the next 20-30 years.

Whole life - created in 1960s Fixed premium and death benefit - one amount of premium for a guaranteed death benefit Growth - On average 3.5% annually Variable universal life - created in the 1980s Flexible premium and cash value - Cash value is invested in sub-accounts that are managed by the insurance company. The investment value can fluctuate with market performance and 100% of the investment risk is taken on by the policy owner Growth - Rate depends on market performance Index universal life - created in late 1990s Flexible premium and cash value - Cash value grows based on an index (such as the S&P 500) but within a cap and floor, meaning the growth will not exceed a maximum growth or drop below a minimum growth level. For example, a market growth of 30% may be capped at 15% but a market drop of -10% may equate to a floor of 0% (no loss) Growth - Rate depends on the market, but often equates to 5-7% annually on average There are other types of permanent life insurance, such as universal life insurance.

Permanent life insurance is not for everyone and we typically don’t suggest that you get permanent life insurance if you do not have a reliable disposable income of $100 per month or if you are not interested in the long term benefits of permanent life insurance, such as passing down wealth to beneficiaries, accessing your coverage for health emergencies, or supplementing your retirement income.

Permanent life insurance is an overall term for life insurance policies that do not expire. Often, permanent life insurance allows you to build cash value that grows tax-deferred and can be accessed tax-free. Permanent life insurance also offers a plethora of riders including long term care, critical illness, term riders, and more. Most of the time, these riders will allow for a portion of or the entire coverage amount to have a dual purpose: a death benefit and for the purpose of the rider. For example, a $500,000 life insurance policy with a long term care rider will allow for the $500,000 to be used for long term care if the individual needs it in his/her lifetime and if not, the $500,000 will be passed down as a death benefit to his/her beneficiary.

Term insurance is a simple life insurance policy that will pay out a death benefit to your beneficiaries if you die within the term period. Otherwise, if nothing happens to you during the term period, the policy expires and typically has no additional value. Term life insurance is simpler and cheaper than permanent life insurance. Permanent life insurance provides lifelong coverage and can include a long term cash accumulation vehicle that can be accessed tax-free by the policyholders while they are alive. Permanent life insurance has a lot more features, including tax deferred cash accumulation and accelerated benefit riders where you can access your coverage amount for severe or long term illnesses or disabilities. Permanent insurance is more expensive than term insurance.

Cash Accumulation

Tax-efficient cash accumulation are only available in permanent life insurance policies, not in term life insurance. The premiums you pay into a permanent life insurance policy will cover the cost of insurance (which provides the death/chronic illness/critical illness coverage) and fees, and the rest is saved and grows in a tax deferred investment account. You can choose how the investment account grows and access the amount tax free after a certain number of years (typically 10-15) for any purpose. There is a penalty for accessing your cash amount before the specified number of years. Here are the tax codes that pertain to the tax-efficiency of life insurance in the U.S.: Death Benefits Policy death benefits are usually paid to beneficiaries income tax-free according to IRC Section 101(a). Benefits paid out before the insured’s death because of chronic or terminal illness are tax free according to IRC Section 101(g)1. Policy Cash Values Cash values can grow within the policy without being subject to taxes according to IRC Section 72. Withdrawals up to the amount of the policy owner’s tax basis are not subject to income tax according to IRC Section 72. Cash values exceeding the owner’s tax basis may be borrowed from the policy income tax free as long as the policy stays in force according to IRC Sections 72 and 7702 Tax-Free Exchanges The owner may exchange an existing for a new one free of income taxes according to IRC section 1035. The owner may exchange a life insurance policy for an annuity free of income taxes according to IRC Section 1035 Overall, life insurance death benefits, healthcare riders, and cash value can be accessed tax-free as long as the guidelines towards saving in the policy are followed appropriately. You can consult an Amplify licensed expert to make sure you are not exceeding the legal amount of cash in your policy to maximize your tax-free returns.

Underwriting & Approval Process

You may go to your own physician for a medical exam but it may be easier, more cost efficient, and faster to go through the insurance company to schedule a medical exam. The third party medical exam companies are specialized in ordering the right blood work and tests that the companies are looking for in their underwriting process. In addition, the third party medical examiners can go to a place of your convenience and the costs are covered by the life insurance company whether or not you end up purchasing the policy. Often, you are able to schedule an exam within a week’s time (compared to having to wait to fit into your doctor’s schedule).

It depends on the carrier and product type. You may choose options where you won't have to take a medical exam, although typically being open to taking a medical exam is how you can access the most options and increase your likelihood for obtaining the lowest premium rate. An increasing number of carriers are offering underwriting with no medical exam.

The time largely depends on how long underwriting takes. Underwriting time depends on policy type, carrier, and your health condition. The underwriting process can take between 15 minutes with no medical exam to 2-6 months with medical exam. Besides underwriting, policy delivery and payment can take up to 1 week.

Here are 11 of the most common reasons for denial of life insurance. Please keep in mind that having any of these does not mean you will be guaranteed a denial: 1. Obesity - not all life insurance companies measure obesity the same- talk to your agent to find the best company for you 2. High Cholesterol - high cholesterol, lipids, and triglycerides (high LDL and low HDL) increases risk of heart disease and stroke 3. Diabetes - some companies are more lenient to diabetes than others 4. Chronic Illness - Examples include cancer, diabetes, HIV/AIDS. heart disease, Parkinson’s disease, asthma. Alzheimer’s disease. If you are currently being treated and your attending physician statement shows shows improvement then you may be able to get approved. 5. Age - The older you are the harder it is to get approved for life insurance and the more expensive the premium. That’s why it’s important to get approved while you’re young and healthy; your premiums will also stay low. 6. Blood/Protein in the Urine - blood or protein in urine signifies either extreme exercise or kidney disease. If this shows up, you will need to go to your physician and show healthy follow up results in order to get approved. 7. Alcoholism - a few drinks here and there won’t affect your chances of acceptance. However, high liver function will cause the company to run positive alcohol markers to see if your drinking is much higher than typical levels, which will increase your chances of denial. 8. Hazardous Occupation - some examples of hazardous occupation includes farmers, electricians, police officers, truck drivers, roofers, airline pilots. Working in these occupations will increase your chances of getting denied. 9. History of Cancer - a family or personal history of cancer will increase your changes of getting denied. Less serious forms of cancer, such as skin cancer, will have less impact on your chances of acceptance than more serious ones such as breast cancer. The insurance company will review how far it’s progressed and how long you’ve been in remission. 10. Financial Reasons - your current income and total net worth will affect how much coverage you can get approved for. 11. Previous Denials - life insurance companies subscribe to something called the Medical Information Bureau (MIB) which shows each individual’s history of approvals/denials of life insurance. Previous denials will increase the risk of future denials, but doesn’t guarantee that you will be denied for life insurance. Ultimately, you should speak with a life insurance agent to find the best company for your personal situation.

Yes, you may choose the income strategy within the policy. The three available strategies are: Whole life: a fixed monthly interest rate for your cash value that usually lies between 3.5-5%. In addition, these whole life products can produce annual dividends depending on the profitability of the life insurance company. Dividends can be used to reduce premium, can be paid out in cash, or be used to purchase additional insurance thus increasing cash value. This strategy is for policyholders with a conservative risk tolerance. Indexed universal life: crediting to the accumulation value is based on market indexes such as the S&P 500, or other national and international indexes. Returns are subject to caps and/or participation rates. The minimum floor is often zero. This strategy is for policyholders with moderate risk tolerance. Variable universal life: a portion of premiums paid can be invested in sub-accounts offering various crediting options typically based on mutual funds (within the available funds list of that particular carrier). This strategy is for policyholders with high risk tolerance. Most carriers will offer the multiple versions of the three strategies. If you need help finding the best product type for you, please consult with one of our licensed experts to better understand which strategy is best for you.

The medical exam will involve - Prior to the exam: you must fast for 8hrs with no food or drink besides water. During the exam: total of 20-25 minutes - A paramedical exam - taking your height and weight as well as asking you a series of health questions around your current and previous health condition and family history of health. - Blood - the licensed phlebotomist will extract two vials of blood to be analyzed. - Urine - you will be instructed to urinate in a cup that is collected by the examiners. After the exam: your results should be revealed in 7-10 days and can be accessed through a web portal provided by the examiners or your life insurance agent.

- Complete our online walkthrough - determine the right plan and coverage amount for each individual and family based on age, health, and financial factors. - Speak with a licensed expert - a licensed advisor can help answer your questions and customize your plan based on your preferences (i.e. which riders to add and how much retirement income you would like to build). - No commitment application - your Amplify Advisor will walk you through the end-to-end application process. You can receive a pre-offer in minutes after you apply. - Approval - The underwriting time and process vary a lot depending on the insurance carrier. For the fastest carrier we work with, 35% of the customers receive an immediate offer with no medical exam and no phone interview and 30% receive an offer within 3 business days, while other companies might require traditional underwriting that takes more than 1 month. The policy will be delivered to you via email where you can e-sign and connect to a bank account of your choice. - Amplify benefits - once you are an Amplify customer, you will have access to our support team for questions at any time regarding any insurance needs. In addition, you will have access to a free estate planning and tax planning consultation with our partners.

Healthcare Riders

You will have an online customer portal with each company that you have a policy with. There, you will be able to access your policy information, documents, and make changes to your account including premium payment, banking information, and retrieving cash from your investment account. Prior to your policy approval and delivery, you will be able to access your application documents and progress of your application through your online customer portal.

Terminal illness is when an individual is expected to die within 12 months as determined by a healthcare professional. The insured can then accelerate up to 100% of their coverage amount early if there is a terminal illness rider attached to the policy.

Critical illness is a severe health condition of which will result in death if untreated in 12 months such as (but not limited to) stroke, heart diseases, critical injuries that lead to paralysis, blindness, etc. 1/4 men will contract a critical illness before age 65. The average age of individuals filing for bankruptcy due to medical costs was 44.9 years old. Critical illness insurance can cover gaps in health insurance such as living expenses (i.e. rent, food, transportation, caretaker, etc.) and out-of-pocket medical costs. These expenses can be much more significant than costs incurred inside of a hospital or medical facility.

Yes, there are two types of life insurance policies that allow for spouses to purchase a joint life insurance policy: First-to-die: this means that 100% of the life insurance coverage will be paid out to the first spouse that passes away to be given to the second spouse. Typically, first-to-die policies are more expensive than a normal life insurance policy. Since the life insurance company is insuring 2 lives vs. 1. Second-to-die: this means that 100% of your life insurance coverage will be paid out only after both spouses pass away and be given to their beneficiaries. Normally, we recommend that each spouse get their own life insurance policy, that way they can protect each other in the case of a life emergency and maximize their coverage amount overall for what they are paying in premiums.

Yes, if you take out your coverage early for a severe health emergency, such as chronic illness or critical illness, your total coverage amount and death benefit will decrease based on how much you retrieve.

Depending on which healthcare riders you choose, you will need to qualify for Long Term Care, Chronic Illness, Critical Illness, or Terminal Illness definitions. - Long Term Care: a disease or injury that is recoverable in which you cannot perform 2/6 Activities of Daily Living (ADL) including eating, bathing, dressing, transferring (moving around), continence (controlling bowel movements), or toileting. - Chronic Illness: a permanent disease or illness in which you cannot perform 2/6 ADL’s outlined above in Long Term Care. In addition, if you have a severe neurological disease that can cause injury or harm to yourself or others if unsupervised. - Critical Illness: specific illness that is determined by each carrier, but often include stroke, heart diseases, critical injuries that lead to paralysis, blindness, etc. - Terminal Illness: activated when you have 12 months (designated by a healthcare professional). Often, you can take your coverage out early, though sometimes this rider only allows you to take a certain percentage of your coverage out early and cancelling the rest of the coverage amount.

Long term care is a disease or injury that is recoverable in which you cannot perform 2/6 Activities of Daily Living (ADL) including eating, bathing, dressing, transferring (moving around), continence (controlling bowel movements), or toileting. More than 70% of individuals need long term care after age 65 and can cost on average $80,300 per year out-of-pocket for a semi-private nursing home.

Life Insurance Safety & Risks

First, state insurance regulators apply more conservative accounting requirements by not allowing certain assets to be included in capital and surplus. Second, many states have implemented investment limitations to reduce exposure to a single issuer by limiting or preventing risky types of transactions. Lastly, in addition to regulatory reviews, insurers must undergo annual independent audits. State regulators monitor the risk of insurers at least quarterly and more for at-risk insurers.

Life insurance companies make money through the investment spread (interest) on the assets it manages. Insurance companies invest the majority of assets in safe, fixed income investments and profit from the investment returns both on the cost of insurance it collects as well as any remaining cash account value within their policies. Lastly, insurance companies make a small amount from fees charged in the policy, such as premium charges, management fees, withdrawal fees, and early policy cancellation penalties.

There are multiple layers of protection for your life insurance policy. Life insurance companies are required to have large cash reserves to be able to pay out a certain percentage of claims. Their cash reserve requirements are much larger than banks. Life insurance companies are reinsured through a Guaranty Association, which is a group of life insurance companies that reinsures any remaining risk that is not accounted for in the cash reserves of the life insurance company. Members of the Guaranty Association will take over the policies in the case of a Member of the Association going bankrupt. If all else fails, the ultimate reinsurer is the state. Life insurance policyholders are insured for a certain amount that differs in each state. For example, in Florida, the state will pay out $300,000 of death benefit and $100,000 cash value for each insured life if needed. They will pay out in the event that all Members of a Guaranty Association are bankrupt (although this scenario is highly unlikely and would represent a severe situation for the U.S. economy overall).

Insurance is regulated on the state level. Each state has its own set of laws, rules, and regulations for insurance companies as well as extensive oversight of insurance companies practicing in that state. The National Association of Insurance Commissioners Solvency Accreditation Program (NAIC) governs states to ensure a uniform system of laws, rules, and regulations and mutual cooperation that every state strives to adhere to.

There is typically a 10-15 year surrender period where you will only be able to access a certain percentage of your cash accumulation amount inside of your policy. After the surrender period, which varies by company, you will be able to access all of the cash accumulation value within your policy.

Change, Transfer, or Cancel Policies

Yes, most often you should be able to increase or decrease your life insurance coverage amount. However, some life insurance companies allow you to increase or decrease only after 2 or 3 years of having the policy and only once every 2-3 years. Also, whenever you increase your life insurance coverage amount you will likely need to redo the underwriting (i.e. medical exam, medical records, etc.) for the new amount of increased coverage since this is a new amount of risk for the life insurance company. If you believe you may need to increase or decrease your life insurance coverage amount at some point in the future, please let your Amplify Advisor know so that we may be able to filter for life insurance companies that are the most flexible for coverage changes.

Here are some reasons why you may want to transfer your old policy into a new one: - You found a cheaper policy - You changed your financial strategy - You found a policy that better suits your needs (i.e. has healthcare riders you want to cover or better cash accumulation return, etc.) Some factors to consider before transferring your life insurance policy: - Will the added features (or cash returns) be worth sacrificing any cash value that is locked in the “surrender period”? You will be giving up that value if you transfer to a new policy (unless you are transferring into a new policy that is owned by the same life insurance company but just different policy types). - How much will the premiums increase since you are purchasing at a later age? - You will restart a new surrender period, meaning your investment value will be locked in for another 10-15 years before accessing 100% of the value inside. Overall, make sure you read all the fine print before deciding on the purchase to transfer your old life insurance policy to a new one. The newer life insurance policies may offer more attractive benefits but it’s also important to know what you’re getting into and understand your new life insurance policy in detail.

You can transfer your old life insurance policy to a new life insurance policy if there is cash value inside of the policy, meaning the cash available that is not locked in by the surrender period of your policy (read “Is there a penalty if I take out my money early?” for more information). You can roll over this cash value into another permanent life insurance policy without any tax liability, called a 1035 exchange (which functions similarly to a 1031 exchange in homes except for life insurance policies). Otherwise, you will not be able to qualify for the same rate as you did when you first purchased the policy and you will be underwritten for your current age and health for the new policy. If you have an old policy you would like to transfer, you should consult with your Amplify Advisor to see what’s the best plan of action. If your monthly premium will significantly decrease, your coverage amount can significantly increase with the same monthly premium, or your investment value will grow significantly greater than if you were to keep the same policy, then it may be worth it in the long term to transfer your life insurance policy to a newer, more updated life insurance policy. Otherwise, you could also consider purchasing a new life insurance policy if there are certain benefits or features of new life insurance policies that you would like to have while keeping you old policy in place.

You will have an online customer portal with each company that you have a policy with. There, you will be able to access your policy information, documents, and make changes to your account including premium payment, banking information, and retrieving cash from your investment account. Prior to your policy approval and delivery, you will be able to access your application documents and progress of your application through your online customer portal.

If you cancel your policy, the amount that you would get back would be your accessible “cash value” inside of your investment account at the time of cancellation. As you may recall, you are only able to access a certain percentage of your cash account that increases in percentage until year 10 or year 15 (depending on the life insurance company) called the surrender period. After the surrender period, you will be able to cash out your entire cash account if you cancel your policy tax-free and penalty-free, as long as you have saved within the MEC guidelines for your policy.

Yes, you may increase or decrease your premiums per month based on a minimum and maximum, which is dependent on the coverage amount you purchase. Increasing your monthly premium will add more money into your cash accumulation account, thereby increasing the cash amount available at retirement. Decreasing your monthly premium will lower the amount in your cash accumulation account thereby decreasing the cash amount available at retirement.

You will likely need to apply for the new policy, which means undergoing the entire underwriting process including a medical exam if necessary, and completing a 1035 exchange form stating the reason for transfer and previous policy details.

You can go to either Amplify or the life insurance company that your policy is under. We will be able to help you answer any questions you have or if you wish to reach out directly to the life insurance company they will be able to assist you as well.

Life Insurance Costs & Fees

The more that you put into your policy early on, the more cash accumulation you will have later in life. Since you have a greater amount of principal to start with, the tax-free compound value of your cash accumulation returns will be greater over time.

No, purchasing life insurance will not effect your income tax bracket. However, in some instances, you may be able to get a tax deduction for purchasing life insurance or long term care. You will be able to receive a federal tax deduction (and some states also offer a tax deduction) for purchasing a stand-alone long term care policy up to certain limits that vary by age (read more here). In addition, if you own a corporation, you may be able to purchase life insurance contracts on any employee that you wish, which will be tax deductible to your corporation. These plans are known as Executive Bonus Plans. If either of these apply to you or interest you, please speak with your Amplify licensed expert to help you structure the right plan for your situation.

Our policies are set to pay premiums up until age 65. If you would like a customized plan to pay more of your policy upfront (and stop paying premiums earlier than age 65) you may talk to one of our agents to customize a payment plan for you.

If you can’t pay your premiums, you have a few options: - You can lower your death benefit coverage amount so that you pay less per month. The lowest amount of death benefit coverage you can lower to is $50,000. - You can pause payment for up to 5 years (during which you are not covered) and still be able to reinstate your policy, after which you will need to pay back the minimum premium required during the missed months of premium in order to reinstate your policy. - Most carriers offer a 61-day grace period, after which you will receive a written notice of a missed payment. You can pause your coverage if you decide not to pay following the written notice. - If you have had the policy for some time (e.g. 5 years+), your policy’s cash value (investment value) may be sufficient to cover some time in cost of insurance. Your cost of insurance will be deducted from your cash value to keep you policy active. If there is no cash value inside your policy, then your policy will go into a 61 day grace period, after which your policy will be paused for 5 years. After 5 years your policy will be canceled without the ability to reinstate.

Yes, you have the option to pay one lump sum and not have to pay anymore. By paying this one time premium, however, you will not be able to put more money into the cash value of your policy.

The fee structure of each insurance company varies widely. However, here are the common fees you should understand, compare, and contrast regarding permanent life insurance: Premium expense charge - a percentage of the premium you put into the policy, which could range from 4-8%. This is used to pay state and local premium taxes due for the life insurance company. Asset charge - some companies charge an annual asset charge, similar to a management fee, on the cash inside of the investment account. This asset charge could range from 0.76%-0.86%. Per 1,000 base charge - this is a charge that is applied in the first 10 years of the policy, which is used to cover the costs associated with setting up the policy, including marketing costs, paying medical examiners, obtaining physician records, etc. Per policy charge - an administrative charge, this goes towards keeping records of the policy such as accounting and bookkeeping. This is taken out per month from the policy and can range from $5-$10 per month. Loan interest charge - some companies will charge an interest rate on the cash that you retrieve from your policy. This interest rate will decrease your death benefit unless you pay back the amount that you’ve retrieved from your policy. At Amplify, we recommend cash value life insurance policies that have no loan interest rate so you are not being charged for taking out the cash or investment value within your policy (and you don’t have to pay it back). Withdrawal fee - typically a fee around $25-100 per time you withdraw from your policy. This fee goes towards administrative and accounting costs of withdrawing from your account.

No, your insurance premiums stay the same over time.

Policy Payout & Benefits

Yes, you can have a beneficiary listed on your policy that lives in another country. You will just need to make sure they have insurable interest on your life (meaning they will suffer financial loss if you die). If you have a beneficiary that lives in another country, make sure you incorporate all the details of their name, date of birth, address, and social security (if they have one) on the policy and provide the beneficiary with the policy number, life insurance company name and contact information, policy type, and agent’s name and contact information. If they are able to return to the U.S. to claim the policy, the process will be fairly simple and straight forward, similar to any U.S. resident. However, if they are not able to come to the U.S., then they will need to request for the life insurance company to mail them the claims package and the process may take a bit longer. Life insurance companies do their best to try to make the process as efficient and streamlined as possible.

Taking out cash from your life insurance policy is literally withdrawing your premiums and loaning from your death benefit. Normally, you don’t have to pay that loan back, unless you want to, and taking out the loan will not affect your death benefit, read more in “What are the fees associated with my policy?”. You have two options with your death benefit: (1) increasing and (2) level. An increasing death benefit will mean that you maintain the same amount of death benefit coverage and the investment value grows on top of the death benefit. However, this can get expensive later, and affect your investment returns in the future, since more and more of your premium will go towards paying the cost of insurance later on as you get older (and your cost of insurance gets more expensive). A level death benefit means that your death benefit will decrease until year 20, after which it will gradually increase until your passing. This keeps your cost of insurance low throughout your life while still allowing a large enough “vehicle” for your investment to grow tax-free (your death benefit has to be a certain multiple greater than your cash value in order to hold the investment return inside and to grow be tax-free). One popular option is for people to choose increasing death benefit and switch to level death benefit after they start retrieving their cash value from their investment account, so their cost of insurance doesn’t continue to rise after they’ve taken out cash from their policy.

Generally, long term care and chronic illness benefits are not taxed as income as long as you stay within the per diem amount. The per diem amount for long term care currently is $370/day or $135,050 per year. Long term care riders that pay out as a reimbursement will be taxed as income for the amount above paid out above the expenses. Critical illness benefits are not taxable at income when paid out during the insured’s lifetime after qualifying for activation of the rider. Terminal illness benefits will not be taxed. However, it may limit your ability to qualify for Medicaid and other public assistance programs.

As long as you have followed the guidelines of premium payments for your policy, you will not need to pay taxes when accessing your cash value in the future (i.e. no large lump sums of premium payments). Your life insurance death benefit grows over time since your premium payment is split between (1) paying for the cost of insurance and other fees and (2) being invested in an investment account that grows tax-free. The way that you are able to access the cash value within your investment amount tax-free is by withdrawing your premiums tax-free and loaning from the investment account of your death benefit at 0% loan interest rate, of which your death benefit pays back after you pass away. Since both your death benefit and loans are tax-free, you will not have to pay taxes when accessing your cash value inside of your investment account. Furthermore, your death benefit is also tax-free under most circumstances.

Some policies are “indemnity” plans and others are “reimbursement” plans. Indemnity means the life insurance company will payout in the form of a check (either monthly, quarterly, semiannually, or annually) in the case that you meet the criteria for the health condition you are covered for through verification of a U.S. healthcare professional. Reimbursement means the life insurance company will payout after receiving receipts or proof of specific care outlined in the policy details, such as admittance into a nursing facility, hospice, or other. - Long term care - most often you can take out 2% of your policy amount per month (within a state maximum) tax-free after a 90 day waiting period. Withdrawing the long term care benefit will decrease the death benefit if added as a rider to a life insurance policy. - Chronic illness - can be accessed after a waiting period of 90 days and within 12 months of a healthcare professional certifying the insured is chronically ill. The maximum amount withdrawn in a given year is the lesser of 24% of your death benefit, $135,050 (per diem amount for 2019), and $240,000. Withdrawing the chronic illness benefit will decrease the death benefit if added as a rider to a life insurance policy. - Critical illness - a physician must certify that the insured has a critical illness that will result in death if untreated in 12 months. For most policies, the insured will have access to 90% of the death benefit or up to $500,000. Withdrawing the critical illness benefit will decrease the death benefit if added as a rider to a life insurance policy. Stand-alone critical illness policies can vary in structure. - Terminal illness - a physician must certify that the insured has a terminal illness that is expected to result in death within 12 months of the diagnosis. The insured will be able to accelerate 100% of the total coverage amount or up to $1,500,000, whichever is less.

If you have a life insurance policy from another country, you have to check if and how they pay out in the case that you pass away in the U.S. (or another country besides where your life insurance company is based). In addition, if you have any healthcare riders, it is important to check if they cover illness that occur outside of that country and what proof or evidence they need in order to activate the coverage. Most often, if the life insurance company does cover healthcare occurrences outside of their home country, they will need verification by a physician of their home country to verify that the insured does indeed have the healthcare issue that is covered by their policy. The U.S. is one of the countries that have the longest life insurance history, which means that (1) the products are more evolved, (2) the companies more financially solid, (3) life insurance regulation is more heavily monitored and standardized, and (4) cost of insurance is efficient due to financial strength and product evolution. If you own life insurance from another country, you can ask your Amplify Advisor to help you review the policy and compare the policy with the leading carriers in the U.S. to find either a more cost efficient premium for the same amount of coverage or coverage that is more suitable for residing in the U.S.

The amount of funds you can access depends on the rider that is added and can range from 2% of your death benefit up to 100% of your death benefit at one time.

You can take out however much is accessible in the cash value of your cash account. If you are within 10 years of starting your policy, you will only be able to access part of your cash account, otherwise after 10 years you will be able to access the value of the cash inside of your cash account tax-free. If you take out 100% of the cash value in your cash account and stop paying for the policy, your policy will lapse. If you continue to pay your premiums and cost of insurance your life insurance policy will continue to cover you.

Your death benefit is tax-free under most circumstances. There are a few situations when the death benefit will be taxed: If the insured or their family chooses not to have the death benefit paid out in one lump sum upon the insured’s passing and the life insurance company holds death benefit. By holding on to the death benefit, the death benefit will gain interest that is owed to the insured’s beneficiaries. This interest will likely be counted towards taxable income to the insured’s beneficiaries. If the life insurance beneficiary is an estate or trust and the total estate is greater than the current estate tax shelter at the time of the insured’s passing, the beneficiaries will have to pay estate taxes on the amount greater than the estate tax shelter.

Most life insurance companies will cover death in a foreign country, especially if you’ve had the policy for more than two years. There are some countries that are deemed more high-risk than others and if traveling to a particularly high-risk region, it is best to let your insurance company know beforehand. In addition, if you travel frequently, you should let your Amplify Advisor know so that they may shop around within the life insurance companies that specifically cover overseas deaths.


Lastly, foreign death claims are often harder to prove, since death claims may not recorded as they are here in the U.S. You can contact an Amplify Advisor to connect you to a life insurance attorney if you have any trouble making a death claim for an insured who passed away overseas.

Accessing your cash value tax-free from your life insurance policy involves withdrawing all of your premium payments tax-free and then loaning the rest of the value out from your death benefit. In cash value life insurance, your life insurance death benefit will grow over time with the cash accumulation value. Therefore, by taking an interest-free loan from your death benefit, you are essentially retrieving the cash returns of the “extra” premium you’ve invested that didn’t go towards the cost of insurance and other fees of the policy. Then, your death benefit will naturally pay back the loan once you pass and the beneficiaries will receive the rest.

Your family will need to notify the company and make a claim. They will need a copy of your death certificate, after which the life insurance company will be required to pay out within a certain number of days (e.g. 30 days) after receiving the paperwork otherwise they will have to pay interest on your death benefit. Below are the steps to claiming your life insurance benefit: Obtain policy details, if possible - store your policy somewhere that your family will be able to access Contact your life insurance agent - your life insurance agent can help your family file the claim. Otherwise, if they have switched careers or is no longer able to make the claim, your family can also make the claim themselves to the life insurance company. Obtain copies of the death certificate - the best time to claim your life insurance is immediately after the insured’s death Complete claim forms - complete the claim forms as directed by the life insurance company Choose your payment option - you can choose between either (1) lump sum, (2) payment installments with interest, (3) lifetime income which allows for payments of the death benefit spread throughout your life, and (4) interest-only option where you are paid on the death benefit’s interest while keeping the death benefit intact, which can then be passed down to your beneficiary. This entirely depends on if you have immediate expenses following the death of the insured and personal preference. In most cases, the death benefit is not taxable but the interest on the death benefit may count into taxable income. Consult with an Amplify Advisor to determine the most suitable option for you. Submit the paperwork - send the life insurance company the claims paperwork and death certificate by certified mail or with a return receipt to be able to track the paperwork and when it’s arrived to the life insurance company. After that it’s just a matter of waiting for the check to arrive in the mail.

Typically, you should be able to have limited access to the cash accumulation account after year 2 or 3, but will not be able to access all of the cash inside of their cash accumulation account until after year 10 or 15 (depending on the life insurance company). Since most cash value life insurance policies are front-loaded with costs, the best value for your cash amount will be to wait 25-30 years to retrieve the cash value inside of your cash accumulation account. This will likely ensure a significant amount of cash accumulation return (e.g. 6-7% internal rate of return) on the total premiums invested. The longer you wait to retrieve your cash, the more return you will be able to access.

If you were to pass away today, your life insurance death benefit will pay out within a certain number of days, often 30 days or less, after the life insurance company receives the claim and paperwork. Read question “What does my family need to do to claim my death benefit after I die?” for more details on processing death claims. If you were in a healthcare emergency that is covered by the details listed in your healthcare rider (i.e. chronic illness, long term care, or critical illness), the time prior to payout will depend on the elimination period stated in your policy. Often, this elimination period could be between 1-3 months where you will be responsible for paying healthcare and living expenses out-of-pocket prior to the activation of the rider.

Suicide - the life insurance policy will not pay out a death benefit if the cause of death is suicide and it occurs within a certain period of time, often referred to as the “incontestability period” and varies between each state, typically it is 1-2 years. If the insured passes away during the incontestability period and the cause of death is suicide, the beneficiary will only receive the premiums paid into the policy, not the death benefit. Fraud - if the insured dies within the incontestability period from smoking, other health-related issues, or a dangerous activity, the life insurance company has the right to investigate and determine whether the insured was providing accurate information at the time of the application (and not lying on the application to improve rates). If the insured purchased a term policy and began smoking after purchasing the term policy, the insured will no longer qualify for non-smoker rates. Universal and whole life policy premiums are locked in for life. This may cause your premiums to increase but you will then not be subject to the “material representation clause”, which states that you cannot lie on your life insurance application otherwise the insurance company has the right to deny the life insurance claim. Illegal activities - if the insured dies while participating in an illegal activity, the life insurance company has the right to deny the claim. Act of war - if the insured dies as a result of an “act of war”, such as a journalist who travels to dangerous locations for his job, the life insurance company has the right to not pay out his death claim. Living in another country - although most policies will allow the death benefit to be paid out if the insured is living in another country, it’s important to read the policy details and make sure there is no clause stating that the policy will not be paid out if the insured is residing in another country at the time of death.

Permanent life insurance can be a great product to add to your financial plan when used in the right way. Some of the most popular benefits of permanent life insurance include: Lifelong protection Accelerated benefit riders that allow access to your coverage for long term illnesses Tax-deferred growth of cash value Tax-free supplemental retirement income Some protection against creditors for your assets The downsides of permanent life insurance are: More expensive than term life insurance Cash in your policy is a long term cash accumulation strategy and ideally should not be accessed for 10-20 years

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