What is whole life insurance?
This is life insurance that remains in force during the lifetime of the insured, provided premiums are paid as specified in the policy. In return for a premium that is guaranteed for the life of the policy, whole life insurance provides a guaranteed death benefit and a guaranteed cash value. While a whole life policy is in force, you may take out a policy loan against the cash value or receive the cash value (less any policy loans and accumulated interest) if you need to surrender the policy. In addition, a whole life policy can pay dividends, which may be used to enhance both the death benefit and the cash value, or may be used to reduce your premium payment. Dividends are not guaranteed; policy loans accrue interest and reduce the death benefit.
What is term insurance?
This is life insurance that pays a death benefit if the insured dies during a specified period of time (the term), and premiums are paid as designated in the contract. No death benefit is payable if the insured survives past the end of the specified term. Since premiums paid are used entirely to cover the cost of insurance, there is no cash value on a term insurance policy. Premiums may increase or decrease, depending on the type of term insurance owned. Find more information about term life insurance.
What is universal life insurance?
This is adjustable life insurance that allows the premium to be paid at scheduled or unscheduled times,* pays the life insurance benefit if the insured dies before the policy’s maturity date, and pays the cash value if the insured is living at the maturity date. When a premium payment is received, an expense charge is deducted and the balance is placed in a cash value fund to earn interest at the current rate. Each month, all insurance expense charges needed to keep the policy in force are paid internally from the cash value, regardless of whether or not the premium was paid. The cost of insurance increases each year on the policy anniversary, based on the attained age of the insured. This is a nonparticipating policy on which no dividends are payable.
*The policy will terminate any time the cash surrender value is insufficient to pay the monthly deductions. This can happen if insufficient premium payments are made, if loans or withdrawals are made, or if current interest rates or charges fluctuate. Learn more about universal life insurance.
What is variable universal life insurance?
This is a form of universal life insurance that combines the premium and death benefit flexibility of traditional universal life insurance and the investment flexibility and risks of variable life insurance. These products are considered securities because the policy owner assumes investment risks associated with the variable Investment Divisions, whose performances will fluctuate with market conditions. Variable universal life insurance is offered by prospectus only. The prospectus contains complete information about the product, including charges and expenses. Only registered representatives of NYLIFE Securities Inc. (Member FINRA/SIPC) may offer this product.
What is an annuity?
An annuity is a contract from an insurance company that individuals generally use to accumulate money for their retirement on a tax-deferred basis, and that guarantees a fixed or variable payment to the annuitant at some future time. The guarantees associated with annuities are based on the claims-paying ability of the issuer.
What is an investment annuity?
An investment annuity is an annuity you purchase, either with a single sum or with periodic payments, to help save for retirement. Earnings in an investment annuity are not treated as taxable income until they are withdrawn. Withdrawals may be subject to regular income taxes and, if made prior to age 59½, may be subject to a 10% IRS penalty. In addition, company-imposed surrender charges may apply. The policy owner can choose the point at which he or she converts the accumulated principal and any earnings in the contract into a stream of income.
The two most common investment annuities are fixed annuities and variable annuities:
With a fixed annuity, the individual knows what the current and guaranteed interest rates are, and when the interest will be credited to the funds in the annuity. Rates are usually guaranteed for a specified time period. After the specified time period, the policy will generally receive a new interest rate every year that is equal to the standard rate being credited by the issuing company at that time. The guarantees of a fixed annuity are based on the claims-paying ability of the issuer.
With a variable annuity, a portion of the policy’s premium may be invested in a variety of Investment Divisions. The amounts allocated to the Investment Divisions will fluctuate in value based on the performance of underlying investments. Assets allocated to the Investment Divisions are subject to market risk. Variable annuities are offered by prospectus only. The prospectus contains complete information about the product, including charges and expenses. Only registered representatives of NYLIFE Securities Inc. (Member FINRA/SIPC) may offer this product.
What is cash surrender value?
This term refers to the amount payable to the permanent life policy owner upon surrender of the policy. It is equal to the current cash value, less any surrender charges that may apply, any monthly contract charges, and any outstanding loans and accrued interest.
What is a surrender charge?
It is the amount of money that is deducted from a policy’s total accumulation value if, during the surrender-charge period of a permanent life policy, you:
- Surrender your policy.
- Decrease the face amount of your policy.
What is Check-O-Matic?
This is a mode of payment in which premiums are paid monthly by deducting the money directly from a policy owner’s bank account. It can be initiated by filling out a Check-O-Matic Request Form and returning it to the Service Center.
Any time that bank information changes, the policy owner must fill out a new form and return it to the Service Center.
What is a beneficiary?
A beneficiary is the person or other party designated to receive death benefit proceeds upon the death of the annuitant/insured prior to the annuitant commencement date. The beneficiary is named when a policy is taken out and can be changed at the request of the policy owner. A contingent beneficiary is the party designated to receive death benefit proceeds if the primary beneficiary should die before the annuitant.
In order to change the beneficiary of a policy, the current policy owner must complete a form and return it to the Service Center.
What is income tax withholding?
Since the enactment of the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), New York Life has been required to withhold federal and sometimes state (depending on the state of record of the policy owner) income taxes from certain taxable distributions. Generally, payees are permitted to elect not to have income taxes withheld from designated distributions.
What is a taxable gain?
Under the tax law, certain distributions from life insurance policies result in taxable income to the policy owner. If a distribution is taxable, the amount on which the policy owner is taxed is limited to the “gain” in the policy, which generally equals the policy’s cash surrender value less the premiums paid. The following distributions and other transactions may result in taxable income to the policy owner: partial withdrawals, policy surrenders and lapses, and certain dividends. In addition, loans from policies that have been classified as “modified endowment contracts” may result in taxable income and a 10% penalty tax to the policy owner.