MTHEL131 Lecture Notes - Lecture 5: Manulife, Term Life Insurance, Mutual Organization

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MTHEL 131 – February 2, 2016
Non-forfeiture options
1. Automatic Premium Loan (APL)
2. Reduced Paid Up (RPU)
3. Extended Term Insurance (ETI)
Options or riders
Riders: things you can add onto a policy to provide additional benefit
These only exist when base policy exist. They all end when base policy expires or is
terminated
1. Waiver of Premium (WP)
oAfter 6 months, insurer will waive the premium (pay the premium for the
policyholder every month until policyholder gets better or dies, or policy expires)
oWe call it WP when insured and life insured are the same person
oE.g., I take out a life insurance policy on my life
2. Payor Waiver (aka, parent waiver)
oWorks same way as WP, but in this case we have a third party policy (e.g., I take
out a policy on my daughter or son’s life. In this case, daughter/son is the life
insured)
3. Level Term Rider
oTerm rider is attached to the base policy
oWe call it level because coverage is level
4. Spousal Term Rider
5. Child Term Rider
oAttached to policy
oProvides each child with, for example, $20 000 (each) for coverage
oWill cover each child until the child turns 18 (expiry age depends on the insurer)
and then coverage stops
6. Guaranteed Insurability Option (GIO)
oMost important rider for young people
7. Accidental Death Benefit (ADB)
oIf this rider is added to your policy, and you die as a result of an accident, the
insurer will pay beneficiary double
oDave hates this one!! Because it can give policy holder a false sense of security,
and not economically justifiable to the client, and can lead to bad relationship
between insurer and beneficiary
oDeath must occur by accident (but within 365 days of the accident)
Manulife
Manulife is a “direct writer” or “ceding company”
Every insurer has a retention limit
Retention limit for Manulife is $50 000
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