The No-Lapse Guarantee

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Published: 12th January 2011
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A particular no lapse guarantee life insurance is definitely a variable universal life insurance policy by which, if the accumulation in the premiums paid out at any point in time (minus policy loans, as well as withdrawals) equals or is higher than the lowest premiums due at this point in time, the policy is held back from lapsing. This particular lapse prevention is certainly guaranteed irrespective of the underlying portfolio return or even policy changes. When you are investing in a no lapse life insurance policy, keep in mind that almost all no lapse policies have got little, and maybe no, cash value, when compared with high cash values which the best traditional whole life policies have.

States have certain needs for the no lapse life insurance policy. Though these types of requirements vary from state to state, the majority of states have certain requirements which have been common to everyone. A statement of disclosure has to be provided that the policy value at the conclusion from the no-lapse guarantee period might be insufficient to have the policy in force unless of course an additional payment is done at that time. The particular disclosure statement must appear in the no-lapse guarantee provision. This statement of disclosure is not really required when the no- lapse guarantee period extends to the end of the contract. There should not be a separate added premium and/or a monthly cost to the no lapse guarantee provision that's within the policy or perhaps in a rider which will often be attached. Another additional premium and/or the monthly cost to the no lapse guarantee provision is required for an optional rider. Typically the grace period provision must address payment of the minimum amount needed to keep the policy in effect. The no-lapse provision have to supply a grace period to the policy owner to pay for every premiums to help keep the no-lapse provision from terminating. A grace period for the no-lapse provision is just not necessary in case the provision has an unlimited amount of time in which to pay adequate premiums to meet no-lapse requirements. The no-lapse provision should report that written notice will be provided to a policy owner if premiums paid are not enough to keep up this no-lapse guarantee. All no-lapse guarantee periods has to be established in the policy. This no-lapse provision must state that if the cash surrender value is enough to pay to the monthly deduction, the particular contract will never lapse whether or not the no-lapse guarantee contains lapsed. The particular no-lapse provision need to certainly define a policy benefit(s) available during the no-lapse period(s). Typically the no-lapse guaranteed premium may be adjusted for policy changes - increases or decreases within the given amount, death benefit option alterations, or even addition of any riders.

This no-lapse guarantee provision may be ended as a result of changes to the contract, such as addition of any riders, specified amount increases or decreases, death benefit option changes, as well as indebtedness. However, right disclosure should be made to the owner:

* if the contract is issued and
* when this sort of adjustments are made to the policy.

Alternatively policy provisions, such as addition of any riders, specified amount increases or decreases, death benefit option changes, as well as indebtedness cannot be disallowed, limited, or affected a result of the existence of the no-lapse guarantee provision and/or rider.

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