Term Life Insurance
Term life insurance is a type of insurance that provides a death benefit for a period of time, such as 10 or 20 years, or up to a certain age such as 65. The death benefit is paid to the beneficiary if the life insured dies during the term. If the life insured does not die within the term, the death benefit is not paid out.
In Snap you can easily add a term insurance policy to your clients' projections.
Open the Term Insurance Data Entry page.
Select Scenario Setup -> Insurance -> Insurance Policies.
Select Add Term.
Enter the Insurance Policy Details.
Enter the details of the new term insurance policy. You will notice that you can select either the client or the spouse as the person who is insured.
A note about joint policies
For joint policies, choose the person who is insured based on your projections. Is one or both of the spouses projected to die within the term of this insurance policy? If this is a joint last-to-die policy, set the insured person to the longest living spouse in your projections. If both spouses live until the same year in your projections, then you can choose either spouse as the insured. If this is a joint first-to-die policy, set the insured person as the spouse whose projections end first. Note that the insurance premiums will be funded by the insured person in the projections.
If you need to update the projections to change the final year for either spouse, you can do that as shown here: How to Change the End Date of Projections
You can record additional details about the policy in the Notes section (as shown below). These notes are only displayed on this data entry screen. Notes for your clients can be added to the Comments section of the Insurance section of the report.
In Snap, the beneficiary is split into the Estate of the client, Spouse, and Other. If you have enabled Charitable Donations in your scenario, a charity may also be selected as the beneficiary. Each of these parties can be assigned a percentage of the death benefit. Please click here to review more details about assigning beneficiaries in Snap. Once you have completed the fields, select Save.
Here, you can see the various options available for updating the Coverage to Age field automatically based on the term length. Also, if you prefer to use dates instead of ages for data entry, click the gear icon to open a date entry field. The types of term insurance you can add automatically are Term-10, Term-20, Term-65, and Term-100. If you wish to add insurance that is already in place with a different term length, you can adjust the Coverage to Age field to match the remaining term of the policy.
To illustrate the renewal of a term policy, create a new term policy with a Coverage from Age entry as the date of expiry of the first policy.
The new policy has a section on the Planning page.
In the Report, select Insurance Policies to view the details and add comments.
Impact on cash flow and estate
The annual insurance premium is subtracted from the insured client's cash flow to cover the cost of insurance.
The death benefit is included in Estate before Tax on the Planning page unless the beneficiary has been set to Other. If the projections of the insured end within the term of the insurance policy, the death benefit is paid to the beneficiary as specified in the Beneficiary section. If the projections of the insured end past the term of the insurance policy, there is no payout to the beneficiary. Please click here for steps to change the end date of projections for a client.
If you wish to add any details about renewal provisions or convertibility options, you can add this information to the Notes section.
Term-100 (Term to 100) insurance is a type of permanent insurance.
At the age of 100, the policy is considered paid up. The premiums cease at that point, but the coverage continues.