Whole life insurance

Whole life insurance is a policy that covers the entire life of the life insured. In addition to a death benefit, a portion of each whole life insurance premium paid to the insurance company creates a cash reserve.

The cash reserve is a pool of money available to the policy owner. If the policy owner no longer wants the insurance, she can withdraw the cash surrender value (CSV) from the cash reserve. At that point, the insurance coverage is terminated. The policy owner can also use the cash reserve to take a policy loan for up to 90% of the amount of CSV.

In Snap you can easily add a whole life insurance policy to your clients' projections.

1

Select Scenario Setup -> Insurance -> Insurance Policies.

2

Select Add Whole Life.

3

Enter the details of the Whole Life policy.  

A note about joint policies

You will notice that you can select either the client or the spouse as the person who is insured. 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

You can choose to enter either the age of the client in the year that the coverage started or the date by selecting the gear icon as shown above. 

To enter the death benefit, CSV and annual premium information select the Edit button. Click here for further details on either typing in this information or copying it from an Excel spreadsheet. Select Save.

4

The policy is listed under the Insurance Policies table. Click on the pencil icon to edit the details, or the trash can to delete the policy. Select Planning Pages to return to the projections. 

The Whole Life policy will appear on the Planning page.  Note that the Death Benefit value will show $0 if the beneficiary of the policy has been set to Other

5

In the Report, select Insurance Policies to view the details and add comments.

Impact on cash flow and estate

The annual whole life insurance premium is subtracted from the insured person's cash-flow to cover the cost of insurance. 

The death benefit is included in Estate before Tax on the main Planning page unless the beneficiary has been set to "Other". If the life insured dies, the death benefit is paid to the beneficiary as specified in the Beneficiary section. Note that cash reserve or CSV is not paid out upon death in the software for a Whole Life policy.

In the example above, you can see that the Estate Before Tax in the first year of projections is $1,717,067.  This includes the Non-Registered account balance plus the WL policy Death Benefit and the Real Assets value.  ($1,717,067 = $105,067 + $1,000,000 + $612,000)

The Insurance Proceeds are shown in a separate line in each year's Estate Summary.

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