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SALES CHARGES

The maximum allowable sales charge for a variable life insurance policy is 9% of the total payments over the life of the policy. The life of the policy is considered the lesser of 20 years or the life expectancy of the insured. Policyholders who cancel their policies within the 45-day free-look period are entitled to a refund of all sales charges paid. Policyholders who cancel their policies within the first two years will be entitled to receive their cash value plus a partial refund of the sales charges assessed to date. A policyholder who cancels a contract within the first two years will receive a refund of all sales charges in excess of 30% of the first year's payments and a refund of all sales charges in excess of 10% of the second year's payments. If a policyholder cancels a contract after two years, he or she is only entitled to receive the cash value of the policy.

Characteristic

Whole

Variable

VUL/UVL

Premium

Fixed

Fixed

Flexible

Death benefit

Guaranteed

Guaranteed minimum

May have guaranteed minimum

Cash value

Guaranteed

Varies

Varies

Coverage

From date of issuance to date of death

From date of issuance to date of death

Policy remains in effect as long as there is enough cash value in the policy to support the cost of the policy

Cash value invested in

General account

Separate account

Separate account

LIFE SETTLEMENTS

There may be times when the owner of a life insurance policy elects to sell the interest in the policy to a third party in exchange for a lump sum payment during the insured's lifetime. The sale of the life insurance policy is known as a life settlement. The sale of a variable life insurance policy is considered to be the sale of a security and is regulated by both FINRA and the SEC. The buyer of the policy agrees to make all future premium payments and will be entitled to receive the payment of the death benefit upon the death of the insured. The market for life insurance policies is illiquid, and pricing of policies can vary greatly. FINRA requires any firm that assists in the selling of client policies obtain multiple bids for the policy to ensure that the client receives a fair price. The firm may not enter into any arrangement that would require the firm to sell all or substantially all of its client life insurance policies to any one buyer. FINRA requires agents assisting in the sale of life settlements, as well as the supervisors of the agents, to receive training relating to life settlements. FINRA further requires that the training be documented for each agent and supervisor.

 
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