Choice of Participating Life Insurance Dividend Options

Your participating life insurance dividend options give you considerable flexibility now and in the future. You can use your dividends to:

  • Buy additional insurance, on a tax-advantaged basis, without evidence of insurability
  • Lower your out-of-pocket premiums

This means you can choose how to balance affordability today and growth tomorrow. Historically, dividend scales increase and decrease over the life of a policy. Keep this in mind as you consider these dividend options. The reduced example in the life insurance illustration shows you the effect of a decrease in the dividend scale on the non-guaranteed values. Actual proportions for paid-up additions and Econolife vary by such factors as age, risk class, amount of life insurance, out-of-pocket premium payments and declared dividends.

Paid-up additions

With this dividend option, you use your dividends to buy additional, fully paid-up life insurance. Here are some advantages of paid-up additions:

  • Your coverage increases annually, with no need to prove insurability. This gives you a way to offset inflation, so your coverage doesn’t erode over time.
  • You buy the additional coverage on a pre-tax basis. Dividends used immediately to pay premiums in the same policy don’t incur income tax.
  • Paid-up additions generate further dividends, similar to your base policy.
  • The cash value of your paid-up additions, once credited to your policy, is vested and cannot be reduced or used in any way without your authorization, other than to pay premiums. Most contracts allow dividends, including those already applied, to be used to help keep the policy from lapsing if a premium is unpaid, for example by the use of an automatic premium loan.

Econolife

With the Econolife dividend option, you use your dividends to buy a combination of permanent life insurance and term life insurance. This gives you access to the coverage you need today, at a very affordable price. Econolife coverage offers these advantages:

  • You buy the Econolife term life insurance with pre-tax dollars. Dividends used immediately to pay premiums in the same policy don’t incur income tax.
  • In years when your dividend is larger than the cost of the Econolife term life insurance, some of the dividend buys permanent paid-up life insurance. Over time, this permanent life insurance can completely replace the temporary life insurance. After that, your death benefit begins to increase. You can use Econolife to strike a balance between affordability today and growth in cash value and death benefit tomorrow.
  • You can convert the temporary Econolife term life insurance component to a separate permanent policy any time before reaching age 65.

Econolife gurantee

  • With the Econolife guarantee (lifetime or 10-year), if your current dividends can’t pay for the Econolife term life insurance, London Life won’t ask for extra out-of-pocket premiums or surrender existing dividends to cover any shortfall while the guarantee is in effect.
  • If the guarantee expires or is forfeited, you may need to make additional premium payments to pay for any shortfall, or reduce your Econolife coverage.
  • Some options will end or forfeit the Econolife guarantee. If you use dividends for a Premium Vacation or withdraw them from the policy, the Econolife guarantee ends. Policy loans don’t affect the Econolife guarantee.
  • If the dividend scale increases, permanent paid-up insurance can replace the Econolife term life insurance even faster.

Accumulation

With this dividend option, your dividends accumulate with interest. The accumulated amount increases the death benefit. The interest rate is adjusted from time to time and interest is credited on each policy anniversary.
Interest on the accumulated dividends is taxable. Some or all of the dividends may be taxable.

Cash payment

With this dividend option, you take your dividends in cash. Some or all of these dividends may be taxable.

Loan reduction

With this option, you apply your dividends to any outstanding policy loan. Other uses for dividends

Premium Vacation

With the Premium Vacation option, you use current and accumulated dividends to pay some or all of your premiums, rather than paying them out of pocket. This flexibility is useful if you have a short-term need for cash, like a career change, tuition or new mortgage, or a long-term need like retirement. It’s a convenient way to balance your cash flow with your need for continuing coverage.

Premium Vacation relies on the dividends earned and retained in your policy. Over the life of the policy, increases and decreases in dividends affect how much is available to pay premiums, how much of each premium you can pay with dividends and how long you can take a Premium Vacation.

Cash payout

With this dividend option, you withdraw dividends to take advantage of an opportunity or meet cash flow needs. This reduces the policy’s death benefit and cash value. Policy illustrations demonstrate how this works.

London-Life

Policy illustrations

I can provide an illustration to show how your policy works. It shows which values and benefits are guaranteed and how dividends affect the growth of non-guaranteed values and benefits, depending on your dividend option. The illustrated growth of non-guaranteed values and benefits assumes the dividend scale continues unchanged over the life of the policy.

While policy illustrations are useful, the illustrated dividends aren’t guaranteed and aren’t an estimate or prediction of future performance. To better understand the sensitivity of the policy values to changes in dividends, compare the illustration’s primary example to its reduced example. For more information on policy illustrations, ask me for a copy of Your guide to life insurance illustrations.

Choice of additional benefits

You can customize your participating life insurance policy by adding a variety of optional benefits. Consult your policy for full details of your benefits. These descriptions cover the main points.

Supplementary term life insurance

You can add term life insurance to the total coverage, without paying the annual policy fee for a separate policy. This is useful if you need additional coverage and affordability is an issue or the need is temporary. This term life insurance is renewable, and the renewal premium rates are guaranteed. You can convert this temporary life insurance to permanent life insurance from London Life.

This conversion option expires on the date shown in your policy.

Total disability waiver of insurance

London Life pays the premium in the event of the insured person’s total disability as defined in your policy.

Premium waiver insurance

In the event of death or disability, as defined in your policy, of the person with premium waiver insurance (usually the premium payor), London Life waives all future premiums, to the end of the specified period. An alternative option simply covers the death, but not disability, of the person with premium waiver insurance.

Accidental death insurance

If the insured person dies as a result of an accident, as defined in your policy, this benefit provides additional insurance. The accident must occur before the policy anniversary when the insured person turns 70.

Guaranteed insurability benefit (GIB)

This benefit gives you the right to buy additional life insurance at certain future dates, without evidence of insurability. You can exercise this option up to two years before or after each option date. The new policy can be for permanent or term life insurance from London Life, subject to administrative rules then in effect.

Where to get more information

  • You can find out more about London Life participating life insurance by calling me (519-860-4223). You can also ask me for an updated policy illustration.
  • Each year on the anniversary of your policy, you receive a statement that updates you on the status
    of your policy.
  • If you have a question about your policy or would like a copy of the most recent London Life
    participating life insurance financial facts (form 41-4031), call the client service centre at 1-877-566-5433.
  • Visit us on the Internet at www.londonlife.com.

Notes:

  • Performance data is provided for illustrative purposes only and represents past performance, which is not necessarily indicative of future performance.
  • The tax information in this guide is based on Canadian legislation at the time of printing and is subject to change. This information is of a general nature only. For further information, discuss the tax implications of your policy with your accountant or tax advisor