Various life insurance policies are known today, including permanent life insurance, such as whole life, universal life and variable universal life insurance, and term life insurance. Whole life insurance guarantees that a benefit will be paid by an insurance company, underwriter or other issuer (generally, “insurance company”) to a beneficiary upon the death of the insured or policyholder (generally, the “insured”). With a whole life policy, a benefit is paid by the insurance company regardless of when death of the insured occurs. Whole life also allows the insured to accumulate cash value so that the insured can draw upon the cash value. Also, whole life policy premiums generally do not increase with age and, instead, are usually stable over time. Term life insurance, on the other hand, involves payment of a benefit to a beneficiary of an insured in the event of the insured's death during a specified period of time. For example, term policies are often prepared for periods of one to thirty years, e.g., one, ten, twenty, twenty-five and thirty years. Thus, a term life insurance policy is temporary and covers only a specified period of time, and builds no cash value.
For example, if an insured has a 25 year term life insurance policy, the insurance company would pay out the specified benefit to a beneficiary in the event of death of the insured during that 25 year term. However, in the event of death of the insured after expiration of the 25 year term, e.g., 25 years and six months, then no benefit would be paid. Term insurance policies are often desirable over whole life policies since they provide benefits at a lower cost compared to whole life insurance. However, a term life insurance policy holder who was fortunate to have outlived the term policy paid premiums to the insurance company without any benefit disbursement and no accrued cash value in exchange for this comfort of limited duration. Further, the insured is placed in a difficult position upon expiration of the term policy, particularly if the insured has no other life insurance policies in place. It may be difficult for a person to obtain a second policy after the first policy expires due to the health and age of the person after the term policy expires.
More particularly, the original term life insurance policy was likely acquired following an initial medical examination. The medical examination may not be an issue for the insured at that time, particularly when the insured is young and in good health. Over time, however, a person's health generally declines, and obtaining a second term policy (or a whole life policy) after expiration of an initial policy typically requires a second medical examination. The second medical examination will likely result in substantially higher premiums since the insurance company is assuming greater risk of death of the insured during the duration of the second term policy, particularly if the second policy is obtained substantially later in life, e.g., 20-30 years later.
Thus, a person is placed in the difficult position of obtaining a second policy at substantially higher premiums or, alternatively, declining to obtain a second policy. This is not a desirable situation, particularly for elderly persons, retired persons who may be on a fixed income, and persons who have developed various health conditions since the initial examination that was used to underwrite the initial insurance policy.
Accordingly, there exists a need for a life insurance policy option that matures as a deferred policy later in life, e.g., at the expiration of a conventional term life insurance policy. Such an option and deferred policy would provide persons with life insurance that would otherwise be unattainable or substantially more expensive if obtained later in life and, at the same time, provide additional premiums to an insurance company which may or may not be required to pay a benefit.
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