How do I enter a permanent life policy in Income InSight?

In this demo, we'll show you how to enter a permanent life policy in Income Insight. So first I'll click on the insurance folder. In the fact finder, I'll click add insurance, permanent life. Now permanent life policies have so many variations that it is literally impossible to catch every possible variation. So, if you're challenged with entering any element of a permanent policy, please call our support, and we'll try to fit as well as we can the policy that you actually own. I might call this policy just by the carrier’s name for example, Colony Life. I might say this one has a $500,000 death benefit. No lump sum premium. We’ll just say it's an indefinite number of monthly premiums. I tend to put in something like $1,000 and a monthly premium of $500. So not a huge policy, but not an insignificant policy. Let's say it started a couple of years ago, and it's not a MEC. If it were a MEC, I would check the box. By checking that box, I'll get annuity tax treatment rather than life insurance tax treatment. Of course, we'll still get life insurance tax treatment at death.

Now I have the ability to input cash values from the illustration. If it's an existing policy, it usually makes sense to request an inforce illustration from a carrier in order to populate this as cleanly as possible. In this case, I'll show you what happens with the cash value by entering in some of the different cash value points here. Let's say it goes from $10,000 to $25,000 to $30,000, to $35,000 to $40,000.  We'll see the cash value in our accounts on the results screen.

Let's also say that this particular policy has a long-term care rider, and maybe it's a $10,000 a month for 50 months. Most of those don't have a COLA, but we wanted to allow for that for design and a residual death benefit. That means even if we exhaust the entire life insurance policy for long-term care, there's still going to be a death benefit that is payable in most policies. And the reason is to continue to keep it qualifying as life insurance.

Now, if I had withdrawals or loans, I can add those here. I would put in the year and the amount of the planned withdrawal. So, if I were planning on taking a withdrawal of $10,000 from the policy in 2019, I would enter that here and do so for each subsequent year. Now, of course, this has to be planned and coordinated, because the software cannot recognizes the difference between all the different policy structures that are out there. So, the only way to have a reasonable estimate of the impact that withdrawals or loans will actually have on the policy is by entering cash values from an inforce illustration. Anything else, and it will be impossible to predict with any reasonable level of confidence, what would actually be happening inside that policy, given the policy's unique cost structure. So, for now, I'm going to delete the withdrawals and loans, keep it simple in the output. Click "done." 

If I want to see this on the results screen, click the Income InSight folder tab. This is a permanent policy, and we're not using up any of the policy for long-term care benefits in our base case. Upon Joe's death in 2043, there is a big jump in the non-qualified account. That's because the insurance policy paid out the death benefit in that year. If I want to zoom in on premiums, I can see that the premiums are outlined here in the income by result. Notice that the premiums always land above the need line, because the premiums don't contribute to lifestyle in any way. They're simply protecting a future lifestyle. If I wanted to zoom in on those, I can eliminate each of the other items. I can see that this is $500 a month indefinitely for premiums paid, but the premiums stop in 2043, because that's when Joe dies. Now, if I want to see the impact of the long-term care rider, I'm going to click the "what if" for Joe needs care. The assumptions that are used in the what if are going to pop up right here, and I'm going to click "show me."

Now, what I'll notice in the income by source is four years prior to Joe's death. I'm going to see this income need kick in and the Colony Life LTC rider is going to start paying out to its policy limit, which was $10,000 a month. You'll notice that payout as part of the income. You'll also notice it in the income by result chart. So those are the additional costs that are represented by our, what if that was entered. That particular permanent life policy provided death benefits at Joe's death or, in the event that he encountered a significant care need it provided the care need, and then that small residual death benefit.