Beneficiaries of fund enhancements
POLICYHOLDERS who made contractual changes with their life insurance companies between 1 January 2001 and 1 December 2006, and who meet the following criteria, will qualify for value enhancements: • RA fund members who stopped paying their premiums or reduced the policy term without the policy coming to an end and whose fund values were reduced by more than 35%. • RA fund members who lowered their premiums and whose fund values were reduced by more than 35%, calculated as a ratio of the premium reduction (eg if the premium is reduced by half, then the fund value reduction may not be more than 17,5%). • RA fund members who retired from their fund before it matured and whose fund values were reduced by more than 35%. If this applies to you, you must apply for a value enhancement before 1 December 2009 since your policy is no longer on the life insurer’s books. • RA fund members who partially retired from their fund before it matured and whose fund values were reduced by more than 35% (calculated as a ratio of the partial reduction). If you have not yet received your final benefit, your life insurance company will contact you. If you have received your benefits, you need to contact your life insurer before 1 December 2009. • RA fund members who lapsed (stopped premiums before the fund value exceeded unrecovered costs) their RA fund policy. If this applies to you, you must apply for a value enhancement before 1 December 2009 since your policy is no longer on the life insurer’s books. • Endowment policyholders who stopped or reduced their premiums or who reduced their policy term, but who have left their investment with the life insurer. Again, life insurers will make sure that you will have received at least 65% of total fund values (premium reductions will be calculated as with RA funds). This does not apply to surrendered endowment policies, where you have already taken the money or the policy has lapsed.
Contractual changes made after 1 December 2006
Going forward, RA fund policies and endowments that are made paid-up (premiums are stopped) or where the premiums or term of the policy are reduced will receive at least 70% of the fund value. An RA fund member who decides to retire early will receive at least 70% of the fund value. Endowments that are surrendered will receive at least 60% of the fund value.
POLICIES THAT QUALIFY • Retirement annuity (RA) fund policies. • Endowment policies. • Preservation fund policies. • A very small number of whole life policies (these policies do not have a maturity date and provide life cover until the insured person dies) that meet certain criteria. POLICIES THAT DON’T QUALIFY Risk insurance policies that cover events such as death, disability, dread disease, loss of income. Universal life policies, primarily risk related. Reinsurance policies. Policies issued to a fund rather than an individual. • Whole life policies, primarily risk
related. • •
When is this going to happen?
Life companies have until the end of May this year to implement the Statement of Intent and to enhance the fund values of qualifying RA fund members and endowment policyholders.
How will I know if this applies to me?
If you qualify, your life company will contact you. The exception is if, between 1 January 2001 and 1 December 2006, your RA fund paid you a final value as a result of contractual changes or if your RA fund value was reduced to zero because you stopped your premiums. In these cases you need to make contact with your life insurer before 1 December 2009.