Jackson National 1980s SPWL Policy

[Bigdogguy]

Has anyone here experienced claims on these policies?
These were created pre-tax act and provided a great deal of income tax-free money to the client, they were designed to do this via the use of net zero policy loans. The policy was designed for the policy owner to take loans.

The beneficiary is being told that the interest that accrued since the last anniversary date was debited daily, but the interest that would be credited is only credited on the anniversary and that JNL will not be adjusting for the partial year. Many months of interest is being charged, but the offsetting interest is not being credited. The client was told that this is the way it is.

I have not seen a company do this and am hoping this is simply an error, but would like to know if anyone has experienced this through JNL or other companies?

 

[walthamny]

There are other companies that do this. It is my understanding they can do whatever the life insurance contract allows and whatever methods DOI in that state has approved as reasonable. As there is no industry standard to what MEC is, there is also no exact standard to how accrued interest should be calculated at death on policy loans.

I agree with you on the question of fairness. You would think there would be just uniform standard way. However, each carrier can come up with charges at death that DOI may approve. Early loan pay off fee, admin fee for applying death benefits to the loan balance, admin fee for calculating loan value due at date of death etc.

 

[scagnt83]

Many contracts do this, especially upon death. Interest and Dividends are calculated and credited on a yearly basis, unless the contract states otherwise.

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There are other companies that do this. It is my understanding they can do whatever the life insurance contract allows and whatever methods DOI in that state has approved as reasonable.

The contract will stipulate how and when interest and dividends are credited to the policy. And yes, they can do what the contract allows them to.

The State DOI approves all life insurance contracts prior to approving them to be sold.

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I agree with you on the question of fairness. You would think there would be just uniform standard way.

You might call if "unfair"... however, if everything was the same, there would be no competition and only 1 single life insurance product on the market.

The person who bought and paid for the policy agreed to that method of dividend crediting.

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As there is no industry standard to what MEC is, there is also no exact standard to how accrued interest should be calculated at death on policy loans.

Incorrect. The IRS defines what a MEC is and how it is calculated.

 

[pfg1]

Incorrect. The IRS defines what a MEC is and how it is calculated.

I think he's saying that on THAT policy, there is not. Sounds like it was before the rules changed.

 

[Bigdogguy]

Thanks for your input, before calling the company, I am trying to get a handle on what people are seeing out there and hoping it's just an error. If anyone remembers the old GP-95 via Old Line Life (now AG); I have seen AG pay the lesser amount until it was escalated, so I am hoping this is the same situation.
It makes no logical sense that an insured could die on policy anniversary minus one day and be charged 364 days of interest on a policy loan, but get no credit, yet die one day later and get both charged and credited on what were always called "wash" loans.
This was a pre-1987 policy, so under very old rules. MEC doesn't have anything to do with this case.
I did contact one of the old mutual companies just to ask how they do it and the claims supervisor affirmed that interest on loans is debited daily and credited annually, but then manually adjusted at death.
I have a feeling that if JNL says they will not credit interest, the client will sue.
There is nothing specific in the policy about it, if you all recall, the illustrations and policies were quite loosey goosey back in the 80s, very ambiguous.

Commenting on fairness, as the writing agent, I certainly can see nothing that was "agreed to" which specifies this and will be utterly shocked if JNL chooses to stay with this method. So, no I don't think the client agreed to this, as I had no idea the interest would be handled this way.

 

[scagnt83]

I think he's saying that on THAT policy, there is not. Sounds like it was before the rules changed.

Perhaps. I didnt read it that way though. But before 88' there would be no differences at all because it didnt exist. After 88' its all the same rules per TAMRA / IRS Guidelines.

 

[walthamny]

The MEC rules were passed by Congress, IRS has authority to apply the rules, and courts have a right to change them. Now most people assume MEC rules are pretty straightforward however, congress put in language like if the policy were to change substantially or reasonable mortality assumptions so each carriers legal dept has a slightly different opinion on what these things mean. And it is not like IRS has any consistency on challenging these things.

 

[Bigdogguy]

MEC issues should not be relevant to this case as we are talking after death distriutions