AIG is now BMO:AIG’s Joint Universal Life Coverage with a Twist


In addition to having highly competitive rates on both their term and universal life policies, AIG offers a unique twist to its joint universal life coverage. Most insurance companies offer applicants the option of a single or joint life universal life policy, but AIG takes this a step further by offering a joint last-to-die conversion option.

This rider provides applicants with the flexibility to convert a single life or joint first-to-die policy to a joint last-to-die plan without evidence of insurability. This option can be selected any time after the 5th policy year. One caveat—this rider cannot be offered if the second life to be insured is rated 200% or more. Policy ratings are given when applicants have certain health or lifestyle issues that make them an added risk. A rating of 200% would be double the standard rate.

Let’s look at a young couple—Ted and Jane. They are both 35-year-old professionals with two small kids. They decide that they like the idea of having a permanent policy which will never increase in cost, so they apply for $250,000 of AIG’s Joint First-to-Die Universal Life policy with a level cost of insurance. They add the Last-to-Die conversion rider for a cost of $150 per year. Thirty years down the road, Ted and Jane’s children are fully grown and the cottage they inherited from Jane’s father has increased sharply in value. Jane and Ted want to pass the cottage on to their children when the die, but they are very cognizant of the fact that it will create a large tax liability for their children.

The solution—Jane and Ted exercise the Joint Last-to-Die conversion option on their Joint Universal Life policy. This allows Jane and Ted to substantially lower their monthly premium, because the conversion is based on their ages at the time they applied for the initial coverage, and the option can be exercised without a medical—good news for Ted, who had a heart attack four years ago. But best of all, the policy will now pay out $250,000 tax-free on the death of the second spouse, giving their children the cash necessary to offset the taxes that will be incurred on the family cottage.

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