Patent Application
20090030736
1. Field of the Invention
The present invention relates to a method and system for an annuity providing flexible lifetime benefit payments, with the option of accelerated withdrawal; and more particularly, to a data processing method for administering an annuity contract for a relevant life, the annuity contract having a payment base value, a contract value, and lifetime benefit payments, with the option of enhanced lifetime benefit payments, if the relevant life is confined to a nursing home and fails two of six predetermined activities of daily living.
2. Description of the Prior Art
An immediate annuity is typically used to provide an income stream within a predetermined length of time from the date the premium is received. The amount of income can be either fixed or variable in nature and typically these products do not provide an account value. A deferred annuity is typically used to provide accumulation and, potentially, a future stream of annuity income. The deferred annuity comprises an accumulation period during which the account value will vary with the underlying investments and an annuitization period where the client purchases an immediate annuity with the account value available. Deferred and immediate annuities typically provide guaranteed income for life which transfers some portion or all of the risk of outliving one's accumulated assets to the insurer.
One basis for distinguishing commonly available deferred annuities is whether the annuity is classified as a “fixed annuity” or a “variable annuity”.
In a fixed annuity, the insurer guarantees a fixed rate of interest applicable to each annuity deposit. Therefore, a fixed annuity is desirable for those seeking a “safe” investment. The guaranteed interest rate may apply for a specified period of time, often one year or more. Often, a rate guaranteed for more than one year is called a “multi-year guarantee”. The rate credited on a fixed annuity is reset periodically, moving in an amount and a direction that correlate the yields available on fixed-income investments available to the insurer.
With a variable annuity, the annuity contract owner bears the investment risk. The relevant life typically has a choice of funds in which he/she can direct where the annuity deposits will be invested. The various funds or sub-accounts may include stocks, bonds, money market instruments, mutual funds, and the like.
Variable annuity contracts typically provide a death benefit. Oftentimes during the accumulation period, the death benefit is related to the contract value. That is, if the sub-accounts backing the contract value have performed poorly, then the death benefit may be reduced to an insignificant amount. After annuitization, the death benefit can be a function of the remaining payments of the annuity at the time of the relevant life's death. Further, if the annuity contract does not provide a guarantee (discussed below), the contract will terminate when the contract value goes to zero or some other amount specified in the contract or rider.
Annuity contracts may also provide guarantees in several different variations. A Guaranteed Minimum Death Benefit (GMDB) is a guarantee that provides a minimum benefit at the death of the relevant life regardless of the performance of the underlying investments. A Guaranteed Minimum Income Benefit (GMIB) is a guarantee that will provide a specified income amount at the time the contract is annuitized. The income payment will be dependent on previously stated details set out in the contract. A Guaranteed Minimum Accumulation Benefit (GMAB) is a benefit that guarantees a specified contract value at a certain date in the future, even if actual investment performance of the contract is less than the guaranteed amount. A Guaranteed Minimum Withdrawal Benefit (GMWB) is a guarantee of income for a specified period of time, and in some versions, the income stream is guaranteed for life without requiring annuitization as in the guaranteed minimum income benefit. However, this guarantee will automatically annuitize the contract if the contract value is reduced to zero or some other amount specified in the contract or rider.
Most deferred variable annuity products in the prior art typically determine the amount of the lifetime benefit payments, if any, to be a predetermined percentage (withdrawal percent) of a withdrawal base. The withdrawal base amount is typically set at the time of the first lifetime benefit payment and is fixed for the remainder of the term of the annuity product. Further, the withdrawal percent is typically fixed after the first lifetime benefit payment is requested, or alternatively the withdrawal percent varies slightly for the remainder of the term of the annuity product.
Many financial products and systems have been disclosed. These include the following: annuity value software for determining deferred and immediate annuity contract living contingent and supporting component funding; method and system for determining additional benefits and costs for an annuity contract; providing account values in an annuity with life contingencies; providing loans and/or lines of credit to terminally ill individuals; managing an investment to increase the after-tax death benefit of the investment; administering death benefits; reducing fraud in government benefit programs; issuing, servicing and redeeming capital market products; increasing liquid assets available to at least partially fund living expenses at an assisted living facility; providing retirement income benefits; providing flexible income, liquidity options and permanent legacy benefits for annuities; and determining optimal and tailored lifetime income and death benefit package, Each one of these prior art references suffers from at least the following disadvantage(s): the annuity contract does not provide an opportunity for enhanced lifetime benefit payments if an insured can demonstrate failure to perform at least two of six predetermined activities of daily living and if the insured is confined to a nursing home, wherein the insured may return to the “normal” lifetime benefit payments if they no longer require the enhanced payments.
Accordingly, there remains a need in the art for a data processing method for administering an annuity contract for a relevant life wherein the annuity contract has a guarantee of lifetime benefit payments. In addition, there is needed a data processing method wherein the annuity contract is designed to provide the insured with the option of withdrawing an amount greater than the guaranteed lifetime benefit payment, if the insured is confined to a nursing home and cannot perform a minimum of two of six predetermined activities of daily living. Further, there exists a need for a method of administering an annuity contract for a relevant life, wherein an insured can elect to withdraw an amount greater than the guaranteed lifetime benefit payment for a period of time, and then return to withdrawing an amount equal to the lifetime benefit payment. There further exists a need for a method of administering an annuity contract for a relevant life, wherein the insured can accelerate the insured's death benefit. Additionally, there exists a need for an annuity contract, which provides a withdrawal amount greater than the guaranteed lifetime benefit payment amount, for a period of time, and continues to pay this benefit, even if the contract value has declined to zero.
The present invention provides a data processing method, system, and deferred annuity contract with lifetime benefit payments. The lifetime benefit payment amount is based upon a predetermined payment base, which is a function of premium payments. In a preferred embodiment of a variable annuity contract, the premium payments are invested in funds and the contract value is a function of the performance of these funds. The lifetime benefit payment amount is paid to the relevant life regardless of whether the contract value declines to zero.
The insured may elect to accelerate, by a multiple, the lifetime benefit payments, in the event that the insured is confined to a nursing home and fails two of six predetermined activities of daily living. Preferably, the insured must also have fulfilled an elimination period and reached a predetermined age, at least a predetermined number of years after issuance of the policy. The insured may elect to return to withdrawing the “normal” lifetime benefit payment, after a predetermined period of accelerated withdrawals in the form of enhanced lifetime benefit payments.
The invention also provides for a predetermined death benefit. If the insured withdraws an accelerated benefit payment, the predetermined death benefit is reduced, by the amount of the enhanced lifetime benefit payments.
In another aspect, the present invention comprises a data processing system for administering a deferred variable annuity contract having a payment base value, a contract value and lifetime benefit payments, comprising: a storage device; a processor coupled to the storage device, the storage device storing instructions that are utilized by the processor, the instructions comprising: (a) determining a payment base value for the annuity contract; (b) determining a contract value for the annuity contract; (c) determining a death benefit amount; (d) calculating a lifetime benefit payment for the relevant life which decreases both the contract value and the death benefit amount; (e) calculating an enhanced lifetime benefit payment if an insured can demonstrate failure to perform at least two of six predetermined activities of daily living and if the insured requires long-term care; wherein the enhanced lifetime benefit payment is equal to a predetermined multiple times the lifetime benefit payment withdrawal and wherein the death benefit is reduced by an amount equal to the enhanced withdrawal payment without reducing the payment base.
In exchange for paying higher fees, the relevant life receives several advantages by selecting the method and system of the present invention, which provides an enhanced lifetime benefit payment for facility care of the relevant life. These advantages include the following: The amount of the lifetime benefit payments increase when expenses are dramatically increased because of being confined to a nursing home. The enhanced facility care benefits are available to the relevant life without requiring a liquidation of the policy. The enhanced lifetime benefit payments are available within specific guidelines without facing, penalties. The cash flow is able to be provided through enhanced living benefit payments, which therefore reduces the need to invade other assets or investments.
Other objects, features, and characteristics of the present invention, as well as the methods of operation and functions of the related elements of the structure, and the combination of parts and economies of manufacture, will become more apparent upon consideration of the following detailed description with reference to the accompanying drawings, all of which form a part of this specification.
A further understanding of the present invention can be obtained by reference to a preferred embodiment set forth in the illustrations of the accompanying drawings. Although the illustrated embodiment is merely exemplary of systems for carrying out the present invention, both the organization and method of operation of the invention, in general, together with further objectives and advantages thereof, may be more easily understood by reference to the drawings and the following description. The drawings are not intended to limit the scope of this invention, which is set forth with particularity in the claims as appended or as subsequently amended, but merely to clarify and exemplify the invention.
For a more complete understanding of the present invention, reference is now made to the following drawings in which:
As required, a detailed illustrative embodiment of the present invention is disclosed herein. However, techniques, systems and operating structures in accordance with the present invention may be embodied in a wide variety of forms and modes, some of which may be quite different from those in the disclosed embodiment. Consequently, the specific structural and functional details disclosed herein are merely representative, yet in that regard, they are deemed to afford the best embodiment for purposes of disclosure and to provide a basis for the claims herein, which define the scope of the present invention. They are deemed to afford the best embodiment for purposes of disclosure; but should not be construed as limiting the scope of the invention. The following presents a detailed description of the preferred embodiment of the present invention.
As used herein, the term “annuity contract” means a set of rules and other data that are reflected in a computer processing system for operations of the annuity product.
As used herein, the term “relevant life” means any one or more of the following: an owner, joint owner, annuitant, joint annuitant, co-owner, co-annuitant or beneficiary.
The present invention comprises a data processing system and method for administering an annuity contract containing a facility care benefit feature. The system, method, and contract provide the client with both the benefit of a periodic lifetime benefit payment as well as the opportunity to accelerate this lifetime benefit payment, in the form of an enhanced lifetime benefit payment when needed. According to the invention, the facility care benefit insures that if the client fulfills certain conditions, such as a ten year wait and an 180 day elimination period, and the client is confined to a nursing home and fails at least two of six predetermined activities of daily living, the client can elect an enhanced lifetime benefit payment that is equal to a predetermined multiple times the lifetime benefit payment. In one embodiment, the predetermined multiple is three.
It is known that for people who move from their own homes to a nursing home, mortality rates are high. In fact, 50-60% of people admitted to such homes die within the first two years and mortality rates are highest in the first six months. A patient's ability to bathe, dress, eat, move from place to place, contain urine and stool, and ambulate independently to the bathroom is strongly related to the patient's prognosis. As a patient becomes unable to perform these activities of daily living, the patient's prognosis worsens.
Nursing homes are expensive and costs continue to rise. According to a recent survey from the MetLife Mature Market Institute, a day in a nursing home costs $203 on average in the U.S., which is up 5.7% from last year's cost of $192. The average stay in a nursing home is 2.4 years, for a total average cost of $177,828. Even a short stay in a nursing home is costly.
The present invention addresses the need for short-term access to funds to help pay for nursing home care. The insured need no longer fear that admission to a nursing home will deplete the insured's estate or that the insured will need to rely on the financial support of the insured's children. The insured need only elect the enhanced lifetime benefit payments available through the facility care benefit rider to meet the insured's needs. If the insured recovers, the insured may elect to return to the standard lifetime benefit payment.
Enhanced lifetime benefit payments only deplete the insured's death benefit. Enhanced lifetime benefit payments do not lower the payment base, which preferably determines the amount of the lifetime benefit payment. The payment base is only reduced when the insured withdraws more than the specified lifetime benefit payment amount allocated under the contract. In one embodiment, the payment base can also be increased or stepped up by a percent, usually not more than ten percent annually, in response to growth of the contract value because of performance of the sub-accounts. The payment base does not fluctuate as much as the account value, which more closely reflects the rate of return on investment of the premium.
In another embodiment, the present invention comprises a system for administering a deferred variable annuity contract during the accumulation phase for a relevant life, the annuity contract having a payment base value, a contract value, and lifetime benefit payments, comprising: a storage device; a processor coupled to the storage device, the storage device storing instructions that are utilized by the processor, the instructions comprising: (i) receiving information from a relevant life in order to establish the deferred variable annuity contract: (ii) determining a payment base value for the annuity contract; (iii) determining a contract value for the annuity contract; (iv) an instruction for determining a death benefit amount; (v) receiving lifetime benefit payment withdrawal requests from the relevant life; (vi) calculating a lifetime benefit payment for the relevant life which decreases both the contract value and the death benefit amount; (vii) calculating an enhanced lifetime benefit payment if an insured can demonstrate failure to perform at least two of six predetermined activities of daily living and if the insured requires long-term care; wherein the enhanced lifetime benefit payment is equal to a predetermined multiple times the lifetime benefit payment withdrawal and wherein the death benefit is reduced by an amount equal to the enhanced withdrawal payment without reducing the payment base.
It should be understood that as used herein the term “periodically” includes method steps that in certain aspects may only be performed once. In other aspects, such “periodically” performed method steps may be performed more than once as described herein.
The following definitions are given hereunder to better understand terms used in the specification.
“Relevant Life” or “Covered Life”: The term relevant life or covered life is the governing life for determination of the living benefits provided under this illustrative embodiment. Covered life (or relevant life) may refer to any one or more of the following: an owner, joint owner, annuitant, joint annuitant, co-owner, co-annuitant or beneficiary.
“Withdrawal Base”: The withdrawal base is the amount used in one embodiment of the present invention to determine the lifetime benefit payment. Preferably, the withdrawal base may be equal to the amount of the original premium, the payment base value, the contract value, or the greater of the payment base value and the contract value.
“Payment Base”: The payment base (PB) (or more accurately the payment base value) is the amount used in one embodiment of the present invention to determine the lifetime benefit payment and the rider charge. In one embodiment of the present invention, the initial payment base value equals the initial premium.
“Premium”: 100% of the dollar amount of the initial or subsequent premium payments deposited into the contract before application of any sales charges or payment enhancements.
“Withdrawal Request”: A request made by the relevant life to withdraw funds during the “accumulation phase” of the contract. One type of withdrawal is a lifetime benefit payment. Any withdrawal that is in excess of the lifetime benefit payment may: (i) decrease the contract value below the minimum contract value; (ii) decrease the payment base value; and (iii) decrease the guaranteed death benefit.
“Lifetime Benefit Payment”: A benefit payment that is available until the death of the relevant life. The lifetime benefit payment may be paid yearly in one embodiment. The total lifetime benefit payment for the year may also be distributed monthly, quarterly or any other defined period. Preferably, the lifetime benefit payment is only available if the covered life age is 60 (or other predetermined age) or older. Preferably, if the relevant life is age 59 (or other predetermined age) or younger, the LBP is equal to zero. Other age restrictions can also be utilized for the lifetime benefit payment.
“Contract Value”: The contract value (CV) is a numerical measure of the relative worth of a variable annuity product during the accumulation phase. The contract value is determined by adding the amount of purchase payments made during the accumulation phase, deducting management fees, deducting contract fees, deducting optional rider fees and surrenders made by the owner, and adjusting for the relative increase (or decrease) of the investment option(s) chosen by the owner. It should be understood that in other embodiments of the present invention, other formulas may be utilized for determining the contract value.
“Sub-account”: Variable account investments within the variable annuity contract, such as mutual funds, stocks and bonds.
“Withdrawal”: Also known as “surrender”, a relevant life may withdraw up to the contract value at any time.
“Death Benefit”: The death benefit provision guarantees that upon the death of the relevant life a death benefit (DB) is paid to a beneficiary named in the contract that is equal to the greater of the guaranteed death benefit or the contract value as of the date the annuity company receives due proof of death. It should be understood that in other embodiments of the present invention, other formulas may be utilized for determining the guaranteed death benefit.
“Benefit Amount”: In one embodiment of the present invention, the benefit amount is used to calculate that amount of the death benefit. Preferably, the benefit amount is equal to the premium payments minus any lifetime benefit payments or withdrawals.
“Annuity Commencement Date”: The annuity commencement date (ACD) is the date upon which the contract enters the “annuitization phase”.
“Withdrawal Percent”: In one embodiment of the present invention, the withdrawal percent (WP) is used to determine the amount of the lifetime benefit payment. It should be understood that in other embodiments of the present invention, other formulas may be utilized for determining the lifetime benefit payment.
“Step-Up”: An increase to the payment base value that is available if the contract value increases because of favorable performance of the underlying investments. Preferably, the step-up is guaranteed at a predetermined percentage.
“Annuity Contract”: The term annuity contract means a set of rules and other data that are reflected in a computer processing system for operations of the annuity product.
“Issue Rules”: The issuance of a contract may be subject to established requirements known as issue rules.
The following detailed illustrative embodiment(s) is presented to provide a more complete understanding of the invention. The specific techniques, systems, and operating structures set forth to illustrate the principles and practice of the invention may be embodied in a wide variety of sizes, shapes, forms and modes, some of which may be quite different from those in the disclosed embodiment. Consequently, the specific structural and functional details disclosed herein are exemplary. They are deemed to afford the best embodiment for purposes of disclosure; but should not be construed as limiting the scope of the invention.
The covered life, or relevant life, may have a single life election or joint/spousal continuation election as described more fully herein.
If a natural owner, the covered life is the owner and the joint owner (if any) on the rider effective date. If a non-natural owner, the covered life is the annuitant on the rider effective date. All age-contingent benefit provisions are based on the attained age of the oldest covered life.
If a natural owner, the covered life is both spouses (as defined by Federal Law). All age-contingent benefit provisions are based on the attained age of the youngest covered life.
Issue rules are set forth to provide a more complete understanding of this illustrative embodiment of the present invention. It should be understood by those skilled in the art that these issue rules are set forth for illustrative purposes only and that other rules may be utilized. Accordingly, the issue rules set forth below should not be construed as limiting the scope of the invention.
The issue rules are rules that apply to the annuity contract. The issue rules may include a maximum issue age. The riders are not available if any covered life or annuitant is age 81 (or other predetermined age) or greater on the rider effective date. In another embodiment, the riders are not available if any covered life or annuitant is age 76 (or other predetermined age) or greater on the Rider effective date. The rider may be elected on contract issue or post-issue.
Single Life Election: No additional requirements
Joint/Spousal Continuation Election: (This may also include co-annuitants)
One of the following must apply:
The Withdrawal Percent (WP) is used to determine the amount of the lifetime benefit payment. There are two types of withdrawal percents: (i) the predetermined withdrawal percent (shown below); and (ii) the withdrawal percent elected by the relevant life during each given year.
The WP is determined at the later of, (i) the attained age of the covered life on the most recent contract anniversary prior to the first withdrawal, or (ii) the contract anniversary immediately following the covered life's 60th birthday (or other predetermined age).
(Note: the following percentages and ages, if ages are in fact used, can vary)
5.0% for attained ages 60 to 64;
5.5% for attained ages 65 to 69;
6.0% for attained ages 70 to 74;
6.5% for attained ages 75 to 79; and
7.0% for attained ages 80 and above.
4.5% for attained ages 60 to 64;
5.0% for attained ages 65 to 69;
5.5% for attained ages 70 to 74;
6.0% for attained ages 75 to 79; and
6.5% for attained ages 80 and above.
The Payment Base (PB) (or more accurately payment base value) is the amount used to determine the lifetime benefit payment (LBP) and the rider charge.
If this rider is effective on the contract issue date, then the PB equals the X % of the initial premium. If this rider is effective after the contract issue date, then the PB equals 100% of the dollar amount of the contract value on the rider effective date, less any payment enhancements received in the last twelve months.
When subsequent premium payments are received, the PB will be increased by 100% of the dollar amount of the subsequent premium payment. Periodically accepting premium payments from the relevant life will increase the payment base, the guaranteed death benefit amount and the contract value.
The insured may elect to accelerate the lifetime benefit payments. The enhanced LBPs may be requested if the insured is confined to a nursing home and cannot perform a minimum of two of six predetermined activities of daily living, fulfills an elimination period requirement and reaches a predetermined age. In other embodiments of the invention, the enhanced lifetime benefit payment may be dependent upon the following requirements: (i) the relevant life reaches a predetermined or specified age (i.e., seventy years old); and (ii) ten years have passed since the issue date of the contract.
It is important to note that, in alternative embodiments, the maximum total withdrawal percent for a given payout period is not established by any specific formula, but rather is predetermined and is an arbitrary number. The above steps are repeated for each subsequent payment period.
If the LBP exceeds the actual withdrawal amount (AWA) on the most recent contract anniversary, any contingent deferred sales charge (CDSC) will be waived up to the LBP amount.
For both single and joint/spousal election, a death benefit may be available on the death of any owner or annuitant. The death benefit provision guarantees that upon death a death benefit (DB) will be paid equal to the greater of the death benefit or the contract value as of the date proof of death is received. The rider charge is not assessed on death.
When proof of death is processed, the contract will go into suspense mode. No charges will apply during that period. The amount available to be paid as a death benefit under the terms of the rider is a return of premium adjusted for subsequent premium payments and partial surrenders.
When a subsequent premium payment is received, the DB will be increased by 100% of the dollar amount of the subsequent premium payment. If the withdrawal feature is revoked, all future withdrawals from the death benefit will be fully proportional as of the date it is revoked.
When calculating a death benefit for a beneficiary, the death benefit is the greater of (i) a predetermined death benefit amount; and (b) the present contract value, unless an enhanced lifetime benefit payment has been made, in which case the death benefit is equal to the predetermined death benefit minus the enhanced lifetime benefit payments.
The minimum contract value rules are an optional feature of the present invention and do not apply to the preferred embodiments. If the minimum contract value rules are selected to be applied, then the following rules are used. The minimum contract value (MCV) is defined as 20% or other predetermined percentage of the payment base on the date of a withdrawal request. Lifetime benefit payments cannot reduce the contract value below this minimum threshold. Only sub-account performance and withdrawals in excess of the LBP can decrease the contract value below the MCV.
Turning now to the figures,
Column 7, the increase factor 612, represents a multiple applied to the respective contract value 604, when the underlying investments increase in value. A typical increase factor 612 is 1.01648. Column 6, the maximum contract value 610 is calculated as the greater of respective contract value 604 at year end, after the corresponding rider fee 606 is deducted, and the maximum contract value 610 before the respective increase factor 612 is applied. Column 8, the LBP payment base 614 is a value initially equal to the corresponding contract value 604, but thereafter, the value is multiplied by the respective increase factor 612 if increase factor 612 is greater than 1. The LBP payment base 614 is updated annually and preferably capped at a maximum of 10%. The LBP payment base 614 is a tracked number used for calculating the amount of the guaranteed payment to the insured. The LBP 616, represented by column 9, is the guaranteed lifetime benefit payment issued to the insured. LBP 616 is typically equal to 5% of the respective LBP Payment Base 614, paid annually. However, it can be increased by a benefit percent, such that the LBP is equal to a maximum of 3 times the initial lifetime benefit payment 616.
Column 10, cumulative withdrawals 618, represents the insured's withdrawals. Withdrawals are deducted from both the contract value 604 and the death benefit 622, which is illustrated in column 12. Even when contract value 604 and death benefit 622 have declined to zero, the lifetime benefit payment 616 continues to be paid. At this point, the insured is paid from the claims portion of the contract. Conversely, if the insured dies before the premium has been paid out completely, the contract continues to pay an annuity. Column 11, contract value after growth and withdrawal 620 represents the value of the contract after the growth has been added to the contract value and after the withdrawal has been subtracted from the contract value.
The values, specific amounts, multiples, and percentages appearing in the table are merely exemplary and are strictly for illustration purposes only. Accordingly, they may vary from one embodiment and contract to another.
In an alternate embodiment, the wait period and the age limit are adjustable. In another embodiment, if the relevant life has not reached the age of 70, but is willing to pay a penalty, the method may proceed to the next step. In yet another embodiment, the relevant life may qualify for the rider if the relevant life is confined to a variety of long term care facilities, such as an assisted living facility or rehabilitation facility.
If the relevant life meets all the above-identified requirements, then the relevant life becomes eligible to elect the facility care benefit rider (block 712). If the relevant life decides to elect the facility care benefit rider, a maximum enhanced lifetime benefit payment amount is calculated equal to three times the guaranteed lifetime benefit payment (block 714). In an alternate embodiment, this amount may vary. The death benefit is reduced by the enhanced lifetime benefit amount the relevant life withdraws at (block 716).
Upon the termination of the enhanced lifetime benefit payments, the relevant life can elect to return to the standard guaranteed lifetime benefit payments (block 720). Thus, the payment schedule is adjusted to return to the standard benefit payment amount (block 722) and the process ends at (block 718).
Referring next to
The network server may also be configured in a distributed architecture, wherein the server components or modules are housed in separate units or locations. Each of the modules described may be implemented as single servers or one or more or all of the modules may be incorporated into a single server. These servers will perform primary processing functions and contain at a minimum, a RAM, a ROM, and a general controller or processor. In such an embodiment, each server is connected to a communications hub or port that serves as a primary communication link with other servers, clients or user computers and other related devices. The communications hub or port may have minimal processing capability itself, serving primarily as a communications router. A variety of communications protocols may be part of the system, including but not limited to: Ethernet, SAP, SAS™, ATP, Bluetooth, GSM and TCP/IP.
In the preferred embodiment, all of the modules described herein are operably inter-connected via a central communications bus 838. The communications bus 838 is able to receive information from each of the modules, as well as to transmit information from one module to another. The insurance contract generating system 814 further includes a display module 804, and a generating module 806. The generating module is used for generating an insurance contract, wherein the insurance contract provides coverage to an individual or group for at least one event defined in the insurance contract.
The insurance contract generating system 814 additionally includes a payment module 808 for making payments to an insured individual or group for a predetermined period of time as defined by the deferred annuity insurance contract.
The system further comprises a beneficiary module 810 for choosing a beneficiary to receive payments from the insurance provider in the instance of an insured individual's death. Furthermore, the system comprises a dependent module 812 for offering an insurance contract structured according to the methods of the present invention to dependents of an individual eligible for the insurance contract described herein.
Additionally, the insurance contract generating system 814 includes: a storage drive 816 for receiving data stored on a storage disc, a processing module 818 for processing digital data received by and contained in the insurance contract generating system 814, a communication module 820 for bi-directional communication with external and telecommunications systems, a data storage module 822 for storing and managing digital information, a text data input module 824 for inputting data in the form of text, and a data input module 826 for converting to digital format documents and images and inputting them into the insurance contract generating system 814.
Finally, the insurance contract generating system 814 includes: an audio data input module 828 for receiving and inputting audio information, an audio data output module 830 for Outputting data in audio format (i.e. recorded speech, synthetically generated speech from digital text, etc), a memory module 832 for temporarily storing information as it is being processed by the processing module 818, a universal serial bus interface module 834 for receiving and transmitting data to and from devices capable of establishing a universal serial bus connection, and a digital data input interface module 836 for receiving data contained in digital storage devices.
Data storage device may include a hard magnetic disk drive, tape, optical storage units, CD-ROM drives, or flash memory. Such data storage devices generally contain databases used in processing transactions and/or calculations in accordance with the present invention. In one embodiment, the database software creates and manages these databases. Insurance-related calculations and/or algorithms of the present invention are stored in storage device and executed by the CPU.
The data storage device may also store, for example, (i) a program (e.g., computer program code and/or a computer program product) adapted to direct the processor in accordance with the present invention, and particularly in accordance with the processes described in detail hereinafter with regard to the controller; (ii) a database adapted to store information that may be utilized to store information required by the program. The database includes multiple records, and each record includes fields that are specific to the present invention such as interest rates, contract value, payment base value, step-up, premiums, subscribers, payouts, claims, etc.
The program may be stored, for example, in a compressed, all uncompiled and/or all encrypted format, and may include computer program code. The instructions of the program may be read into a main memory of the processor from a computer-readable medium other than the data storage device, such as from a ROM or from a RAM. While execution of sequences of instructions in the program causes the processor to perform the process steps described herein, hard-wired circuitry may be used in place of, or in combination with, software instructions for implementation of the processes of the present invention. Thus, embodiments of the present invention are not limited to any specific combination of hardware and software.
Suitable computer program code may be provided for performing numerous functions such as providing a deferred annuity insurance contract to an individual, generating a deferred annuity insurance contract, and making payments to the individual as defined in the deferred annuity insurance contract. The functions described above are merely exemplary and should not be considered exhaustive of the type of function, which may be performed by the computer program code of the present inventions.
The computer program code required to implement the above functions (and the other functions described herein) can be developed by a person of ordinary skill in the art, and is not described in detail herein.
The term “computer-readable medium” as used herein refers to any medium that provides or participates in providing instructions to the processor of the computing device (or any other processor of a device described herein) for execution. Such a medium may take many forms, including but not limited to, non-volatile media, volatile media, and transmission media. Non-volatile media include, for example, optical or magnetic disks, such as memory. Volatile media include dynamic random access memory (DRAM), which typically constitutes the main memory. Common forms of computer-readable media include, for example, a floppy disk, a flexible disk, hard disk, magnetic tape, any other magnetic medium, a CD-ROM, DVD, any other optical medium, punch cards, paper tape, any other physical medium with patterns of holes, a RAM, a PROM, an EPROM or EEPROM (electronically erasable programmable read-only memory), a FLASH-EEPROM, any other memory chip or cartridge, a carrier wave as described hereinafter, or any other medium from which a computer can read. Various forms of computer readable media may be involved in carrying one or more sequences of one or more instructions to the processor (or any other processor of a device described herein) for execution. For example, the instructions may initially be borne on a magnetic disk of a remote computer. The remote computer can load the instructions into its dynamic memory and send the instructions over an Ethernet connection, cable line, or even telephone line using a modem. A communications device local to a computing device (or, e.g., a server) can receive the data on the respective communications line and place the data on a system bus for the processor. The system bus carries the data to main memory, from which the processor retrieves and executes the instructions. The instructions received by main memory may optionally be stored in memory either before or after execution by the processor. In addition, instructions may be received via a communication port as electrical, electromagnetic or optical signals, which are exemplary forms of wireless communications or data streams that carry various types of information.
Servers of the present invention may also interact and/or control one or more user devices or terminals. The user device or terminal may include any one or a combination of a personal computer, a mouse, a keyboard, a computer display, a touch screen, LCD, voice recognition software, or other generally represented by input/output devices required to implement the above functionality. The program also may include program elements such as an operating system, a database management system and “device drivers” that allow the processor to interface with computer peripheral devices (e.g., a video display, a keyboard, a computer mouse, etc).
For example, a user provides instructions for the amount of the living benefit payment that is requested. It should be understood that the user may communicate with the computing system directly or indirectly through another party, such as the insurance provider 802. In the event the user communicates with an insurance provider 802, the insurance provider 802 receives and transfers information, to and from the insurance contract generating system 814 via the text data input module 824, audio data input module 828, audio data output module 830 and the display module 804. As used herein the data storage module 822 is also referred to as a storage device. The processing module 818 is contained within the insurance contract generating system 814, which is coupled to the storage device, the storage device stores instructions that are utilized by the processor. The instructions preferably comprise: (i) an instruction for establishing a contract value while maintaining a lifetime benefit payment; (ii) an instruction for paying an enhanced lifetime benefit payment when, (a) an insured is able to demonstrate failure to perform at least two of six predetermined activities of daily living and (b) the insured requires long-term care; whereby a distribution of funds from the insured's account is accelerated by reducing a predetermined death benefit.
However, it should be noted that in some situations the payment base value will change over time from its original value; preferably, the relevant value of interest in the present invention is therefore the present payment base, not the original payment base. In another embodiment, the original payment base is used for the selection of the withdrawal base. The formula used to calculate the lifetime benefit payment amounts in this example is: Lifetime Benefit Payment=Withdrawal Percent×Withdrawal Base, wherein for this example the Withdrawal Percent is 5%.
It is important to note that for the purposes of illustration, the example in
It should be understood that several of the method steps of the present invention require a computer in order to be able to determine the respective values. In other words, a computer is required to use the method of the present invention; that is to say the calculations and appropriate data records must be accomplished by computer. For example, in one embodiment of the present invention, the payment base is related to premium payments by the relevant life. In one embodiment, the lifetime benefit payment is dependent on a selected withdrawal percentage. Although the method and system require an instruction from the relevant life for the withdrawal percent to use for each given year, the instruction does not have to come directly from the relevant life. The instruction may come indirectly by going through the company issuing the contract or other third party or agent. In one embodiment, the predetermined withdrawal percent is based on the age of the relevant life at the time of the first requested lifetime benefit payment. As noted above, in alternative embodiments, the maximum total withdrawal percent for a given payout period may be established by a specific formula, or may be predetermined and is an arbitrary number for any given period.
The annuity commencement date is a date established according to rules, with certain restrictions. The Initial guaranteed death benefit amount is determined in a similar fashion. Preferably, the initial guaranteed death benefit amount is set for calculation purposes. In a preferred embodiment, the initial guaranteed death benefit amount is equal to the payment base.
The lifetime benefit payment is paid periodically, such as yearly, quarterly, monthly, weekly, etc. The lifetime benefit payment withdrawal percent that is requested by the relevant life for a given year may be any amount greater than zero and equal to or less than the maximum total withdrawal percent remaining for the given payout period. The available lifetime benefit payment withdrawal percent that is remaining is determined at the start of each new year. However, the relevant life does not have to elect the highest possible available lifetime benefit payment at any given time. That is, the relevant life may choose how to “spread” the total withdrawal percent that is available for a given payout period between the individual years within the payout period. The value that is requested by the relevant life, if any, for the lifetime benefit payment for a given year will be subtracted from the contract value, but not from the payment base.
Enhanced lifetime benefit payments do not lower the payment base, which preferably determines the amount of the lifetime benefit payment. In one embodiment, the payment base is only reduced when the insured withdraws more than the specified lifetime benefit payment amount allocated under the contract. In another embodiment, the payment base can be increased or stepped up by a percent, in response to growth of the contract value due to sub-account performance. Usually this increase or step-up is not more than ten percent annually. The payment base does not fluctuate as much as the account value, which more closely reflects the rate of return on investment of the premium.
In a preferred embodiment, the relevant life may not request an enhanced lifetime benefit payment withdrawal until after: (i) the expiration of a moratorium period, which is measured from the issue date of the contract; or (ii) the date the relevant life reaches age 70 (or other predetermined age), whichever is later. In one embodiment, such a moratorium period is five years. Any length of time may be selected for the moratorium period. Preferably, the predetermined yearly withdrawal percent is a function of the relevant life's age. In one embodiment, once the first lifetime benefit payment withdrawal is taken, then that withdrawal percent is used to calculate the maximum total withdrawal percent that is available for a given payout period by multiplying that first withdrawal percent by the number of years in the payout period. In another embodiment, the withdrawal percent used to calculate the maximum total withdrawal percent available for a given payout period continues to rise with the relevant life's age, no matter if the relevant life has already begun to take lifetime benefit payments. In another embodiment, the withdrawal percent may either increase or decrease over the term of the annuity. Alternatively, the withdrawal percent may fluctuate over the term of the annuity.
It should be noted that the predetermined withdrawal percents for each year of the relevant life's future age is different than the withdrawal percent that is elected by the relevant life for any given year in any given payout period. As described above, the predetermined withdrawal percents are used in certain embodiments in order to calculate the maximum total withdrawal percent for any given payout period.
The lifetime benefit payment for any given year, if any, is paid in periodic installments throughout the given year, or alternatively, is paid in a single installment during the given year. The withdrawal percent used may fluctuate for each year during any given payout period according to the needs and/or preferences of the relevant life. The number of years in the payout period is in the range of 2 to 20 years, more preferably in the range of 3 to 10 years, and most preferably 5 years. In a preferred embodiment, the number of years of the first payout period for the lifetime benefit payments is the same as the number of years of each subsequent payout period, if any. The yearly predetermined withdrawal percent may be fixed; may increase at the beginning of each subsequent payout period; may decrease at the beginning of each subsequent payout period; or may fluctuate over the term of the annuity.
In a further embodiment, the present method comprises the step of: periodically paying a withdrawal payment during a given payout period, that is in excess of the lifetime benefit payment, to the relevant life from the contract value which decreases each of: the contract value, the payment base, and the guaranteed death benefit amount, and can decrease the contract value below a predetermined minimum contract value.
In another embodiment, the present method further comprises the step of paying a death benefit to a beneficiary upon the death of the relevant life, wherein the death benefit is the greater of: (a) a predetermined guaranteed death benefit amount; and (b) the present contract value. Where an enhanced lifetime benefit payment has been made, the death benefit is equal to the predetermined death benefit minus the enhanced lifetime benefit payments.
Alternatively, the guaranteed death benefit is paid to the beneficiary only if the relevant life dies during the accumulation phase. Preferably, if the contract value reaches a predetermined minimum value, then the contract annuitizes and annuity payments commence. Preferably, the value of the annuity payments, if any, equals the value of the last guaranteed lifetime benefit payment.
In another embodiment, the present invention comprises a deferred annuity contract having a payment base value, a contract value, and lifetime benefit payments, comprising: (i) means for receiving information from a relevant life in order to establish the deferred variable annuity contract; (ii) means for determining a payment base value for the annuity contract; (iii) means for determining a contract value for the annuity contract; (iv) means for determining a death benefit amount; (v) means for receiving lifetime benefit payment withdrawal requests from the relevant life; (vi) means for calculating a lifetime benefit payment for the relevant life which decreases both the contract value and the death benefit amount; (vii) means for calculating an enhanced. lifetime benefit payment if an insured can demonstrate failure to perform at least two of six predetermined activities of daily living and if the insured requires long-term care; wherein the enhanced lifetime benefit payment is equal to a predetermined multiple times the lifetime benefit payment withdrawal and wherein the death benefit is reduced by an amount equal to the enhanced withdrawal payment without reducing the payment base.
In another embodiment, the present invention comprises a system for administering a deferred variable annuity contract during the accumulation phase, the annuity contract having a payment base, a contract value and lifetime benefit payments, the improvement comprising: (i) administrative means for predetermining a series of payout periods, wherein the number of years of each payout period is greater than one year; (ii) administrative means for predetermining a maximum total withdrawal percent for each payout period; and (iii) administrative means for calculating the amount of the lifetime benefit payment withdrawal for each given year within a given payout period that provides a withdrawal percent to use for each given year, wherein the sum of the withdrawal percents from each given year within the payout period is equal to or less than the predetermined maximum total withdrawal percent that is allowed for the given payout period.
In another embodiment, the annuity product includes a step-up provision wherein the payment base is increased in response to positive performance of the underlying investments of the contract for a given period. Preferably, the step-up would take place at the beginning of each new payout period (e.g. every five years).
Other formulas may be utilized to determine the lifetime benefit payment amount, wherein the withdrawal base is related to other values besides the payment base and/or the contract value.
The following description and examples further illustrate the preferred features of the present invention.
Preferably, there is a mandatory moratorium period, which is measured from the issue date of the contract. In one embodiment, the moratorium period is five years. The present method allows several years of withdrawal percents to be clustered together, and providing the enhanced flexibility to select a lifetime benefit payment amount based on the preferences and needs of the relevant life. The annuity contract has a series of payout periods, wherein each payout period has a maximum total withdrawal percent that may not be exceeded. Alternatively, the maximum total withdrawal percent for a given payout period may be exceeded if it is part of the multi-period withdrawal percentage total as described herein. In one embodiment, the maximum total withdrawal percent for any given payout period is calculated as the first year's predetermined yearly withdrawal percent during the payout period times the number of years in the given payout period. It is important to note that, in alternative embodiments, the maximum total withdrawal percent for a given payout period is not established by any specific formula, but rather is predetermined and is an arbitrary number. For example, the maximum total withdrawal percent could be predetermined to be 15% over a three year payout period. In a preferred embodiment, the maximum predetermined yearly withdrawal percent is guaranteed at a predetermined percentage, for example about 10%. Preferably, there is a maximum withdrawal percent for any given year, so that the relevant life cannot take the entire total withdrawal percent for the payout period in a single year. In another preferred embodiment, the maximum withdrawal in a given year is guaranteed at a value between 0% and the maximum withdrawal percent for the withdrawal period. For example, if someone withdraws 15% over three years, the maximum in any single year may be 10%. In another feature of the invention, any withdrawal percent amount that is not taken during a given payout period may be rolled into the next payout period, thereby increasing the available withdrawals for that payout period, if certain restrictions are met. In an alternative feature of the present invention, the product requires asset allocation constraints set by the company issuing the annuity product.
Having thus described the invention in rather full detail, it will be understood that such detail need not be strictly adhered to, but that additional changes and modifications may suggest themselves to one skilled in the art, all falling within the scope of the invention as defined by the subjoined claims.
While the present invention has been described with reference to the preferred embodiment and several alternative embodiments, which embodiments have been set forth in considerable detail for the purposes of making a complete disclosure of the invention, such embodiments are merely exemplary and are not intended to be limiting or represent an exhaustive enumeration of all aspects of the invention. The scope of the invention, therefore, shall be defined solely by the following claims. Further, it will be apparent to those of skill in the art that numerous changes may be made in such details without departing from the spirit and the principles of the invention. It should be appreciated that the present invention is capable of being embodied in other forms without departing from its essential characteristics.
This application claims the filing date of U.S. Provisional Application No. 60/961,785, filed Jul. 24, 2007, entitled Method And System For Providing A Facility Care Benefit In An Annuity Providing Lifetime Benefit Payments.
| Number | Date | Country | |
|---|---|---|---|
| 60961785 | Jul 2007 | US |
