Product FAQs
Life Insurance FAQs
What is life insurance?
Life insurance is a contract on the life of an individual (the “insured”) between an individual (the “policy owner”) and an insurance company in which the policy owner pays premiums to the insurance company while the insured is alive in return for a sum of money (the “death benefit”) paid out to chosen beneficiaries should the insured pass away. The death benefit is only payable if the policy is active and in good standing at the time of the insured’s death.
What kind of life insurance does Navy Mutual offer?
Navy Mutual offers Level II Plus Term, term life insurance which, when active, provides coverage for a specified period of time. Navy Mutual also offers Flagship Whole Life, whole life insurance which, when active, provides coverage for the lifetime of the insured.
How much coverage does Navy Mutual offer?
Individual Level II Plus Term and Flagship Whole Life insurance policies are limited to $1.5 million in coverage, with a maximum coverage amount of $3 million per insured across all policies.
Children and grandchildren of Members are eligible for Flagship Whole life policies, provided they are purchased between ages 6 months and 26 years. However, initial coverage amounts are based on the age of the insured at the time of policy purchase:
- Age 0 to 3: Up to $250,000
- Age 4 to 11: Up to $500,000
- Age 12 to 17: Up to $750,000
- Age 18 to 26: Up to $1,500,000
What is the oldest age at which I can apply for a Navy Mutual life insurance policy?
This depends on the type of policy for which you are applying. If you are applying for Level II Plus Term insurance, you must be under 76 years old. If you are applying for Flagship Whole Life insurance, you must be under 81 years old.
Do Navy Mutual's product premiums change over time?
Premiums remain in effect at their set price for the duration of the policy’s term, regardless of product.
For Level II Plus Term policies, the premiums will remain the same for the duration of the coverage period. After the Level II Plus Term period expires, individuals will need to reapply for a new policy if they wish to maintain life insurance coverage. New policy premiums will be calculated based on the insured’s attained age, gender, health status, nicotine use, and face amount of insurance.
For Flagship Whole Life policies, premiums will never change.
What are my options for term length?
For Level II Plus term life insurance policies, your term length options are 10, 15, 20, 25, or 30 years. However, coverage cannot last beyond the insured’s age 85, which may limit term length options depending on the timing of policy purchase.
Does a term policy automatically renew at the end of the term?
Term policies do not automatically renew upon the completion of the term. If you are near the end of the term on your policy and would like to speak to a representative about continuation of coverage, contact us at 888-300-9331.
Is there an age cutoff for term insurance?
Yes, you must be under 76 years old to apply for Level II Plus term insurance.
Does a term life insurance policy have a cash value?
No, this type of policy does not have cash value.
What is a Level Term conversion?
A Level Term conversion is an opportunity to convert a Level II Plus Term policy to a Flagship Whole Life policy without the need for additional underwriting
You can convert Level II Plus Term coverage to Flagship Whole Life coverage at a guaranteed rate with no medical exam provided that 1) your term duration has five or more years remaining, and 2) the insured is under the age of 71 and the policy’s anniversary date has not passed. If you convert, your new Flagship Whole Life premium will be based on the insured’s age at the time of conversion and the health category originally approved for the term policy.
You may call 888-300-9331 to confirm your conversion deadline or obtain additional information.
What are Paid-Up Additions?
Paid-Up Additions are included in Flagship Whole Life insurance policies and may be used at the policy owner’s discretion to increase a policy’s total death benefit and cash value. Paid-up additions are purchased at guaranteed rates; adding a specific amount of money to the policy in the form of paid-up additions will result in a calculated increase in both the policy’s death benefit and cash value. The cash value of these additions is eligible for potential future dividends and can be surrendered at any point without impacting the base coverage amount. If you’re interested in learning more about Paid-Up Additions, please reach out to a Sales Representative at 888-300-9331.
Annuity FAQs
What is an annuity?
An annuity is a contract between the annuity owner and a life insurance company that allows you to invest a sum of money in exchange for either a guaranteed future accumulation value or a guaranteed stream of income, subject to the terms, conditions, and limitations of the contract.
What types of annuities does Navy Mutual offer?
Navy Mutual offers non-qualified fixed annuities funded with a contribution of after-tax dollars not contained within a retirement account. Each of the two basic types of annuities (tax-deferred and immediate), provides a guaranteed minimum rate of return that is not directly subject to market fluctuation.
How does a deferred annuity work?
A deferred annuity is funded with either a single lump sum or piecemeal (systematic or ad hoc) contribution of premium which earns tax-deferred interest at growth rates established by Navy Mutual. Interest earnings accumulate on a tax-deferred basis until the owner decides to initiate distributions or make a withdrawal from their annuity, which may affect the timing and amount of taxable income.
What types of deferred annuities does Navy Mutual offer?
Navy Mutual offers two deferred annuity products:
- A Single Premium Deferred Annuity locks in a rate of return at the point of issue for three, five, seven, or 10 years after a single, lump-sum contribution of funds.
- A Flexible Premium Retirement Annuity experiences floating rates over time but maintains a guaranteed minimum rate of growth and allows for contributions over time.
Both types of deferred annuity are generally designed for long-term accumulation. Distributions taken before age 59 ½ may be subject to tax penalties on deferred interest earnings, in addition to any other contract limitations or tax consequences.
How is interest credited to a Navy Mutual deferred annuity?
The rate for a Single Premium Deferred Annuity remains the same for the entire duration of the rate lock elected, after which, renewal rates float with potential adjustments on a quarterly basis. Navy Mutual’s Flexible Premium Retirement Annuity guarantees the rate of growth on any new deposit for the following 12 months, after which renewal rates float with potential adjustments on a quarterly basis. Daily accruing interest earnings compound on an annual basis.
Do I have to choose how or when I will distribute from my deferred annuity at the point of purchase?
No, situations change over time and so might the owner’s ultimate use case for their product. Navy Mutual’s deferred annuity products do not force income annuitization at any future point, so the owner could defer taxation so long as the annuitant and/or a spouse beneficiary is living, if desired.
Is my deferred annuity accessible if I need money?
Yes, but withdrawals are subject to contract limitations and tax planning considerations. After the first 12 months, an owner may withdraw up to 10% of the annuity contract’s most recent anniversary accumulation value without triggering a Market Value Adjustment (MVA). Deferred gains are distributed first under a “Last In, First Out” (LIFO) methodology, and any interest earnings distributed before the owner reaches age 59 ½ may be subject to a 10% tax penalty. Timing distributions from a deferred annuity to minimize adverse tax consequences is an important planning consideration.
Navy Mutual does not provide tax advice. Consult with a financial adviser or tax expert before making distributions from an annuity.
What is a Market Value Adjustment (MVA)?
Any distribution within the first 12 months of a deferred annuity, or any distribution that exceeds the 10% annual withdrawal amount available without a Market Value Adjustment, could trigger a Market Value Adjustment calculation. This calculation could have a positive, negative, or zero impact on surrender value and applies for the entire length of a Single Premium Deferred Annuity rate lock or during the first seven contract years of a Flexible Premium Retirement Annuity. If a Market Value Adjustment is triggered, it will automatically result in removal of any premium bonus that applied to the contract at purchase, plus interest that bonus has earned.
Does Navy Mutual allow any waivers to a Market Value Adjustment (MVA)?
Yes, there are four contractually provided waivers to the Market Value Adjustment requirement:
- Annuitant death
- Annuitant confinement to nursing home
- Annuitant terminal illness diagnosis
- Life income annuitization
How often can I withdraw 10% without risk from my deferred annuity?
The 10% annual risk-free withdrawal amount resets each year on the contract’s anniversary.
Can an owner contribute additional funds to a current annuity?
Owners can contribute additional funds to a Flexible Premium Retirement Annuity only. If an addition to a Single Premium Deferred or Immediate Annuity is desired, issuance of a new contract at prevailing interest rates would be required.
What amount will be taxable upon taking a withdrawal from a deferred annuity?
Withdrawals from a tax-deferred product are taxable to the extent of any gain on the contract first before any tax basis (principal contribution) is returned to the owner.
Can I own more than one annuity product?
Certainly. At various points throughout life, an annuity owner might have both types of deferred annuities and/or one or more immediate annuities that layer additional income as needed throughout retirement. Younger owners might start out with a Flexible Premium Retirement Annuity and transition to a Single Premium Deferred Annuity as their account balance increases. At older ages, immediate annuity income streams might be used to create either a temporary bridge of income or a stream that lasts for the rest of an annuitant’s lifetime. An individual’s goals, liquidity needs, time horizon, and overall financial situation should guide whether additional annuity products are appropriate over time. Owners should consult with their own financial planners or tax experts before choosing their annuity products.
How does an immediate annuity work?
Immediate annuities are funded using a single premium contribution. Premium funding may come from death benefit proceeds, surrendered value from a previously issued cash value life insurance or deferred annuity contract, an exchange from a deferred annuity, or a lump sum of cash, subject to applicable product requirements and transaction rules.
All of Navy Mutual’s immediate annuity options provide a fixed stream of income that does not fluctuate with changing market conditions. Each income payment produced from an immediate annuity is made up of both return of principal and taxable interest earnings; this tax treatment is commonly referred to as an exclusion ratio. The interest rate used to calculate any income payment is based on the expected duration of distribution and can be structured over a fixed period of 1 to 30 years or over a lifetime.
Can two people receive income for the rest of their lives?
Yes, a Joint & Survivor Single Premium Immediate Annuity could be purchased to provide income for the remaining lifespans of both annuitants.
How much money does it require to start an annuity with Navy Mutual?
The initial contribution required to purchase an annuity contract depends on the product selected.
- Single Premium Deferred Annuity: $10,000 – $5,000,000
- Flexible Premium Retirement Annuity: $100 – $1,000,000
- Single Premium Immediate Annuity: $10,000 – $1,000,000
Can I elect beneficiaries for my annuity contract?
Yes, one or more beneficiaries can be elected on any annuity contract. A beneficiary may need to choose a settlement option, either lump sum or income, that satisfies applicable distribution timing requirements under IRS Section 72(s). Beneficiaries will normally be taxed on their share of distributed gains as ordinary income.
Can the annuitant of a contract be changed?
Once issued, the annuitant of a contract cannot be changed, but a second annuitant could be added for a Joint & Survivor income settlement if the applicable contract terms and requirements are satisfied.
What process is involved in purchasing a Navy Mutual annuity product?
Before purchasing an annuity, an individual should consider whether the product aligns with their financial objectives, liquidity needs, time horizon, risk tolerance, tax situation, and other available financial resources, consulting with their financial planner or tax expert as appropriate. Once a need has been determined, the first step is a brief discussion with an Annuity Specialist to complete a suitability assessment and determine how the ownership, annuitant, and beneficiary roles should be designed to best match your goals. From there, application and disclosure paperwork is populated for electronic signatures via Docusign. The initial premium contribution is either drafted from a checking account or wired by the owner’s bank or broker to complete funding and establish the applicable interest rate.
Product features, eligibility requirements, coverage amounts, premium rates, conversion options, and Paid-Up Addition limits may vary by policy type, issue age, underwriting approval, and applicable policy provisions. Coverage is subject to the terms, conditions, exclusions, and limitations of the policy. Term life insurance does not automatically renew at the end of the level term period. If continuation, conversion, or new coverage options are available, premiums may be different and will be based on factors such as the insured’s age, health status, nicotine use, gender, and coverage amount at that time. Guarantees are based on the insurer’s financial strength and claims paying ability. For complete details, please review your policy documents or contact Navy Mutual.
Annuities are long-term insurance products and may not be appropriate for every financial situation. Product availability, features, rates, guarantees, limitations, and tax treatment may vary by contract and should be reviewed before purchase. Guarantees are based on the insurer’s financial strength and claims paying ability.