M Group Term Conversion & Majestic Conversion Credits

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1 M Group Term Conversion & Majestic Conversion Credits One benefit of having a John Hancock inforce term policy still in its conversion period is that it can be converted to any John Hancock permanent policy, including products within the Majestic series. An additional benefit of being an M Group client is that if your clients convert their term policy into a Majestic product, the Majestic policy is eligible for a term conversion credit. The Term Conversion Credit is equal to the previous year s annualized term insurance premium (or the pro-rated premium for term policies still in their first year). The Credit is not commissionable. It can be easily illustrated using the Lump Sum feature in JH Illustrator or included in the regular first year premium; meaning less out of pocket expense for your clients, year one. Please note illustrating the credit will overstate the commissions shown on the illustration output. Please give us a call if you have any questions or for assistance with running a case. Contact Us: Please contact JH M Group Marketing at Option 2-1 with any questions. For Agent Use Only. This material may not be used with the public. Insurance policies and/or associated riders and features may not be available in all states. Insurance products are issued by: John Hancock Life Insurance Company (U.S.A.), Boston, MA (not licensed in New York) and John Hancock Life Insurance Company of New York, Valhalla, NY MLINY

2 M Group Term Conversion and Term Conversion Credit Policy The following conversion policy applies when converting John Hancock term policies into any new permanent policy. ( Permanent includes whole life, universal life, and variable life policies.) When converting into a Majestic product M Group clients are eligible for a term conversion credit. These guidelines also apply to policies issued out of our New York companies. General Guidelines Term policies may be converted to permanent policies without medical examination. However, in the case of conversion to a policy with a higher face amount than the term policy, the insured must be underwritten for the additional amount of insurance that is being applied for. The smoking status question must be answered at the time of conversion only if requesting a smoking status change or for an increase in face amount. The new policies are issued at current date; if necessary, a policy may be dated up to 60 days prior to save age. Backdating rules will continue to apply. Term Conversion Eligibility Term policyholders can convert to any of our permanent retail products available for sale, as long as the other contractual provisions, such as term conversion period, are met. Term Conversion Credit (into Majestic only) 1. A conversion of any John Hancock term product will receive a conversion credit when converting into any Majestic product. John Hancock YRT is not eligible for the credit. Please note that conversion credits are not given when converting into a non-majestic product. 2. For policies in year 2 or later, the Conversion Credit equals 100% of the annual term premium due in the current policy year assuming a conversion to a policy with the same, or greater, face amount. Regardless of mode, the credit is given based upon the equivalent annual premium. Also, the credit includes substandard rating charges and the policy fee but it does not include any rider premium. 3. The attached Conversion Credit Grid can be used as a reference for the following term conversion situations: Conversion to a policy with same face amount Partial conversion to a policy with a lower face amount Conversion to a policy with a higher face amount Credit calculation for policies inforce for less than a year Conversion to a joint life policy Conversion of 2 term policies on the same life to one permanent policy Mid-year conversion if term policy premiums are paid to the end of the current policy year NO term conversion credit is given in these instances: 1. Conversion of a term policy into a non-majestic product. 2. Replacement of term policies or riders by other term policies or riders. 3. Conversion of a policy that is on a disability waiver of premium.

3 Application of the Conversion Credit The credit is treated as first premium paid toward the permanent policy and is counted towards 7 pay testing. Also, the credit is treated just like premium with respect to loads and taxes. For UL and Variable products the credit is automatically applied against the first target premium. Commission Treatment of the Conversion Credit Credit is first applied as premium up to target, and generates no commission. Example: Target Premium: $500 Conversion Credit: $100 Policyholder pays: $600 cash Total amount applied toward premium: $700 Apply $100 credit toward target premium. No commission received. $400 target premium remains. Apply $600 toward remaining $400 target premium. Apply full first year commission rate on the first $400 and excess commission rate on the remaining $200. Application and Submission Requirements (please submit to M Underwriting) We have a new Term Conversion Application that can be downloaded easily off of Once you download the Term Conversion Application, please follow these steps: 1. Complete and sign the Application for Term Conversion, (NB5037US). You may also use the regular application. 2. Indicate term conversion to Majestic in Special Requests box of application. 3. Submit any required replacement forms. 4. Submit old term policy. 5. Submit illustration for new policy. Conversion Rule Regarding the Refund of a Permanent Policy In the event that the permanent policy is not taken, any term conversion credit applied is excluded from any premium amount refunded to the policyholder.

4 John Hancock M Group Term Conversion Credit Grid Type of Conversion Calculation Calculation Example Additional Information/Rules Conversion to policy with same face amount* Partial conversion to policy with lower face amount* Conversion to policy with a higher face amount* Conversion of policy inforce for less than one year = current term premium paid (if policy is on mode other than annual, the credit is based upon the equivalent annual premium) = current term premium x converted amount term face amount Converting $100,000 term to $100,000 permanent policy, $1,000 term premium = $1,000 credit Converting $100,000 of a $250,000 term policy, $1,000 term premium = $1,000 x $100,000 = $400 credit $250,000 = current term premium Converting $250,000 term policy to $500,000 permanent policy, $3,000 term premium = $3,000 credit Normal underwriting is required for the additional $250,000. = current term premium x # of months inforce 12 Policy issued 2/1/98, $2,400 term premium, converting to permanent policy on 7/1/98 = $2,400 x 5/12 = $1,000 credit On an increasing YRT policy, the current year premium is counted toward the credit even if only a portion of the premium is paid. If the remaining term face amount (in this case $150,000) is now in a lower band due to the conversion, the new term premium is adjusted to the appropriate band. The insured must be underwritten for the additional amount of insurance being issued. Premium already paid in excess of the pro-rated credit will be refunded. Conversion to a joint life policy one term policy currently covering one insured* Each insured is assigned ½ of the Total Face Amount (TFA) of the permanent policy. If The face amount of the term policy is < or = ½ the TFA of the permanent policy, the term conversion credit will = current year annual premium. or 2. The term policy is > ½ the TFA of the permanent policy; treat the conversion as a partial conversion when calculating the credit. 1. One insured $500,000 term policy, $6,000 term premium, converting to $2m Survivorship along with a 2 nd life that is not currently covered = $6,000 credit. Normal underwriting is required for the additional $1.5m and for the second life not currently covered. 2. One insured $1,000,000 term policy, $8,000 term premium, converting to $1m Survivorship, along with 2 nd life that is not currently covered = $8,000 x $500,000 = $4,000 credit $1,000,000 Normal underwriting is required for the second life not currently covered. 1. Explanation: Half of the permanent policy TFA applies to each life for calculating the credit. The term policy is < ½ of the policy TFA that is applied to each insured, so the conversion credit = the current year premium. 2. Explanation: Half of the permanent policy TFA applies to each life for calculating the credit. The term policy is >½ of the policy TFA that is applied to each insured, so the partial conversion credit applies. For any term conversion questions please contact M Marketing at or M Service at *Assuming policy has been inforce for more than one year. Note: The sum of the Base Face Amount and the Supplemental Face Amount (if applicable) should be used in any calculation that references the Total Face Amount of the new permanent policy.

5 Type of Conversion Calculation Calculation Example Additional Information/Rules Conversion to a joint life policy two term policies currently covering two insureds* If the face amounts of both term policies are < or = ½ of the TFA of the permanent policy, the term conversion credit is the sum of the current year annual premiums on both policies. (No example given.) 2 insureds, $500,000 term policy each, premiums of $3,000 and $5,000, converting together to $1m survivorship. Explanation: Half of the permanent policy TFA applies to each life for calculating the credit. Since the term policy on both insureds is > ½ of the TFA applied to each insured, it is treated as a partial conversion for calculating the credit. If either term policy is > ½ the TFA of the permanent policy, treat the conversion as a partial conversion when calculating the credit. (See calculation example.) = $3,000 x $250,000 = $1,500 credit $500,000 and = $5,000 x $250,000 = $2,500 credit $500,000 Conversion of two term policies on the same life to one permanent policy* If the permanent policy TFA is = or > than the sum of the 2 term face amounts the insured will receive a term conversion credit equal to the sum of the current year term premiums of the 2 policies. (See calculation example.) total credit = $4,000 2 term policies, $100,000 & $300,000 premiums of $1,000 and $2,500, converting to $500,000 Survivorship. = $3,500 credit Mid-year conversion if term policy premiums are paid to end of current policy year* If the permanent policy TFA is less than the sum of the 2 term face amounts, the credit should be calculated as a partial conversion. (See calculation example under partial conversion and conversion to a joint life policy.) Annual term premium of $2,000 paid in full on 2/1/08. On 8/1/08 the insured wants to convert to permanent policy of = or > face amount. = $2,000 credit Would refund $1,000 of term premium paid this year and give a full term conversion credit of $2,000 applied to the new permanent policy. Note: When converting a term policy for a permanent policy with the same face amount, in addition to the credit, there will be a refund of unearned premium. Commissions will be charged back on any unearned premium amount refunded. *Assuming policy has been inforce for more than one year. Note: The sum of the Base Face Amount and the Supplemental Face Amount (if applicable) should be used in any calculation that references the Total Face Amount of the new permanent policy.