The Premium Deposit Agreement (Agreement)* can provide a simple solution to fund a life insurance policy with a lump sum without creating a Modified Endowment Contract (MEC)1. With one lump sum payment, it establishes an account called a Premium Deposit Account (PDA) that automatically pays the first and future annual premiums so your client doesn’t have to worry about scheduling future payments. While the money is in the account waiting for future payments, it earns interest. When your client opens the account, they lock in the interest rate. There is no extra premium cost to establish or maintain the PDA.
Use these resources to familiarize yourself with the Premium Deposit Agreement and its value-add features.
Agent Materials
Download these materials to share in a meeting, send in a follow-up email or visit Supply Warehouse to order copies to keep on hand!
Consumer Materials
Explore common sales concepts of Premium Deposit Agreement
1. For most policies, withdrawals are free from federal income tax to the extent of the investment in the contract, and policy loans are also tax-free so long as the policy does not terminate before the death of the insured. However, if the policy is a Modified Endowment Contract (MEC), a withdrawal or policy loan may be taxable upon receipt. Further, unpaid loan interest on a MEC may be taxable. A MEC is a contract received in exchange for a MEC or for which premiums paid during a seven-year testing period exceed prescribed premium limits (7-pay premiums).
* THIS AGREEMENT IS NOT INTENDED TO BE USED FOR INVESTMENT PURPOSES.
Premium Deposit Agreement is issued on form series LR509 or state variation by North American Company for Life and Health Insurance, West Des Moines, IA. Products, features, riders, endorsements, or issue ages may not be available in all jurisdictions. Limitations or restrictions may apply.
1670NL-1c
FOR AGENT USE ONLY. NOT TO BE USED FOR CONSUMER SOLICITATION PURPOSES.
