Paycheck Term Policy Pricing System for Predictable Beneficiary Income
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Solution Overview
Problem
Traditional life insurance policies face challenges in determining the appropriate death benefit amount, leading to either excessive or insufficient coverage, and beneficiaries often struggle to manage lump sum payments effectively, resulting in uncertainty and potential financial instability.
Innovation Solution
A computerized system for pricing and issuing 'paycheck term' policies that provide a predetermined, periodic benefit amount upon the insured's death, allowing insureds to select a monthly payment amount and offering a return of premium option, ensuring predictable income for beneficiaries.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Quantity of substance
If a lump sum death benefit is provided, then the beneficiary receives a large amount of money, but the beneficiary may spend it too quickly and face financial uncertainty
Solution Approach 1:
The patent segments the lump sum death benefit into periodic payments (e.g., monthly installments) that are distributed over time. This allows the beneficiary to receive the total benefit amount in manageable portions, preventing rapid depletion and ensuring long-term financial stability. The segmentation transforms a single large payment into a structured income stream that matches the beneficiary's financial needs over time.
2Quantity of substance
If a large lump sum policy is purchased to ensure sufficient coverage, then the death benefit amount is adequate, but the premium expense becomes excessive
Solution Approach 1:
The patent implements dynamic premium structures that adjust based on the selected payment term and benefit amount. By allowing policyholders to choose from different payment periods (e.g., 10, 20, 30 years), the system dynamically calculates premiums to match the desired coverage level and payment duration, optimizing the balance between adequate coverage and affordable premium expenses.
3Loss of energy
If a small lump sum policy is purchased to reduce premium expense, then the premium cost is reduced, but the death benefit is insufficient to replace income
Solution Approach 1:
The patent enables dynamic adjustment of coverage levels through selectable payment terms. Policyholders can choose longer payment periods to extend the duration of benefits or select higher benefit amounts within their premium budget, allowing flexible optimization between affordable premiums and sufficient income replacement coverage.
4Speed
If a lump sum death benefit is provided, then the beneficiary receives immediate funds, but the beneficiary must properly manage the amount which creates uncertainty
Solution Approach 1:
The patent automatically segments the death benefit into structured periodic payments that are distributed by the insurance company rather than requiring beneficiary management. This eliminates the burden of managing large sums while ensuring steady income flow, making the benefit both immediately available and automatically managed without beneficiary intervention.
Data Source
AI summary
Pursuant to some embodiments, a computer system for pricing a paycheck term policy is provided which includes a processor, a communication device in communication with the processor the communication device configured to receive an input data set, the input data set including at least an issue age of an insured associated with the policy, a desired death benefit payment amount, an underwriting class associated with the insured, and an interest rate factor.