Forgotten Asset Class
Types of Life Insurance
Term
Whole Life
Variable Life
Indexed Life – Indices like the S&P 500.
Participate in gains but if index has a negative
performance (like 2008) policy is credited at 0%.
Survivorship Life – Estate Planning
Universal Life
Guaranteed No-Lapse UL (“lifetime term”)
Guaranteed Premium & DB to age 121.
Life Insurance Benefits
FLEXIBILITY – Ability to adjust premiums and DB’s.
Valuable riders such as Guaranteed future purchase
options and Long term care benefits.
UNLIMITED protection of cash values from lawsuits
or judgments (ARIZONA)
Cash Values can be accessed TAX-FREE via
withdrawals & loans
Many new Policies have “wash” or 0% net loans
Gains can avoid ANY taxation unless you let policy lapse.
No penalty taxes for early withdrawal.
Free of federal income, capital gains, AMT, state and
income doesn’t trigger taxation of Soc. Security benefits.
Reasons for a Policy Review
More Competitive Product Pricing
Many newer policies have better Guarantees
Older policies needed interest rates to remain much
higher than current rates to stay in-force – High
incidence of Lapses.
Independent review of trust – owned policies showed
86% could be improved with a policy review.
Improved Life Expectancy* – Lower Insurance
(Mortality Costs)
40 Yr. old Male in 1975 – 68.8 yrs. LE
40 Yr. old Male in 2006 – 75.2 yrs. LE
*Source: National Cernter for Health Statistics
Consumer – Friendly Enhancements
Trends in Life Insurance
Term Insurance
Return of Premium Term
Stretch DB payout to beneficiaries rather than lump sum
= helps to reduce premium cost
EXAMPLE: 50 Yr. Old Male (Preferred N/T)
20 yr. level @ $500K = $1,285
20 yr. level - Payout $33,333 @ 15 yrs. =
$919.72 (28% Lower Premium)
Trends in Life Insurance (pg. 2)
Cash Value Insurance Enhancements
New popular policies are issued WITHOUT surrender charges.
Available on UL/VUL/IUL (Index Life) chassis.
Index Life offers upside participation while providing downside protection using
popular stock indices like the S&P 500, Hang Seng, Euro Stoxx 50 & World Index.
Participate in Index Gains with a CAP but NOT Losses.
100% Participation in the S&P 500 index up to a 16% Cap
140% Participation in the S&P 500 index up to a 14% Cap
Advantage of a Lookback – 75% into best performing index, 25% in next best
performing index & 0% in the worst performing index.
MUCH higher early cash values and in some cases, the 1st yr. surrender
values => premium.
Example*: 35 Yr. Old Male Excellent Health $1M DB ($27,500 Prem. @ 8 yrs.)
** Old Style – Yr. 1 SURRENDER Value = $3,833
-- Yr. 10 Projected Surrender Value = $323,850
** New-Style – Yr. 1 SURRENDER Value = $27,500
-- Yr. 10 Projected Surrender Value = $320,210
* MN Life Eclipse IUL with @ without SVEA Rider
Trends in Life Insurance (pg. 3)
LONG TERM CARE riders
Popular for insured who doesn’t like to pay premiums and not
receive any benefits.
Tax-Free Death Benefits & Long Term Care Benefits
90% Mortality Underwriting – possibly a little easier to qualify
for some Life + LTC plans.
Tax-Free 1035 exchange from existing life policy.
Example: 60 Yr. Old Female Good Health ($50K Single Prem.)
- Guaranteed Death Benefit of $101,481
- Guaranteed Return of Premium after 3 yrs.
- Guaranteed Cash Value - $65,497 @ age 80.
- Guaranteed LTC pool of $$ = $304,443 ($4,228 mo.
benefit payable @ 72 months)
► LTC $$ available for Home Health, Assisted Living
and Nursing Home.
LTC – Facts concerning Women
Women have a 10X chance of reaching age 85 than a
man. (1)
Women need care longer than a man
3.7 yrs. versus 2.2 yrs. (2)
Women who live past age 65
50% greater chance of entering a nursing home than a
man & (3)
Are TWICE as likely to live alone. (1)
(1) American Association for Long Term Care Insurance (AALTCI) 2009
(2) National Clearing House for LTC Information, US Dept of Health & Human Services, 11/14/2007
(3) AHIP (America’s Health Insurance Plans Aug. 2007)