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Who Provides Your Insurance Does Make Difference


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									            INSURING THOSE WHO SERVE                                     SPRING 2012

Who Provides Your Insurance
Does Make a Difference
A life insurance purchase is often a “do it and forget it” decision. When it comes to permanent
insurance, i.e., insurance designed to last for the rest of your life, this may not be the best strategy.
Take a look at the crediting rate being paid by other permanent life insurance plans
and compare the rate with other options available. Make sure you are earning the
best available rate and making the most of your opportunity to earn cash value on
a tax-deferred basis.
If you don’t like what you see, you do have options. You can replace your life insurance with what the
IRS calls a “1035 Exchange,” which functions much like a Rollover IRA. The 1035 Exchange allows
you to move the cash surrender value of your existing commercial life insurance policy to another
company’s insurance plan without losing the tax deferral you have been enjoying. A 1035 Exchange
can be a very effective tool for maximizing the value and benefit of permanent life insurance. Since the
funds do not pass through your hands, but are transferred directly between the two insurance compa-
nies, the IRS does not tax the transfer. To qualify as a 1035 Exchange, the funds must be transferred
into a new plan and the owner and the insured must be the same on both the old and new plans.
Being a Member of Navy Mutual gives you an advantage over commercial life insurance owners.
You can use a 1035 Exchange to move money from an underperforming life insurance plan into
a new Permanent ‘Plus’ plan with Navy Mutual. If you have an old policy you bought before you
joined Navy Mutual, or a small life insurance policy a parent or grandparent bought you when you
born and gifted to you at an older age, a1035 Exchange allows you to turn these lower crediting
rate plans into a higher-earning Permanent ‘Plus’ plan. That way, you can take advantage of the
benefits of Navy Mutual’s highly rated whole-life plans and our excellent crediting rate (currently
6.5%) without losing the tax advantages you previously enjoyed. Our nonprofit status allows us
to charge lower costs and pay higher crediting rates than most for-profit life insurance companies.

Compare Navy Mutual’s Permanent ‘Plus’ to Other Cash Value Insurance
                  Surrender        Sales               Sales     Free Long Term         Crediting
                  Charges          Commissions         Fees      Care Protection        Rate
‘Plus’            NO               NO                  NO        YES                    6.5%
Other Cash
Value Life        YES              YES                 YES       NO                     3-5%
It is important to remember that, while permanent life insurance includes a savings type compo-
nent that can provide retirement income, life insurance itself isn’t an investment. Also, unlike Navy
Mutual, some commercial insurers may impose a surrender charge when you move your plan.
Contact a Membership representative to receive a comparison quote for replacement coverage and
details on how a 1035 Exchange may benefit you. More information is available online at navy-
                               A Message from
                        Navy Mutual’s President

Another Banner Year for Navy Mutual

It’s my pleasure to report that 2011 was yet another great year for your As-
sociation. Navy Mutual’s 2011 Annual Report will soon be available for your
review on our Website and in print. In it, you’ll learn the specifics about how
Navy Mutual continued to thrive, even in difficult economic times. Here are
some highlights:
■	   We enjoyed continuous month-over-month sales increases throughout the
■	   We added about 3,500 new Members in 2011, reinforcing the long-term
     stability of your Association;
■	   Our direct premium income totaled about $84 million;
■	   Our Fitch rating stayed steady at A+ with a stable outlook, reflecting our
     strong capital levels, high quality investment portfolio and strong business
■	   We generated a net investment yield of about 6.4%, well above industry
■	   In response to satisfaction surveys, 94.3% of our responding Members said
     they were satisfied or very satisfied with Navy Mutual;
■	   More than 97% of our Members stayed with us, a level that significantly
     exceeds industry averages.
Navy Mutual’s mission continues to include education of our Members and
their families. This edition of our Spring newsletter is filled with educational
articles on topics that include annuities, insurance type comparisons, 1035
exchanges and guaranteed insurability. We hope they will be useful as you
consider the insurance needs of yourself and your loved ones.
We are, as always, grateful for the opportunity to support our Members and
their loved ones. Thank you for the trust you place in us. We are honored to
serve you.

Bruce B. Engelhardt
                                                             Equal Partners
                                                                 Need Equal
                                                              Life Insurance
In just under half of all married couples, both partners work outside of the home.
Generally, both partners don’t work for fun. They both work because the extra income allows their
families to pay off their debts, maintain their standard of living, and provide a quality life for themselves
and their children.

Ask yourself: what would you do if your spouse suddenly were no
longer in the picture?

The death of a spouse is certainly a traumatic event. This catastrophe can be even more difficult if the
income provided by the deceased spouse was critical to the family’s financial plan and the security of the
family unit. Increased expenses and lower family income are only part of the changes a family will be
faced with after the traumatic experience of losing a loved one.
Even if your family has one main breadwinner and the remaining spouse works from the home, you
still need to think about planning for the loss of both the higher income worker and the “stay at home”
spouse. Planning can be critical to the survival of the family.
Obviously, the breadwinner will need to have protection on his/her life so that the family does not face
the financial devastation that could occur due to the immediate loss of income. But many people don’t
realize how important the financial contributions of the “stay at home” spouse really are. Just think
about how much you rely on your spouse to take care of things when you are not around.

If you are asking the question: “does my spouse need life insur-
ance,” the answer is probably “yes”!

Although no loss of earned income may result, the family could face the financial challenge of paying
higher expenses for things such as child care, dealing with transportation issues, household maintenance
and other miscellaneous family responsibilities that the “stay at home” spouse has always provided. For
our military Members, the challenge is even greater. If you deploy (and especially with short notice),
who will care for your children 24/7? Is your family available to help and, if so, how long can they offer
assistance before they have to return to their own lives? Even then, someone else would still have to take
care of all the tasks that the “stay at home” spouse previously handled.
“All those services have a price and could be a significant expense for a family to replace,” says Steven
Brostoff, a spokesperson for the American Council of Life Insurers. Childcare alone can run more than
$30,000 a year. A family would need roughly $1 million in investments to produce that kind of income.
That’s why life insurance is so important for BOTH partners.
                                            Insure.com, an online insurance broker, took an informal snap-
                                            shot of the various tasks a “stay at home” parent performs and
 Sample tasks:                              added up how much a family would have to spend to pay
                                            professionals to do the same thing. Bottom line: families could
 Task. . . . . . . . . . . Annual Cost
                                            expect to spend $61,436 a year. That’s just for the routine tasks
 Cooking . . . . . . . . . . . . $6,938     and does not include any income a primary caregiver/parent
                                            might provide from either full or part-time employment.
 Driving . . . . . . . . . . . . . $6,285
                                            Regardless of whether one or both spouses are working, if one
 Tutoring . . . . . . . . . . . . $7,140
                                            spouse were to have an untimely death, the surviving spouse
 Shopping . . . . . . . . . . . $1,580      will almost always be faced with greater financial responsibili-
                                            ties. Do your whole family a favor and take a few moments
 Housekeeping . . . . . . . $4,888
                                            to find out how much protection is needed to insure you and
                                            your partner, then find a life insurance plan that works with
                                            your budget.
Are Annuities Right for Investors
in Transition?
Living longer, healthier lives has become a reality in America, but ensuring that your retirement savings
will last 20 to 30 years or longer is a challenge. A common concern for many of our Members is running
out of money in retirement.
Individuals who have reached, or are about to reach, the end of their earning years have specific needs.
Shorter time horizons for investments and a lower risk profile are becoming realities. These are investors
in transition, moving from asset accumulation, the savings mode, to asset usage, the spending mode.
For these individuals, income replacement already is or will be a need in the near future.
While continuing to seek long-term appreciation on a portion of their investments is important, pres-
ervation of principal and income replacement often become the primary goals for at least a portion of
the assets accumulated. Income replacement has become a growing concern for both retiring and retired
If any of the following statements below are true for you, considering an annuity could be a good idea.
■ I would like to earn a competitive rate of return but not sacrifice the safety of my investment principal.

■ I would like to defer taxes on my savings until after retirement.

■ I want my assets to avoid probate and immediately be available to my heirs upon my death.

■ I want access to my money without incurring any surrender fees.

■ I want my savings to provide me with a stream of retirement income that I cannot outlive.

Secure Income Right Now
An immediate annuity is designed to meet the needs of income replacement. It guarantees that payments
will continue for a selected period of time that could be a specific number of years or the annuitant’s life-
time. This is an excellent option for those who want or need to convert a portion of their "nest egg" or
retirement assets into a reliable income stream.

Secure Income Coming Soon
To help achieve savings goals and protect future financial security, deferred annuities may be the best
option. Free from the risk of variable annuities, deferred fixed annuities could be a great compliment to
a financial plan looking for continued growth in the near term with security for future income replace-
ments. They allow individuals both to lower overall retirement portfolio risk and to defer taxes. Addi-
tionally, earnings in a deferred annuity normally will not affect taxation of Social Security benefits.
Interest Earnings from other options, such as a CD, can impact how much Social Security will be taxed.

                                                                                     Security           te
               NNuIty                                                                Avoidance of Proba
   IM MedIate a lump sum into guaranteed income                                      Free Withdrawals
                convert a
    Purpose: To             le premium p
                                                                ar                    Everlasting Income
    How Purch  ased: A sing                       within one ye
                              aymen ts must begin                                     Tax Deferral
                on Period: P
     accumulati                                                                       Yield
Product Comparison
There are a variety of financial products available in the market that allow safety of principal, so here is
a quick side by side comparison. You be the judge of which product is best for you.
                                 Guaranteed    Quick   tax deferred   Can Provide
                     Safety of    Interest   access to   Interest     Guaranteed                Probate
                     Principal     Rates    your Money   Growth     Income for Life            avoidance

  Savings Account        ✔	            	            ✔

  Certificate of
  Deposit (CD)           ✔	           ✔

  Savings Bond           ✔	            	             	            ✔

  Navy Mutual
  Deferred Annuity       ✔	           ✔	            ✔	            ✔	               ✔	               ✔

Get more information about annuities at
Navy Mutual annuities offer a big advantage over many other low risk financial products. Due to our
nonprofit status, we offer a higher rate of return than other safe investments generally do. When you
add in the tax deferral benefit,the benefits of annuity ownership increase. Plus, all Navy Mutual annui-
ties are free of commissions and sales fees, and carry no surrender charges. This is a unique benefit that
applies to Navy Mutual annuities which likely will not apply to annuities purchased from other insurers.
No fees, No surrender charges – in an Annuity – YES!
If you are interested in receiving more information on Navy Mutual’s various annuities and how they
can help you meet your needs, call a Membership representative at 800-628-6011.

  deF eRRed aNNassets on a tax-deferred basis
                    umulate                                ium payments
   Pu rpose: To acc                  ium or  multiple prem
                      A single prem
   How   Purchased:                         g-term
                            : Short- to lon
    accumula  tion Period

                           Pass It On
The Navy Mutual Aid Association was established to
provide financial protection to sea service personnel and
their families at the lowest possible cost. To date, we
have fulfilled that mission with flying colors by
providing our Members with life insurance and
annuity products that are second to none.
But Navy Mutual doesn’t stop at just providing great
life insurance products. We continue to fulfill our
obligation to our Members’ families by assisting the
survivors in receiving other financial benefits after
the passing of their loved ones.
Introduce Navy Mutual to your friends. This
small gesture could make a huge difference
in their lives and the lives of their families.
Take a moment and think of someone
you know who would also benefit from
membership in Navy Mutual. Pass on the
peace of mind you have experienced by
telling your friends to visit
www.navymutual.org, call 800-628-6011
or email us at counselor@navymutual.org.
What Is the Difference Between Term and
Permanent Life Insurance?
Term and Permanent life insurance plans both provide a death benefit, but that is where the similarities
end. Understanding the differences between these two general types of plans will enable you to make the
right decision about which coverage best meets your specific financial needs.

Why is Life Insurance So Important?
Life insurance ensures that, when you die, your beneficiaries will have financial resources in place to
protect their future income and pay for immediate and future financial obligations. Life insurance
proceeds are paid quickly to the beneficiary(ies) without the delay of probate and are income tax-free.

term Insurance
Term insurance provides death benefit coverage for a specified period of time with a premium that
is initially low relative to permanent insurance premiums. Premiums are initially low because most
contracts do not cover individuals through old age, when death is most likely to occur. Premiums are
based on the type of term plan you select, the amount of coverage, risk status (smokers and people in poor
health or with dangerous lifestyles pay higher premiums), current age and the age to which coverage is
desired. Term policies providing death benefits at older ages usually have substantially higher premiums.
Term insurance does not have cash value. If you terminate a term life insurance policy, none of the
money paid in premiums is recoverable, with few exceptions. The longer the duration you choose to
keep your coverage, the higher the premium.
Death benefits on term plans can be either level or decreasing. With Level Term the death benefit and
the premium will both remain level until the end of the plan, at which point the policy will be termi-
nated. Decreasing Term will provide a death benefit which decreases after a period of time until the plan
is terminated or the coverage becomes level at a very low value for the remainder of the insured’s life.

Permanent Insurance 
Permanent life insurance provides insurance for the insured’s entire life. In addition to lifetime protec-
tion, this type of plan can contain a savings element known as “cash value.” The cash value represents
premiums paid into the policy and any interest that accumulates over time. If the policy is canceled
(surrendered), the owner receives the cash surrender value.
Premiums for permanent life insurance are higher than term life insurance because the death benefit
is certain to be paid out. The premium is based on the type of permanent plan you elect, the amount
of coverage, current age, risk status and the number of years that you wish to take to pay off the plan.
You typically may elect to pay up the plan with a single payment or over a period of time up to age
100. The longer the premium payment duration you choose, the lower the monthly premium you pay.
Permanent plans can have either level or increasing death benefits.
                                  InSurance needS & TypeS
                               Personal Debts & Funeral Expenses
                                                Spousal Income
                                Child’s Income
                                 College Fund
                                                  Estate Expenses
Birth              20                 40             60                         80                Death
                         ■	Permanent Insurance            ■	Term Insurance

The illustration above shows some of reasons for buying insurance and their possible durations (indicated
by the length of the line), and the insurance type that may be most appropriate to meet the obligation.

Which type is Right for you?
Different coverage needs require different insurance types. If you have multiple liabilities, which you
will most likely have, then you should consider a combination of insurance plans rather than just one.
This illustration shows some of reasons for buying insurance and their possible durations (indicated
by the length of the line), and the insurance type that may be most appropriate to meet the obligation.
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                                                                                                                                                                     OUR FOCUS IS YOU!
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                                     ARLINGTON, VA

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                                                                                                                                            September 19, 2008 10:17:04

 Is Your Birthday Around the Corner? Are You
 Getting Married? New Baby on the Way?
 Don’t forget about our Guaranteed Insurability Option (GIO).
 Members who are between the ages of 25 and 45 years old and who own a Permanent ‘Plus’ plan with
 Navy Mutual, can buy an additional $20,000 of coverage without a physical.
 If you are under age 45 and can say yes to any of these questions, this option applies to you.
 Within the past 90 days I have:
 ❑	 Experienced the birth or adoption of a child, or
 ❑	 Become married, or
 ❑	 Had my 25th, 30th, 35th, 40th or 45th birthday.
 Plus, you may exercise this feature up to four times!

 Please give us a call at (800) 628-6011 to speak to one of our representatives, or email us at counselor@
 navymutual.org to exercise your Guaranteed Insurability Option.
                                                                                                                          Age   Nonsmoker                                                                                             Smoker
     Monthly premiums for this option will vary                                                                           25     $17.90                                                                                                     $21.60
     based on your age and the payment period
                                                                                                                          30     $20.60                                                                                                     $25.10
     you select. For example, if you choose to
     pay premiums for 20 years, the monthly                                                                               35     $23.90                                                                                                     $29.20
     premiums for the additional $20,000 of
                                                                                                                          40     $28.10                                                                                                     $34.30
     permanent insurance would be:
                                                                                                                          45     $33.40                                                                                                     $39.80
                                                                                                                                                             U.S. POSTAGE
The “Rule of 72” is a mathematical rule that                                                                                                                      PAID
estimates how many years it will take for an                                                                                                                      AMI
investment to double in value at a specified rate of                   Henderson Hall ■ 29 Carpenter Road                                                        22304
                                                                       Arlington, VA 22212
return. Just divide 72 by the expected rate of return
to estimate how long it will take for your investment
to double in value.
                                                                       ❑	PLeaSe SeNd Me MORe INFORMatION:
For example, at a 5% rate of return, an investment                     ❑ Myself               Birth date: ________ Coverage Amt: $ ________ Tobacco use: ❑ yes ❑ no
will double in 14.4 years (72 / 5 = 14.4). You can also                ❑ Spouse               Birth date: ________ Coverage Amt: $ ________ Tobacco use: ❑ yes ❑ no
determine the rate of return you will need in order                    ❑ Child/grandchild     Birth date: ________ Coverage Amt: $ ________
                                                                                                ❑ Term Insurance        ❑ Permanent Insurance
to double your money in a specified number of years                    ❑ Deferred Annuity     Investment Sum: $ ________ Birth date: ________ Spouse birth date ________
by simply dividing 72 by the desired number of years.                  ❑ Immediate Annuity    Investment Sum: $ ________ Birth date: ________ Spouse birth date ________
For example, to double your money in 10 years you                      ❑ Email me at: ____________________________ ❑ Call me at: ____________________________ NEWS-S12
will need to earn a rate of return of 7.2% (72 / 10 =
Try this out the next time you are looking at your

INSIDE: Message from the President | Equal Partners Need
Equal Life Insurance Coverage | Are Annuities Right for Investors in
Transition? | Pass It On | What Is the Difference Between Term and
Permanent Life Insurance? | Guaranteed Insurability Option

www.navymutual.org                                 1-800-628-6011

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