1 Survivorship Products Joshua Littrell Key Account Manager Survivorship products insure two lives and are suited when the client has a need for death benefit protection is at the death of a second insured.Often these products are ideal for wealth transfer planning, however, they too can offer lifetime benefits such as access to cash value for lifetime income needs and Accelerated Benefits after the first insured’s death.National Life Insurance Company® | Life Insurance Company of the Southwest™National Life Group® is a trade name of National Life Insurance Company, Montpelier, VT, Life Insurance Company of the Southwest (LSW), Addison, TX and their affiliates. Each company of NLGroup is solely responsible for its own financial condition and contractual obligations. LSW is not an authorized insurer in New York and does not conduct insurance business in New York.TC72205(0213)
2 Survivorship Product Overview SIULDeath BenefitVery FlexiblePremiumFlexibleCash ValueInterest credits based on the changes in a major market index.Downside protection with upside potentialThe companies of National Life Group offer a three forms of Survivorship Products:Current Assumption Survivorship ULIndexed SurvivorshipWhole Life SurvivorshipConsider the following when choosing the best insurance policy for your client’s needs.Are they someone who needs guarantees and wants to know exactly how much your insurance will cost? Then they may want to consider Survivorship Whole Life.Are they looking for flexibility with the opportunity to accumulate cash value for future income needs? Then they may want to consider a Survivorship ULIf they are looking for the opportunity for more upside potential than a Survivorship IUL policy may make sense..All indices are unmanaged and you cannot invest directly in any market index.Guarantees are dependent upon the claims-paying ability of the issuing company.
3 NL & LSW LifeCycle Solution SIUL Not your typical Survivorship product.Cash value accumulationSurvivor Protection Rider – 1st Death ProtectionBesides the 2nd death protection, is also attracitve for:Potential source of retirement income through policy loans and withdrawals, or using LIBR*Short funding estate preservation approachBusiness Protection and Continuation StrategiesMinimum Interest Rate of 2.5% at death or surrenderLifeCycle Solution is not your typical Survivorship product.Although LifeCycle Solution is a Survivorship life product, its positioning extends far beyond traditional estate planning. This product has been designed to meet the needs of individuals throughout their entire life cycle.Product Focus:• Meets multiple needs throughout client’s life cycle; designed for cash value accumulation• DB paid at second death with option to pay additional DB at first death with Survivor Protection RiderMarketing Strategies:• Retirement income with Lifetime Income Benefit Rider• LifeCycle approach or short funding estate preservation approach• Business protection and continuation strategiesHighlights:• Cash Value Accumulation Design – LifeCycle Solution offers the opportunity for cash value accumulation through upside interest crediting potential and downside protection with a 0% floor.• First-to-Die Rider – The Survivor Protection Rider lets clients have the option of having a death benefit paid at the first death with a variety of benefit payment options.• Income for Life – With the Lifetime Income Benefit Rider, your clients have the potential to receive a stream of income for life – guaranteed!•
4 NL & LSW LifeCycle Solution Availability & Options Issue AgeMin Face AmountMax Face AmountRate ClassRiders0-85(age nearest birthday)$250,000Subject to underwriting & reinsuranceSix rate classes that vary on clients’ combined rate classificationsABR: Terminal, Chronic & CriticalAdd’l Protection BenefitBalance Sheet BenefitDeath Benefit ProtectionEstate PreservationLIBRPolicy Split OptionsOverloan Protection*Survivor ProtectionSystematic AllocationAccelerated Benefits Riders – Available to be added to policy after first death. ABR Terminal, Chronic and Critical are available.Balance Sheet Benefit Rider – waives surrender charges in exchange for level commissions. This rider is ideal when there is a need to have a high ratio of premium to cash value in the early years of the policy.Death Benefit Protection Rider – Guaranteed death benefit protection for up to 30 yearsEstate Preservation Rider: Provides four years of second-to-die term coverageLIBR –Once elected, the Lifetime Income Benefit Rider can provide an income guaranteed for life.Policy Split Option – PSO: change in federal estate tax law or a divorce between the insureds. In these cases, PSO provides for splitting the survivorship policy into two individual permanent policies on favorable terms. The exchange date will be the issue date of the new policies, however, the exchange does not trigger new suicide or incontestability periods. There is no current charge for the rider. A $200 administrative fee is charged at the time of the split.Overloan Protection Rider – The Overloan Protection Rider (OPR) protects a policy from lapsing as a result of the loaned amount exceeding the accumulated cash value. This feature can prevent a tax liability as a result of a policy lapse due to being over-loaned. The policy holder will be notified of this rider option when all conditions have been met including that the policy has been inforce for 15 years, and the insured having attained age 75. When the rider is put into effect, the policy becomes “paid-up”. At this time, there are no future premiums or charges due. Loans and withdrawals are no longer available.Availability: Issue Ages: 0 – 85The Overloan Protection Rider is not available in pension sales.This rider will automatically be added to all eligible policies at new issue.Conditions for exercising the rider:• Policy is in corridor• Loans at least equal to 95% of policy’s accumulated cash value• Policy is in force for at least 15 years• This rider is not available with CVAT• Insured has attained the age of 75• There is a charge when the rider is exercised.Survivor Protection Rider – provides first death protection. Takes the guess work out of which of the two insured may die first and which to provide 1st death term protection for. Insures both lives and pays a benefit at the first death.Systematic Allocation – available for large premiums including 1035 exchange amounts and renewal buckets. Instead of have the interest credits based on a single point, premiums/renewal allocations are spread over 12 months resulting in 12 points to base interest credits on.*Substantial limitations apply to exercising the Overloan Protection Rider, including that the policy be in force for at least 15 years and the insured having attained the age of 75.
5 Individual vs. Survivorship? One InsuredNeed for death benefit protection for both insuredsNeed for ABR benefits on both insuredsWants to have their policy purchased through their pension planTwo InsuredsMost concerned about death benefit at the second deathPossibly looking for some death benefit protection at the first deathHealth issues or not insurableABR benefits for Surviving InsuredYou have a client or clients with a need for life insurance. How do you determine which product makes sense.Read bulletsConsider Individual PoliciesConsider Survivorship Policies
6 Value isn’t always measured in Dollars and Cents One Policy vs. TwoThe choice between two individual policies or a Survivorship policy may not always be based on financial analysis “Dollars and Cents”.You will have clients that make their decision on their financial analysis but you will have other client’s that decisions are based on ease of purchase.Is your client the type that will always go to the bank and take a cash withdrawal to avoid the ATM fees? Or are they willing to pay the fee for the ease of doing business through an ATM?Knowing your client’s style will help you in building your presentation and product recommendation.Value isn’t always measured in Dollars and Cents
8 When Survivorship Is The Product of Choice Case factsHusband and wife; husband primary bread winnerHusband has some health issuesBoth husband and wife need a survivor benefitInterested in the Tax-Free Retirement StrategyInsure just the HusbandInsure just the WifeThere are times when LifeCycle Solution may be the preferred product choice.Review case assumptions and reasons why insuring just the husband or just the wife doesn’t make sense.Husband’s health caused increased cost of insurance and was draining the premium that could be allocated to CV accumulation.Lower cost to acquire insurance and greater potential to accumulate CV. However, what happens if husband dies first? How would future premiums be paid when husband’s income was gone?The use of cash value life insurance to provide a tax-free source of retirement assumes that there is first a need for the death benefit protection. Policy loans and withdrawals reduce the policy’s cash value and death benefit and may result in a taxable event. Withdrawals up to the basis paid into the contract and loans thereafter will not create an immediate taxable event, but substantial tax ramifications could result upon contract lapse or surrender. Surrender charges may reduce the policy’s cash value in early years.
9 Insure both Husband and Wife When SurvivorshipIs The Product of ChoiceInsure both Husband and WifeProvides death benefit protection on both insuredsBetter underwriting through a 2nd-to-die policy for health issues than an individual insurance policySurvivor Protection Rider provides first death protection that can be used to fund future premiumsLower cost over purchasing two individual IUL policiesABR Benefits after the first death to protect survivor should they become illLifetime Income Benefit Rider can address a concern of living too long
10 Being an AdvocateWe have many white pages and sales strategies for our survivorship products on NLGroupU. Here’s one of my favorites…An Advocate’s StoryChristopher Huchro, an agent from the Northern New England Agency, worked with an older couple who had no children. He found them inspiring. They were actively involved in their local church, volunteered at their local hospital and worked closely with several charities which they wanted as their beneficiaries.“They reminded me of my own grandparents. Selfless people, hard working and very involved with their church,” said Huchro.The couple had many loose assets which, working with Christopher, they organized using the American Gift Fund to help minimize the taxable event and named their charities as the beneficiaries.A Benefit for the CommunityYears later the couple passed away. Because of the proper planning Christopher put in place their estate was successfully paid out to the charities. Money was donated in their name to improve their local education system. Over 100 iPad tablets were purchased to incorporate into local schools’ curricula.As an advocate for his clients, Christopher ensured their legacy would be felt throughout the community as the schools were improved.
11 Multigenerational Planning Most of us would like to provide for our children, and what grandparent wouldn’t want to do something nice for their grandchildren? The typical challenge is being sure our own retirement needs are provided for first and foremost, and then doing what we can for future generations with what’s left.That’s a very reasonable and rational position to take, but wouldn’t be nice if there were a way to provide for both ourselves and our family with what we currently have? Unfortunately, recent market performance and the uncertainties of the future make that a difficult proposition.There is a way to accomplish both on a cost-effective basis through the use of – wait for it – life insurance. While we can only divide our existing assets up in so many ways to cover future generations, we have the potential to create an asset on a deeply discounted basis that will both provide for future generations and preserve our existing assets for our own use and enjoyment in our retirement.I’m now going to pass it the mic over to Pat Lang to discuss some of our trust options for multigenerational planning.Irrevocable Life Insurance Trust (ILIT)“Dynasty Trust”Grantor Retained Annuity Trust (GRAT)Survivorship Standby TrustCash Values for EmergenciesDeath Benefit Excluded from Survivor’s Estate
12 Grandparent or Parent Gifting Opportunity* Grandparent makes annual gift to trustTrust uses gift as premium sourceTrust purchases Insurance policy insuring Grandparent and GrandchildTrust is Owner and BeneficiarySurvivor Protection Rider, payable at grandparent’s death, can be used to pay ongoing premiumsAfter grandparent’s death, the Accelerated Benefit Riders can be added to provide benefits during Grandchild’s lifetime in the event of Terminal, Chronic or Critical IllnessTrustee can use policy cash value, through loans and withdrawals, to make lifetime distributions to Grandchild for such needs as college expenses, home purchase etc.2Retirement Income can be guaranteed for life once the Lifetime Income Benefit Rider is exercisedDeath proceeds ultimately create a legacy for Grandchild’s familyGrandparents often give CDs or savings accounts to their grandchildren as gifts.Survivorship life insurance, insuring the Grandparent (or Parent) and Grandchild (or Child), may be a better solution.This concept accomplishes a number of objectives by providing the potential for:A gifting / legacy plan that reduces the grandparent’s estate and ultimate taxesLifetime insurance coverage for grandchildThe opportunity to take distributions through loans and withdrawals – potentially income tax free – for the grandchild’s lifetime needs such as education, home purchase, starting a business or retirement.Review flow chart**** RESTRICTIONS OF SURVIVOR PROTECTION RIDER ********Provides term coverage on a joint first-to-die basis.OverviewThe Survivor Protection Rider offers LifeCycle Solution policy owners more death benefit flexibility than a traditional SIUL policy would by providing a death benefit at the first death.Payout OptionsThe death benefit will be defined as a period certain and can be paid out one of two ways:• Income Stream• Lump SumIf the Beneficiary chooses to receive the benefit as a lump sum, the benefit will be discounted. The default death benefit will be paid as an income stream to the beneficiary. If the beneficiary decides to take the death benefit as an income stream, they then have the option to receive benefit payments directly into the policy as premium payments.Minimum Payout Years: 1Maximum Payout Years: 30AvailabilityThis rider may be added after issue and increase segments may be added after issue.Minimum Coverage Amount: $25,000 based on lump sum equivalentMaximum Coverage Amount: 2 x the sum of Base and APB coverage amountsThe insureds must be the same two insureds on the base policy. The beneficiary may be named separately from the base policy beneficiary.Both insureds must be between the ages of 20 and 70, inclusive of issue ages 20 and 70.ChargesThis rider will have a charge per thousand of coverage, commissionable target premiums, minimum monthly premiums and monthly guaranteed premiums.Riders are optional, may be available at additional cost, and may not be available in all states.*Assumes Grandparent dies first1. Receipt of Accelerated Benefits will reduce the Cash Value and Death Benefit otherwise payable under the policy, may result in a taxable event, and may affect your client’s eligibility for public assistance programs.2. Policy loans and withdrawals will reduce the policy’s cash value and death benefit and may result in a taxable event. Surrender values in the early years may reduce policy values.3. Certain criteria must be met to exercise the rider including but not limited to the insured’s attained age being between age 60 and 85, and that the policy has been in-force at least 10 years. Insufficient policy values, outstanding policy loans and other considerations may also restrict exercising the rider. Receipt of income benefits will reduce the policy’s cash value and death benefit and may terminate other riders or reduce their benefits.
13 Special Needs Planning The term “special needs” may bring up many images. A child who is born with physical or mental challenges who needs lifetime care. An adult who has incurred an injury and needs a little assistance. A teenager who has been hurt in a car accident and has an unknown prognosis as to independence. A family that has to consider the emotional, financial, and strategic impact of taking care of a special needs person. These images, and others, do not really tell us the details about a family’s overall situation or what they may or may not have in common. However, it is fair to say that many special needs families do have a commonality of purpose – that is to take care of the special needs person, to take care of the care givers, and to take care of the rest of the family. Of course, depending upon the specifics of a situation, there are a myriad of options available to help clients meet their purpose.Continue financial stability for the surviving caregiver, the special needs person, and other dependent family membersProvide a stable inheritance to special needs person after death of both caregiversSpecial Needs Trust
14 Business Planning Case Facts Consulting Business Husband and Wife – 50/50 ownersKey Person ProtectionCase FactsConsulting BusinessHusband and Wife – 50/50 ownersKey Person ProtectionBusiness could continue if something happened to one but not bothWould need a small influx of cash if one or the other died to carry them through a transition periodSOLUTION LifeCycle Solution with Survivor Protection Rider and BSB Rider
15 LifeCycle Solution Policy Survivor Protection Rider provides cash at first death to help carry business through transition periodCash Value grows tax-deferred while owned by the businessBSB Rider provides a high cash value to premium paid for business balance sheetIf both die, proceeds can be used to continue to run the business until buyer is foundBusiness can access policy values for business needs or future executive benefit payments using policy loans and withdrawals*Review flow chart*Policy loans and withdrawals reduce the policy’s cash value and death benefit and may result in a taxable event. Surrender charges may reduce the policy’s cash value in early years.
20 SecurePlus Paramount 5Outstanding flexible premium deferred annuity for the 401 (k), 403(b), 457(b), IRA and NQ MarketsAvailable with our Guaranteed Lifetime Income Rider*10-10 Compliant (state and broker dealer friendly)*Guarantees based on claims paying ability of the company. Rider available at an additional cost.
21 5% Immediate Interest Credit Applied to every premium paid in the first 7 Policy YearsThat’s 105% of the premium earning interest from the date of payment or receipt of premiumFully vested immediately – no strings attached
22 Availability Maximum Issue age: 80 Available for 401 (k), 403(b), 457(b), IRA, Roth IRA, Simple IRA, SEP IRA, Roth 403(b)
23 Withdrawal Charges Declining Withdrawal Charge – 10 Years No MVA! Policy YearIssue Age1234567891011+0-8010%9%8%7%6%5%4%3%2%1%0%* 59+8¼%7¼%6¼%*Only applies to AK, AL, CA, DE, MN, NV, NJ, OH, OR, SC, TX, UT, WA, if available
24 SecurePlus Preferred 6 & Preferred 6 GLIR Welcome to this overview of LSW’s SecurePlus Marquee 10 and Marquee 10 Guaranteed Lifetime Income Rider.
25 SecurePlus Preferred 6 Highlights Plan TypesQualified or Non-qualified except 412(i)Bonus Accumulation Value6% of the Accumulation Value vesting in yearsIssue Ages0-80 (Actual Age)Minimum Premium$10,000Maximum Premium$ 1,000,000 (0-75), $ 350,000 (76-80)Free Withdrawals10% of the Accumulation Value each year after the first Policy yrWithdrawal Charge %10, 9, 8, 7, 6, 5, 4, 3, 2, 1, 0 (Reduced for age 59+ in some states)Riders (where approved)Nursing Home and Terminal Illness at no additional costIncome RidersPreferred 6 GLIR at an additional cost (required on all sales)Special Enhanced Life Income (SELI)- in approved statesAvailable after 5th Policy Year if Annuitant is at least 55 and cannot perform 2 of 6 ADLs permanently – annuitization benefitLoansYes 403(b) and 457(b), up to 50% of cash value if plan permitsGuaranteed Minimum87.5% of the premium paid growing at a rate between 1-3% based on formula on file at state department of insurance.The SecurePlus Marquee 10 can be used for qualified and non-qualified money. It has a minimum premium of $10,000 dollars and max premium of 500,000 dollars up to age 75 and 250,000 dollars age There is a 10 percent penalty free withdrawal available after the first policy year and it has a ten year withdrawal charge schedule. The guaranteed minimum is 87 and a half percent of the premiums paid growing at a rate between one and three percent based on a formula on file at the state department on insurance.
26 SecurePlus Preferred 6 Delivers 6% Bonus Accumulation Value – vests 1/5th per year in years 11-15BAV included in the death benefit day-oneGuaranteed Lifetime Income Rider*The Preferred 6 GLIR – includes 6% BAV beginning day oneExtra Features - at no additional costSpecial Enhanced Life Income Options where approvedNursing Care and Terminal Illness Riders where approvedThe SecurePlus Marquee 10 Delivers. It has a 10 percent bonus accumulation value that vests in years but is included in the death benefit day one. Marquee 10 is guaranteed never to lose a penny due to a downturn in the stock market, assuming no withdrawal in excess of the penalty free amount. Also the Marquee 10 features a guaranteed lifetime income rider that includes the 10 percent BAV in the benefit calculation base day one. Very competitive commissions and extra features such as the Special Enhanced Life Income option, Nursing Care Rider, and Terminal Illness rider, all at no additional cost.*GLIR currently required on all sales
27 Example - Accumulation Phase 55-year-old purchases $100,000 SecurePlus Preferred 6 with the Preferred 6 GLIRLSW SecurePlus Preferred 6Accumulation ValueDay One $100,0003%* Average Interest Credited Annually Net Of Rider Charges(*This is a hypothetical rate, and it is not guaranteed. The rate will vary.)AV End of Year $134,392Guaranteed Lifetime Income RiderBenefit Calculation BaseDay One ,0006.0% CompoundingRoll Up RateEnd of Year ,829To understand the mechanics of the rider let’s look at an example of how an LSW indexed annuity and its Guaranteed Lifetime Income Rider works.If a 55-year old contributes $100,000 to a SecurePlus Marquee 10 with the Marquee 10 GLIR. On the left you will see how the annuities accumulation value might grow. This is a hypothetical example. Day one, the Accumulation Value is $100,000. Over a 10-year period, the annuity’s accumulation value increases at a 3 percent interest rate (hypothetical rate…the rate could be higher or lower, depending on the index’s performance and the current caps and participation rate), net of the rider charges. The accumulation value after 10 years is $134,392.Now, let’s look at the right side, the Marquee 10 GLIR. Day one…the Benefit Calculation Base is 110,000, reflecting the 100,000 single premium and 10 percent bonus accumulation value. This amount is not an account value. It is used solely to determine the guaranteed withdrawal payment. The current rollup rate is 7%. In 10 years, the benefit calculation base increases to 216,387.
28 Example - Distribution Phase Guaranteed Withdrawal Payments are elected at Age 65, Level Income OptionSecurePlus Preferred 6Accumulation Value (example only)End of Year $134,392GWP $ 8,542AV after Withdrawal $125,8503.75% interest* $ 4,719(*Hypothetical rate)Rider Charge $ 1,173$129,396BAV Transfer $ 1,612AV end of yr $122,466Guaranteed Lifetime Income RiderBenefit Calculation BaseEnd of Year ,829Lifetime Income Calculation189,829X 4.5% (Guaranteed Withdrawal age of 65)$8,542 Guaranteed Income for LifeThe greater of the Accumulation Value or Benefit Calculation BaseNow let’s look at the distribution phase…The person elects to take guaranteed withdrawal payments at age 65, 10 years later.On the left, the Accumulation Value is 134,392 and the Benefit Calculation Base on the right is 216,387.At the time of election, LSW compares Accumulation Value versus the Benefit Calculation Base. Since the benefit calculation base is higher, LSW uses this amount and multiplies it by the Guaranteed Withdrawal Percentage at the attained age of 65 which is 5 percent. The 216,387 is multiplied by 5 percent to get an annual guaranteed withdrawal payment of $10,819 for life, even if the accumulation value goes to zero.Once Guaranteed Withdrawal Payments are elected, the Benefit Calculation Base ceases to exist.Now, how do the Guaranteed Withdrawal Payments work with the Annuity’s Accumulation Value.The Guaranteed Withdrawal Payment of 10,819 is subtracted from the Annuity’s Accumulation Value. The AV after the GWP is $123,572. Let’s say the annuity is credited 3.75% interest. The amount of $ 4,634 is added to the accumulation value. Then LSW will subtract the rider charge of $1,090. The Accumulation Value at the end of year 11 is $127,116, then the next guaranteed withdrawal payment of $10,819 is paid out and lastly the AV transfer of $2,564 is added in. Then this same process keeps repeating itself. Again, there is no annuitization required, so if the policyowner were to die at the end of the 11th year, his or her beneficiary would receive the annuity’s Accumulation Value.
29 $1209.52 (declining) $20,482.3 $34,189.20 What Would you Choose? 90 BPs Income riderCalculated of $134,392For a cost of$ (declining)After 20 years$20,482.390 BPs Income RiderCalculated of $189,829For a cost of$ (level)After 20 years$34,189.20
30 Nursing Care RiderProvides access to some or all of the accumulation value without withdrawal chargesAvailable after the first policy years and once the policyowner is confined to a nursing facility for 60 consecutive daysIf under the age of 76 at issue then up to $250,000 of the accumulation value may be withdrawn without withdrawal chargesIf 76 or older at issue 25 percent of the accumulation value may be withdrawn at one time without withdrawal charges in place of the 10 percent free withdrawalNot available in all states
31 Terminal Illness Rider Allows for up to $250,000 to be withdrawn without application of withdrawal chargesAvailable if the onset of the illness is after the first policy yearDiagnosed terminal within 12 monthsNot available in all states
32 What Are Your Next Steps? How I Will Work with You Answer questions by phone orDetermine your target markets and how to utilize these annuitiesProvide WebEx’s presentations and make you an expert in our productsIncrease your overall production and annual incomeI’m sure you all have questions that apply specifically to your situation. I would be happy to set up a mutually convenient time to meet one on one. Then, we will calculate your TRS benefit and address your retirement gap. I would like to make sure you understand the powerful benefits of your 403(b) plans and help you chose your savings options.Thank you for your time. Be sure to take my card and some material before you leave. I look forward to getting to know each and every one of you better. Helping you achieve a secure retirement would be my pleasure.