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For Producer or Broker/Dealer Use Only. Not for Public Distribution. Life Insurance Review A Sales Tool for All Clients For Producer or Broker/Dealer Use.

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Presentation on theme: "For Producer or Broker/Dealer Use Only. Not for Public Distribution. Life Insurance Review A Sales Tool for All Clients For Producer or Broker/Dealer Use."— Presentation transcript:

1 For Producer or Broker/Dealer Use Only. Not for Public Distribution. Life Insurance Review A Sales Tool for All Clients For Producer or Broker/Dealer Use Only. Not for Public Distribution.

2 Why a Life Insurance Review Agenda Hypothetical classic client situations MetLife support This presentation is not intended to promote insurance replacement. Life insurance is medically underwritten. Clients should not cancel their current coverage until their new coverage is in force. Surrender charges may be due on an exchange of one contract for another. A change in policy may require a medical examination. Surrenders may be taxable. Clients should consult their own tax advisors regarding tax liability on surrenders.

3 For Producer or Broker/Dealer Use Only. Not for Public Distribution. Why a Life Insurance Review

4 For Producer or Broker/Dealer Use Only. Not for Public Distribution. Role of Life Insurance Central in client plans –Survivor protection –Retirement planning –Estate planning –Business planning Flexibility in design –Can tailor policy to client’s needs –Can make life insurance complex Complexity calls for ongoing review

5 For Producer or Broker/Dealer Use Only. Not for Public Distribution. Why a Life Insurance Review? Portfolio review – life insurance review What a review accomplishes –Reviews a client’s needs Examines original vs. current goals –Reviews existing life insurance to current goals Who needs to do a life insurance review? –Financial professionals –Trustees –Business owners

6 For Producer or Broker/Dealer Use Only. Not for Public Distribution. Personal Changes Family changes –Marriage, birth, divorce Term to permanent Term at a better price Policy insufficient for current needs Changing job & benefits Owning a business Education funding Changes in retirement income needs or savings options Buying a home

7 For Producer or Broker/Dealer Use Only. Not for Public Distribution. Life Insurance Changes Newer products –More cost efficient –Better guarantees 1 New riders may offer improved options 2 Improved underwriting Underperforming policies Changing insurer ratings Some policies scheduled for premium increases 1 Guarantees apply to certain life insurance products and are subject to product terms, exclusions and limitations and the insurer's issuing claims-paying ability and financial strength. 2 There may be an additional charge for optional riders.

8 For Producer or Broker/Dealer Use Only. Not for Public Distribution. Hypothetical Classic Client Situations

9 For Producer or Broker/Dealer Use Only. Not for Public Distribution. Luis & Maria Bought $300, year term insurance 10 years ago for mortgage protection 2 children & Maria stopped working Luis’ employer benefits dropped to $50,000 Group Term Must purchase any additional group coverage Current insurance could only cover: Balance of mortgage 2 years of expenses Current insurance could NOT cover: Family expenses after 2 years College tuition Case Study

10 For Producer or Broker/Dealer Use Only. Not for Public Distribution. Couple’s Dilemma Family support costs if Luis were to pass away –In addition to tuition & mortgage Retirement income –Luis is fully funding his 401(k) & IRA –Current savings won’t support family’s current lifestyle

11 For Producer or Broker/Dealer Use Only. Not for Public Distribution. Term or Permanent Insurance? Term coverage is very low cost, but… –No cash value savings –Coverage ends at age 40 Compare permanent coverage, such as MetLife’s Equity Advantage Variable Universal Life –20 annual premium payments $20,000 premium for $1,750,000 death benefit –Cash value at age 65 would be $1,270,593 (not guaranteed) –Policy projected to lapse at age 66 if rate of return equals 0% with guaranteed charges Example based on a 35 year old male, funding a $1,750,000 hypothetical life insurance policy. Life illustration assumes 8% gross hypothetical rate of return (7.29% net RoR). This hypothetical is for illustration purposes only and actual results may vary. Investments in variable life insurance are subject to market risk including loss of principal. Please see the policy and prospectus for additional details.

12 For Producer or Broker/Dealer Use Only. Not for Public Distribution. Summary for Luis & Maria Increased death benefit to $1,750,000 Permanent coverage is more consistent with clients’ goals Possibility to supplement retirement income with cash value 2 Scheduled premium payments end when Luis is age Distributions are generally treated first as tax-free recovery of basis and then as taxable income, assuming the policy is not a Modified Endowment Contract (MEC). However, different rules apply in the first fifteen policy years, when distributions accompanied by benefit reductions may be taxable prior to basis recovery. Non-MEC loans are generally not subject to tax but may be taxable when the policy lapses, is surrendered, exchanged or otherwise terminated. In the case of a MEC, loans and withdrawals are taxable to the extent of policy gain and a 10% penalty may apply if taken prior to age 59 1/2. Always confirm the status of a particular loan or withdrawal with a qualified tax advisor. Cash value accumulation may not be guaranteed depending on the type of product selected. Investments in variable life insurance are subject to market risk, including loss of principal. Loans and withdrawals will decrease the cash value and death benefit. 3Performance assumes an 8% gross hypothetical rate of return(7.29% net RoR). Actual results will vary. Please see a full product illustration and prospectus for additional details.

13 For Producer or Broker/Dealer Use Only. Not for Public Distribution. Trust Owned Life Insurance

14 For Producer or Broker/Dealer Use Only. Not for Public Distribution. Case Study This is a hypothetical client situation. Actual results will vary. Trust established when clients were age 50 and 47 Irrevocable Trust (ILIT) bought two policies $3.5M Variable Second-to-Die $3.5M Participating Joint Whole Life Paul & Margaret Set up estate plan 15 years ago Planned $80,000 gifts for 20 years (their ages 70/67) $7,000,000 covered by second- to-die in a trust

15 For Producer or Broker/Dealer Use Only. Not for Public Distribution. 15 Years Later Much Has Changed

16 For Producer or Broker/Dealer Use Only. Not for Public Distribution. Trustee’s Problem: Variable Universal Life 15 Years ago: Illustrated at 10% –$35,000/year for 20 years would have carried $3.5M death benefit Performance: averaged 2% over past 15 years –Under planned gifts: policy projected to lapse at age 86 –Or requires $82,000 in premiums at age 86 –Or requires continued premiums until age 93 Hypothetical Example. Actual Results Will Vary.

17 For Producer or Broker/Dealer Use Only. Not for Public Distribution. Trustee’s Problem: Whole Life Participating Whole Life - $45,000 premium –Kept premiums low with term-perm blend Dividends were to buy Paid Up Additions –Would have sustained $3.5M death benefit Dividends have dropped with interest rates –$3.5M death benefit will lapse at age 89 –Or maintain current premiums for life Hypothetical Example. Actual Results Will Vary.

18 For Producer or Broker/Dealer Use Only. Not for Public Distribution. Possible Solution Life Insurance Review shows –Ongoing need for $7M death benefit –Existing policies will lapse without change Possibly look to newer life insurance policies –Section 1035 exchange into a Legacy Advantage Survivorship Universal Life with Joint Coverage Continuation Rider –Can gift $73,635 (indexed split gift) for 8 years and receive $7,000,000 guaranteed death benefit Example based on 65 year old male & 62 year old female standard non-smokers funding Legacy Advantage Survivorship UL policy with joint coverage continuation rider; 1035 exchange of $1,050,000 cash surrender value; death benefit guaranteed to age 120. Clients may incur surrender charges or other fees as a result of this type of exchange. Advisors and clients should consider these potential charges in determining the appropriateness of replacing existing coverage. Hypothetical Example. Actual Results Will Vary.

19 For Producer or Broker/Dealer Use Only. Not for Public Distribution. Business Owners

20 For Producer or Broker/Dealer Use Only. Not for Public Distribution. George & Spencer Set up a cross-purchase when business was worth $4,000,000 7 years ago Were 50:50 owners Each bought a $2,000,000 Term policy on the other George paid more for Spencer’s policy Smoker and weight problems Balanced costs with salary bonus Case Study For Illustrative Purposes Only

21 For Producer or Broker/Dealer Use Only. Not for Public Distribution. 50% owner –$2,000,000 stake –$2,000,000 coverage Older Plan: 7 Years Ago 50% owner –$2,000,000 stake –$2,000,000 coverage George Spencer

22 For Producer or Broker/Dealer Use Only. Not for Public Distribution. 33% owner –$3,000,000 stake –$2,000,000 coverage Where Do They Stand Today? 33% owner –$3,000,000 stake –No coverage Betty 33% owner –$3,000,000 stake –$2,000,000 coverage Spencer George

23 For Producer or Broker/Dealer Use Only. Not for Public Distribution. Insurance Review: Issues Amount of Coverage –George & Spencer - $1,000,000 shortfall –Betty – no coverage Type of Coverage –Currently term insurance –Consider permanent coverage as an alternative? Structure of the Buy-Sell –Cross-Purchase or Redemption –Which is best for current and evolving business needs

24 For Producer or Broker/Dealer Use Only. Not for Public Distribution. Structure of the Buy-Sell Existing Plan Cross-Purchase 2 policies, 2 owners $2,000,000 per policy Options Maintain Cross-Purchase –6 policies, 3 owners –$1,500,000 per policy Change to Redemption 5 –3 Policies, 1 owner –$3,000,000 per policy 5 The income tax-free status of life insurance death benefit proceeds is very valuable. To ensure that the death proceeds of an employer- owned policy can retain this benefit, it is essential to comply with the requirements of Internal Revenue Code Section 101(j).

25 For Producer or Broker/Dealer Use Only. Not for Public Distribution. Changing Coverage: Potential Benefits Changing to permanent coverage –Policy cash values can build business assets –Can offer lifetime benefits –Can structure the policy to build cash value that can be used to supplement income 6 Underwriting changes –Spencer no longer smokes, has lost weight Product changes –May want to weigh new policy designs What options are there with current coverage –Improved pricing may drop costs 6 Loans and withdrawals will decrease the cash value and death benefit. Tax-free distributions assume that the life insurance policy is properly structured, is not a modified endowment contract (MEC), and distributions are made up to the cost basis and policy loans thereafter. If the policy has not performed as expected and to avoid a policy lapse, distributions may need to be reduced, stopped and/or premium payments may need to be resumed. Should the policy lapse or be surrendered prior to the death of the insured, there may be tax consequences.

26 For Producer or Broker/Dealer Use Only. Not for Public Distribution. Options 1 & 2: Maintain Cross-Purchase Maintain existing policies –Drop George & Spencer’s coverage to $1,500,000 each –Purchase coverage on Betty –Have Betty buy coverage on George & Spencer OR Price out new coverage –Drop term in favor of cash value life insurance Use cash value for lifetime buy-out

27 For Producer or Broker/Dealer Use Only. Not for Public Distribution. Options 3 & 4: Change to Redemption Plan Use existing policies –Transfer existing insurance to business –Purchase new insurance to fund any shortfalls OR Replace existing term with permanent life insurance –Use cash value to fund lifetime buyouts –Use to fund nonqualified (NQ) benefit programs Watch the tax results in your situation. Certain transfers of policies may trigger adverse income tax consequences. Please note: Clients should consult with and rely on their own independent legal and tax advisors regarding a particular set of facts and circumstances.

28 For Producer or Broker/Dealer Use Only. Not for Public Distribution. MetLife Support

29 For Producer or Broker/Dealer Use Only. Not for Public Distribution. MetLife Support Dedicated life insurance sales teams Marketing materials ePresentations Advanced Sales Center assistance for complex situations

30 For Producer or Broker/Dealer Use Only. Not for Public Distribution. What Information Will I Need? Permanent insurance –In-force ledger –Copy of policy Term policy –Copy of policy Employer benefit –Benefit information

31 For Producer or Broker/Dealer Use Only. Not for Public Distribution. MetLife Brand One of America’s largest financial companies with roots as far back as 1863 Serves over 90 of the top one hundred FORTUNE 500 ® companies 7 Recognized as the Nation’s Largest Life Insurer 8 7 MetLife. Quick Facts: Full Year Based on life insurance in-force as of December 31, 2008.

32 For Producer or Broker/Dealer Use Only. Not for Public Distribution. Legal Disclaimer Pursuant to IRS Circular 230, MetLife is providing you with the following notification: The information contained in this document is not intended to (and cannot) be used by anyone to avoid IRS penalties. This document supports the promotion and marketing of insurance products. Your clients should seek advice based on their particular circumstances from an independent tax advisor. MetLife, its agents, and representatives may not give legal or tax advice. Any discussion of taxes herein or related to this document is for general information purposes only and does not purport to be complete or cover every situation. Tax law is subject to interpretation and legislative change. Tax results and the appropriateness of any product for any specific taxpayer may vary depending on the facts and circumstances. You clients should consult with and rely on their own independent legal and tax advisers regarding their particular set of facts and circumstances. Prospectuses for Equity Advantage Variable Universal Life, and for the investment portfolios offered thereunder, are available from MetLife. The policy prospectus contains information about the policy’s features, risks, charges and expenses. Investors should consider the investment objectives, contract features, risks, charges and expenses of the investment company carefully before investing. The investment objectives, risks and policies of the investment options, as well as other information about the investment options, are described in their respective prospectuses. Clients should read the prospectuses and consider this information carefully before investing. Product features and availability may vary by state. MetLife life insurance policies have limitations, exclusions, charges, termination provisions and terms for keeping them in force. There is no guarantee that any of the variable investment options in this product will meet its stated goals or objectives. The cash value is subject to market fluctuations so that, when withdrawn, it may be worth more or less than its original value. Guarantees are subject to the claims paying ability and financial strength of the issuing insurance company. Life insurance is medically underwritten. Clients should not cancel their current coverage until their new coverage is in force. Surrender charges may be due on an exchange of one contract for another. A change in policy may require a medical examination. Surrenders may be taxable. Clients should consult their own tax advisors regarding tax liability on surrenders. Life insurance products are issued by MetLife Investors USA Insurance Company, Irvine, CA 92614, Metropolitan Life Insurance Company, New York, NY 10166, and in New York only by First MetLife Investors Insurance Company, New York, NY All guarantees are subject to the claims-paying ability and financial strength of the issuing insurance company. Variable products are distributed by MetLife Investors Distribution Company, Irvine, CA All are MetLife companies. July 2011 Insurance Products Are: Not A Deposit Not FDIC-Insured Not Insured By Any Federal Government Agency Not Guaranteed By Any Bank Or Credit Union May Go Down In Value BDVL21686 L [0812] © 2011 METLIFE INC. © Peanuts Worldwide


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