Protect Yourself Against Disability’s Triple Threat Individual Disability Insurance [presenter name] [title] [company]

Disability’s Triple Threat Business owners face a triple threat 1.Maintaining your lifestyle 2.Keeping the doors of your business open 3.Keeping your business investment intact

Income Protection: Maintaining Your Lifestyle Individual Disability Income insurance

What is your most valuable asset? 1 “ Average new car price zips 2.6% to $33,560”, May 4, National median existing single-family sale, 2014, National Association of REALTORS®. 3 Projected cumulative income of a 35-year-old earning $6,250/month ($75,000 annually), assuming a 5% annual increase to age 65. Your ability to work and earn an income is your most valuable asset. HOME $212,400 2 CAR $33,560 1 INCOME $4,983,000 3

Important questions to ask What would happen to your income? How would you maintain your lifestyle? Where would the money come from to pay bills? What happens to your retirement savings and other financial goals? Do you have Group Long-Term Disability insurance in place? Are the benefits taxable?

Few could live on 42% of their income Available disability income sources Chart based on $6,250 gross monthly income ($75,000 annually), with 60% group long- term disability program, assuming a 30% tax bracket for Federal, State and FICA. Group long-term disability (LTD) insurance coverage

Maintaining Your Lifestyle Personal income protection so you can: Provide for your family if you become too sick or hurt to work Maintain your lifestyle without draining savings or business profits Protect a higher level of your income (in the event you have Group LTD insurance) Individual Disability Income (DI) insurance

Risk management: Keeping the doors of your business open Overhead Expense & Key Person Replacement Insurance

When disability strikes, it affects the business, too Healthy and working Revenue Profit Expenses Disabled and not working Debt Business

Important questions to ask If you are unable to work, would your business be able to keep the doors open? How would business expenses get paid (rent, salaries, utilities, etc.)? Would you have to turn clients away? How would you meet your business loan obligations? What would happen if a key employee became too sick or hurt to work?

Source: Commissioner’s Individual Disability Table A, Equally Weighted, All Occupation Classes, Unisex Likelihood of disability Chances of a disability lasting 3 months or longer (before age 65) Age1 Owner2 Owners3 Owners %70.%83.6% %64.5%78.8% %54.8%69.6% %35.4%48.1%

Covering business expenses Possible income sources Business partner Creditors Liquidate assets Personal savings Sell the business

Keep the doors of your business open Overhead Expense insurance With this coverage: Fixed business expenses are reimbursed You don’t rely on creditors Your savings and investment plans aren’t jeopardized Avoid foreclosure or liquidation Premiums are tax-deductible Covered business expenses Replacement salary Lease for building, furniture and equipment Malpractice, property and liability insurance premiums Utilities, phone bills, office supplies, postage Accounting, billing, legal fees And more Business loan protection 1 helps cover your loan obligation so that your loan does not go into default. 1 Not available in all states.

Keep the doors of your business open Key Person Replacement insurance 1 Protects the business from the loss of a key employee Business pays for and is the owner of the policy Any benefits received can be used at your discretion, but cannot be assigned to the key employee Helps demonstrate financial stability to creditors, shareholders and other stakeholders 1 Not available in all states.

Succession planning: Keeping your business investment intact Disability Buy-Out Insurance

Important questions to ask Would you want to sell your share of the business? Would you want to buy out your partner? How would the price be determined? Where would the money come from? Do you have a buy-sell agreement? Is it properly funded? If you or one of your partners becomes disabled …

What happens when an owner can’t work Become a drain on income while not contributing to revenue Have different priorities for the business income and profits and may not want to reinvest profits Decide to let spouse or relative take over their role in the business Be able to pay the disabled partner an income and maintain the business Have funds to buy the disabled partner out Want to share business decisions with the disabled partners family The healthy partner may not: The disabled partner may:

Planning ahead with a buy-sell agreement Assures a definite price and buyer Financial future is no longer contingent on the business’s success Avoids negotiation of price Assures complete and orderly transfer of ownership Retains control of the business Continuity and credibility for customers and creditors Buy-Sell Agreement: Stipulates how ownership interest is transferred when an owner departs the business due to events like death or disability. Disabled owner advantages Healthy owner(s) advantages

Keep your business investment intact Disability Buy-Out Insurance Funds a buy-sell agreement on a reimbursement basis Benefits are received income-tax free Other Buy-Sell Agreement funding options Current cash flow Establish a sinking fund Borrow the funds

Multi-life Discount OE + DI + DI = 20% discount A business owner purchases OE and employees purchase their own DI DBO + DBO + KPR = 20% discount Two business owners purchase DBO policies and pay premiums for a KPR policy on an employee DI + DI + DI = 20% discount Three employees with a common employer purchase DI policies Receive a 20% discount when three or more employees with a common employer purchase any Principal Life Individual Disability Insurance policies. 1 1 In Ohio, Multi-Life Discount is not available for Key Person Replacement, OE or Disability Buy- Out policies. This includes any Multi-Life Discount given for fully underwritten, Simplified Multi- Life and Guaranteed Standard Issue cases.

For more information Name Title Phone | Principal Life Insurance Company, Des Moines, IA 50392, Disability insurance has limitations and exclusions. For costs and coverage details, contact your Principal Life financial representative. This information is provided with the understanding that The Principal is not rendering legal, accounting, or tax advice. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, or accounting obligations and requirements. No part of this presentation may be reproduced or used in any form or by any means, electronic or mechanical, including photocopying or recording, or by any information storage and retrieval system, without prior written permission from the Principal Financial Group ®. DI | 11/2015 | © 2015 Principal Financial Services, Inc.