1.  Jerry Rhinehart, CIC, CLU, ChFC, RHU Panama City, FL Top Five Uses of Life Insurance

2. 1 Advantages of Life Insurance 2Create an Estate 3Fund a Business Transfer 4Pay off the Home Mortgage 5Key Person Insurance 6“Tax-Free” Retirement Replacement Learning Objectives 1

3. Please note the DISCLAIMER 2

4. 3  Tax Advantages The Advantages of Life Insurance

5. Taxation of Life Insurance  The Premiums are Not Deductible 4  Death benefit free of income tax  Benefit will be in Estate of Owner  Gifted policy could result in Gift Tax  Cash Values grow Tax Deferred – FIFO

6. Example of First In, First Out — FIFO Cash Value15,000 Paid Premiums10,000

7. Example of First In, First Out — FIFO Cash Value15,000 Paid Premiums10,000 Gain 5,000

8. The Advantages of Life Insurance 3  Tax Advantages  Benefit Advantages  Relationship Advantages

9.  What (and how important) is Relationship in our business?  As the agent you want to Build A Wall around your clients. This is especially important for a P/C agent.   Working with an Insured (life) or a Beneficiary should lead to additional sales … including P/C. Why Should Your Agency Sell Life Insurance?

10. Life Insurance Fact-Finder Questioning is the basic foundation for selling 4

11. Life Insurance Fact-Finder  Go gather data...  … and then try to sell them something! 5

12. Life Insurance Fact-Finder 5

13. 5 Emotional Selling Questioning (70% - 30% rule)

14. Life Insurance Fact-Finder followed by...

15. Life Insurance Fact-Finder

16. L&H questionnaire (pages 27-30)  L&H questionnaire (pages 27-30)

17.  Create an Estate  What is “an estate”? Life Insurance Can Be Used To... 7

18.  Create an Estate  What is “an estate”? Life Insurance Can Be Used To... 7

19. $100,000 $300,000 A View of Your “Stuff” $3,000,000 $1,000,000 $250,000 $4,650,000 8

20. What Makes Up Your Estate?

21. Everybody has an estate _________. Everybody’s estate is either __________ … or it is _________. ___________ can solve either problem. 8

22. Losses That Can Impair an Estate 7  Property Losses  Casualty Losses  Disability  Death  Loss of Employment

23. What Type of Life Insurance is Best for this Need? 7

24. Term Insurance 7 Great for Temporary Needs!  

25. Return of Premium (ROP) Term How to sell ROP using the “TWO ACCOUNTS” concept

26. Return of Premium (ROP) Term How to sell ROP using the “TWO ACCOUNTS” concept Brad Walton - Nearest Age 38 – Pref Plus / Non-Tob $1,000,000 Level Term Lincoln Benefit Life Insurance Company TrueTerm 30 Year LevelTrueTerm 30 Year Level ROP $1,390 Annual ($122 per mo)$2,410 Annual ($211 per mo) Death Benefit - $1,000,000 30 Years - $41,700 Total Prem30 Years - $72,300 Total Prem Cash returned at Age 68? - 0 -$72,300

27. Permanent Insurance 7 Great for Long-Term Needs!  Whole Life  Universal Life  Variable Life or VUL

28.  “you gotta have the piece of paper”  Create an Estate  Fund a Business Transfer Life Insurance Can Be Used To... 9

29.  “you gotta have the piece of paper”  Create an Estate  Fund a Business Transfer Life Insurance Can Be Used To... 9

30. What the Remaining Owners Really Want! Full Control of the Business Minimum Payment for the Business No Interference from the Deceased Heirs A Smooth and Prompt Transfer Continuing Line of Credit

31. The Cost of Borrowing 10  To borrow the moneyand buy-out the heirs will be extremely burden- some … and expensive  No partner – lost expertise  How much profit do you have to earn to pay back the bank?

32.  Death  Disability  Termination 10 Key Provisions of a

33.  Death  Disability  Termination  Pre-arranged Price / Formula  First Right of Refusal 10 Key Provisions of a

34. Funding the Buy-Sell  Personal Funds      Sinking Fund  Installment Payment to Heirs  Borrowed Funds

35. Funding the Buy-Sell  Personal Funds      Sinking Fund  Life Insurance  Installment Payment to Heirs  Borrowed Funds

36. 11 Examine the “Key Point” on Page 11

37. What is your Role as the Agent Concerning the Buy-Sell Process? 12 1 –Understand the Basics 2 –Know how life insurance fits 3 –Motivate your client to take action

38. What Type of Life Insurance is Best for this Need? 11

39. Permanent or Term Insurance 11  Term Insurance  Permanent Life Insurance or  First-to-Die Life

40.  Create an Estate  Fund a Business Transfer  Pay off the Home Mortgage Life Insurance Can Be Used To... 13

41. Mortgage Amount - $200,000 Mortgage – 5% Term - 30 years Monthly Payment - $1,073 Total Payout (360 mo.) - $386,280 “How Much Are You Really Paying For Your House?” 14

42. Mortgage Amortization Calculators 14

43. How do we find our “Mortgage Pay-off” prospects?  All New Homeowner’s Applications  All New Commercial Property Insurance Applications  Talk with your Realtor friends  Check the Real Estate closing at the Court House

44. What Type of Life Insurance is Best for this Need? 13

45. Permanent or Term Insurance 11  Term Insurance / Joint Decreasing 13

46. Permanent or Term Insurance 11  Term Insurance / Joint Decreasing  Permanent Life with Term Rider for Spouse – Cash Value for Future Payoff 13

47.  Create an Estate  Fund a Business Transfer  Pay off the Home Mortgage  Key Person Insurance Life Insurance Can Be Used To... 15

48. Is it possible we are insuring our PCs better than our VPs?

49. A Natural Sale for the P/C Agent Insuring the Key Person

50. Use the Comparison of “Key Equipment” Insuring the Key Person 15

51. Various Methods for Valuation  Earnings Approach  Replacement Approach  Present Value Method  Seat-of-the-Pants Method Insuring the Key Person 16

52. What Type of Life Insurance is Best for this Need? 15

53. Type of Insurance 11  Term Insurance  UL / VUL / WL with Other Person Term Riders 15

54.  Create an Estate  Fund a Business Transfer  Pay off the Home Mortgage  Key Person Insurance  Create a “Tax-Free” Retirement Fund Replacement For Loved-Ones Life Insurance Can Be Used To... 17

55.  Prior law left a lot to be desired regarding distributions from qualified plans  Terms:  Required Beginning Date (RBD)  Required Minimum Distribution (RMD)

56.  The date when a participant MUST begin taking their retirement money  IRAs – required at 70½  Non-IRAs – normally at 70½, but later is possible  A Roth IRA has no RBD for the account holder

57.  The minimum dollar amount that can be taken by the account holder from all cumulative qualified plans  The amount taken is now subject to ordinary state and federal income tax  Penalty for under-payment – 50%

58.  This year the account holder’s RMD was $40,000 … but took nothing.  The financial institution is required to “rat” you out! Now look what happens with the IRS:

59.  This year the account holder’s RMD was $40,000 … but took nothing.  The financial institution is required to “rat” you out! Now look what happens with the IRS:  $20,000 penalty … that really hurts!

60. 18 Roll-Under … Now What is That?  Using Annuities and Life Insurance to greatly increase the ultimate payout... and with possible tax advantages. -Take a distribution from all Q-Plans (maybe rolling to an annuity) and use to pay for life insurance. -All payout will be income-tax (and estate tax) free when received by the beneficiaries … but only if the kids are NOT the beneficiaries of the qualified plans!

61. 18 Roll-Under … How Does It Work?  Bob currently has his 3 children listed as beneficiary of his $1.5 million in the Q-Plans  Bob – age 70 – qualifies for a $1.5 million life policy ($42,000 annual premium). (ILIT owns, pays and beneficiary)  Bob “rolls” all his Qualified money into an annuity and takes @$65,000 annually (taxable = @ $42,000 after-tax)  Bob name s his favorite charity the beneficiary of his Qualified Annuity

62. 18 Roll-Under … How Does It Work?  Upon Bob’s death … the charity receives the remainder value of his annuity and his estate receives a tax deduction on his last tax return. The kids receive NONE of the Q-Plan proceeds nor do they have any tax liability on these proceeds.  Upon Bob’s death … the ILIT receives the $1.5 free of any tax.  Upon Bob’s death … each child receives – from the ILIT – $500,000 free of any tax.

63. Using Life Insurance at Older Ages 20 Pro’s and Con’s

64. What Type of Life Insurance is Best for this Need? 19

65. Permanent or Term Insurance 11  Term Insurance  Permanent Life  WL - UL - VUL 19 

67. - Charitable Gifting Uses 21

68. State Road 50 21

69. State Road 50 21

70. State Road 50 3% $7,500 21

71.  Can You Deduct the Premium?  Gifting Issues  Ownership / Beneficiary Issues 21

72. Permanent  Permanent Life  WL - UL - VUL  Existing Policies no longer needed?? 22

73. - Pension Payout Protection 23

74. 24

75. Permanent  Permanent Life  WL - UL - VUL  Existing Policies?? 23

76. - Equalize Inheritance 25

77. 26 Using Life Insurance to Equalize an Inheritance  Dad owns business - $1,000,000 value  Daughter active in the business - being groomed to take it over  Son - not involved in the business  Dad dies - 50/50 to each child

78. 26 Using Life Insurance to Equalize an Inheritance  Dad owns business - $1,000,000 value  Daughter active in the business - being groomed to take it over  Son - not involved in the business  Dad dies   - 50/50 to each child

79. 26 Using Life Insurance to Equalize an Inheritance

80. Term or Permanent ife - short term solution only  Term Life - short term solution only  Permanent Life  WL - UL - VUL  Second-to-Die (if a couple) 25

81. Top Five Life Insurance Needs  Jerry Rhinehart Panama City, FL