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Indexed Universal Life

Indexed UL Products: A safe haven in today's volatile economy  

presented by

Alan Watson CLU, ChFCWealth Designs Advisors Group 

Indexed UL is the safe and lucrative growth strategy for permanent insurance cash values. 

Knowing how to use this valuable product in today's volatile market can provide for your clients both a safe haven and significant upside potential, all without subjecting cash values to market risk.

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Universal Life Insurance

What is Indexed Universal Life?

Although indexed universal life has the same flexible death benefit and premium changes as a traditional universal life policy, it credits interest differently.

Rather than apply a company declared interest rate, interest is credited to the client's policy based in part on the movement of an index over a period of time, usually 1 year.

The policy owner does not invest money directly in the index or stock market.

Why Indexed UL?

Why Indexed UL?

Why Indexed UL?

What can Indexed UL provide my client?

In addition to the widely-known characteristics of traditional universal life, such as premium and death benefit flexibility and tax-deferred growth, indexed universal life offers the following advantages: Competitively priced permanent protection Minimum interest rate guarantees Variable loan & withdrawal capabilities High growth potential 

Why sell IUL?

Upside potential with downside protectionIndexed universal life can illustrate a potentially higher rate of return and offers downside protection from market downturns.

Market is booming and Indexed Universal Life is "hot”The annualized premiums of indexed universal life have grown significantly over the past few years. The potential for further growth is especially great due to a promotion by the industry and changes in alternative products.

IUL Sales

Indexed Universal Life Annualized Premium *2000 = $63 Million2002 = $96 Million2004 = $124 Million2005 = $186 Million2006 = $338 Million* Source: Advantage Compendium

From 2006 through 2010, IUL sales grew 192%:an average of 38% annually, according to LIMRA.

Why sell IUL?

Market Conditions are right. Variable universal life sales have taken a big hit as the stock market took losses in recent years. In many situations, this phenomenon is difficult to overcome. Indexed universal life offers the downside protection from such stock market losses.

Low current rates on Traditional Universal Life. A significant issue affecting traditional universal life insurance policies is the current interest rate environment. Interest rates in the 3% or 4% range may be acceptable to some clients, but many others are seeking potentially higher returns in other areas.

Market shift toIndexed Universal Life

Question:

Why has the market shifted to Indexed Universal Life?

Answer:

The shift in market interest is a result of the low interest rate environment. When rates fall to the point they have, agents and consumers start looking for another, more profitable, alternative - that alternative is indexed universal life.

Who is the ideal Indexed Universal Life Client?

Indexed universal life is ideal for clients looking for: Greater flexibility and control than term and whole life. Clients who want permanent life protection and also

want a flexible face amount, the flexible premium payment frequency, or partial withdrawal options.

Possibility of higher returns than traditional universal life.

Protection from volatility and risks of variable universal life and looking for minimum return.

Many clients are looking for the potential upside of market growth, but don't want the downside risk. Regardless of age or risk classification, many clients simply are not prepared to face the risks of variable universal life, and therefore, are interested in the minimum guarantee and upside potential of indexed universal life.

Indexed Universal Life Terminology

In order to fully understand how an indexed universal life product works, producers must also have a clear knowledge of the terms used. Listed below are some basic terms and their definitions.

Index Cap RateThe Index Cap Rate is the maximum interest rate that is used in the calculation of the Index Credit.

Index CreditThe amount credited to an Index Segment. The Index Credit is calculated and added to an Index Segment at the end of an Index Period.

Index Crediting DateThe Index Crediting Date is the date index interest is applied to the policy.

Index Crediting MethodThe method used to calculate the index change.

Indexed Universal Life Terminology

Index Floor RateThe Index Floor Rate is the minimum interest rate that is used in the calculation of the Index Credit. Note that a product with a high floor is not necessarily the best product, since often times a higher floor is accompanied by a lower participation rate or lower caps.

Index Participation RateThe portion of the index change that is used in the calculation of the Index Credit.

Index PeriodThe period of time during which an Index Credit is calculated.

Index Selection A combination of an index and an Index Crediting Method (Example: NASDAQ-100® Point-to-Point).

How does IUL work? Policy owners can direct premiums to an account that offers a fixed

rate of return (the Fixed Account), to one or more Index Selections or to a combination of both depending on what they think is right for them. Note: If the policy owner chooses, 100% of premiums can be allocated to the Index Selections.

The Fixed Account earns interest at the company's declared rate.

When premium is allocated to a particular Index Selection, an Index Segment (or bucket) is created and an Index Period begins. The Index Period is the length of time over which the index change is measured. Each premium has its own bucket.

Each Index Segment receives its own Index Credit (if any) on the Index Crediting Date (the first business day on or after the end of the Index Period).

The Index Credit is affected by partial surrenders, and is subject to the Index Participation Rate, the Index Cap Rate and the Index Floor Rate.

Indexed & Fixed Account Options

While the client does not invest directly in the stock market or index, they choose an index, which is used to calculate any Index Credit. Typical index options include: DJIAsm

NASDAQ-100®

S&P 500®

Russell 2000 ®

Hang Seng®

EURO STOXX 50®

Multi-Index or Blend Group

The client can choose the index in which they would like to allocate premiums. The client may change allocations from one index to another or with each new premium payment.

Index Crediting Methods

Possible Crediting Methods with an indexed universal life policy include:

1) Annual Point-to-Point

2) Inverse Point-to-Point

3) Daily Averaging

4) Multi-Index Point-to-Point

5) Monthly Averaging

For each method, the change in index value, if any, is subject to the Index Participation Rate, Index Cap Rate and Index Floor Rate. Crediting Methods vary by product.

Buckets

With the flexibility of indexed universal life, premium may be received at different times. Indexed universal life uses Index Segments, or buckets, to handle each payment.

Each premium payment is handled as a separate bucket. A policy with monthly premiums could have a minimum of 12 different buckets. That is to say, 12 different index starting points and 12 different possible credited interest rates and 12 different annual reset points to start the next Index Period. There number of buckets a policy may have is unlimited.

Credited Interest Rate Any Index Credit applied to your policy equals the

Index Segment value at the beginning of each Index Period, minus any partial surrenders, multiplied by a credited interest rate based, in part, on any index change.

The credited interest rate may differ from the actual index change because of three features: 1) Index Cap Rate; 2) Index Participation Rate; and 3) Index Floor Rate.

Uses of Indexed Universal Life

Retirement Supplement/ LIRP

College Funding

Low Cost Protection

Buy-Sell

Mortgage Protection with Early Payoff

Starter Policy

Limited Pay Plans

Policy Rescue/Safe Harbor

Wealth Designs Value Proposition

In summary, we offer help with any IUL case and advanced case consulting services and design sales solutions using IUL for both LIRP and Safe Haven Rescue strategies.

With our concierge approach and our multi-carrier platform, we shop the market for the best carrier fit and consult with you on our findings to prepare you for your presentation to your client.

Contact information:

Wealth Designs Advisors Group 2140 11th Avenue South, Suite 200

Birmingham, AL 35205

205.939.8070 alan@wealthdesignsag.com

www.wealthdesignsag.com