Introduction to Whole Life Insurance · 2018-07-09 · • Equitable Life is the largest federally...
Transcript of Introduction to Whole Life Insurance · 2018-07-09 · • Equitable Life is the largest federally...
Introduction to Introduction to Whole Life Insurance
John PerreRegional Life Sales Manager
• Introduction to Equitable Life• Stock company VS a mutual company• Benefits of dealing with a Mutual Company• Introduction to Participating Whole Life• Where does it fit?
Agenda
• Where does it fit?• Dividends• Features• Sales Concepts• Summary
• Equitable Life is the largest federally regulated mutual life insurance company in Canada.
• Our participating whole life policyholders
Introduction to Equitable Life
• Our participating whole life policyholders have received dividends every year since we launched participating whole life in 1936.
• Eligible to share in the distributable earnings of the PAR Account in the form of Dividends.
• Voting rights.• Focused on long-term interests, not driven by
Benefits of dealing with a Mutual Company
• Focused on long-term interests, not driven by shareholder pressures for quarterly results.
• We remain focused, stable and strong while stock companies consolidate.
• Customers know who they are dealing with now, and in the future.
Introduction to Participating Whole Life
The evolution of whole life insurance
– Term → Whole Life → Universal Life
– First whole life introduced in 1762
Introduction to Participating Whole Life
– Longest standing form of permanent insurance
– Precursor of UL
– Whole life’s popularity can fluctuate based on market volatility
Canadian Life Insurance Sales
Annualized Premium
as at December 31, 2010
36%31%
33%
Univeral Life
Whole Life
Term
Source: 4th Quarter 2010 LIMRA Canadian Individual Life Insurance Sales
Canadian Life Insurance Sales - Premiums
Sales by Total Annualized Premium
29%35%
2012
Source: 4th Quarter 2011 LIMRA Canadian Individual Life Insurance Sales
36%
Term Whole Life Universal Life
Canadian Life Insurance Sales
Number of Policies
as at December 31, 2010
Source: 4th Quarter 2010 LIMRA Canadian Individual Life Insurance Sales
26%
19%
55%
Univeral Life
Whole Life
Term
Canadian Life Insurance Sales - Policies
Sales by Policy Count
25%
2012
Source: 4th Quarter 2011 LIMRA Canadian Individual Life Insurance Sales
54%
21%
Term Whole Life Universal Life
Term Insurance Par Whole Life Insurance
PremiumPremium
Term Life vs Whole Life
Premium
Death Benefit Cash Value Death Benefit
Participating Whole Life
Permanent need
Higher cost but opportunity to use dividends to potentially reduce the premium
Term Insurance
Temporary need
Lower initial cost
The Key Differences
premium
Accumulates a cash value
Eligible to receive dividends
No cash value
Not eligible to receive dividends
Convertible to permanent insurance
Par Whole Life Universal Life Insurance Insurance
Monthly (unbundled) ChargesPremium
Whole Life vs. Universal Life
Monthly (unbundled) ChargesPremium
Death Benefit Cash Value Death Benefit Cash Value
• Low-cost permanent life insurance protection• Flexibility
– Premium Holiday– Riders and Benefits– Death Benefit Configurations
The Key Similarities
– Death Benefit Configurations
• Tax-deferred Cash Accumulation• Access to Cash
– Withdrawals– Policy Loans– Collateral Loans
• Guaranteed “limited pay” periods
Participating Whole Life
The company manages the cash accumulation
•Hands-off investment
Dividend Scales can increase or decrease, but can never be “negative”
Universal Life
The client/advisor manages the cash accumulation
•More investment choices/decisions
Account values can earn negative and positive interest
The Key Differences
decrease, but can never be “negative”
Premium is “bundled”
Little premium flexibility
Guarantees
•Cash Values
•Death Benefits
•Premiums
and positive interest
Premium is “unbundled”
A lot of premium flexibility
Limited Guarantees
•COI Charges
•Administration Charges
•Minimum Interest rates on some GDAs
The Situation
– Male, age 43, non-smoker
– Low risk tolerance
The Need
Whole Life or UL? – Case Study
The Need
– $750,000 Permanent Insurance
– Premiums payable for a maximum 20 years
– Cash available to supplement retirement income between age 65 and 69
– Currently maxing out RRSP
– Has $20,000/year available to spend
Equimax®
• Equimax Estate Builder
Equation Generation® IV
• Premiums payable for 20 years
• Level Protector as Death Benefit
Whole Life or UL? – Case Study
The Choices
• 20 Pay
• Dividend Option – EnhancedProtection with Lifetime guarantee
• $650,000 of basic with $100,000 of Enhancement
• Excelerator Deposit Option added toincrease premium to $20,000
• Level Protector as Death Benefit Option
• YRT as COI type
• Portfolio Interest Option electedearning 4.0% interest (plus investment Bonus)
• 8% increases to tax shelter the depositand growth
Equimax Estate Builder*
Equation Generation IV
Premium $20,000 $20,000
Death Benefit $750,000 $750,000
Guar. CV Age 65 $409,500 N/A
Age 85 $557,700 N/A
Total CSV Age 65 $764,865 $745,987
Age 70 $1,025,446 $961,211
Age 85 $ 2,125,683 $2,038,313
Total DB Age 65 $1,369,362 $1,160,907
Age 70 $1,653,583 $1,348,160
Age 85 $2,619,828 $2,038,313
*Equimax values are based on the current dividend scale
Whole Life – The Right Choice if…
The Need Par Whole Life – The Solution
Guarantees • Death Benefit, Cash Values and Premiums
Stable investments • Long-term investment focus of the Participating Account
Tax-sheltered growth • Dividends accumulation on a tax-sheltered basis. Tax-sheltered growth • Dividends accumulation on a tax-sheltered basis. (depending on dividend option selected.)
• Stable, hands-off investments managed by the company.
• Flexibility to choose from higher long-term value or higher early cash values within the first 20 years
Access to a cash reserve • Access to the cash value for any reason.• Eligible for a Collateral Loan of up to 90% of the
CSV (subject to approval by the lending institution)
• Equimax® is a Participating Whole Life Insurance Policy
• Dividends are one of the UNIQUE features
Reaping the rewards of ownership
UNIQUE features
• Par policyholders are eligible to share in the distributable earnings of the PAR Account in the form of dividends.
• Death benefit structure for all Dividend Options except Enhanced Protection
Basic Permanent Protection
• Paid in Cash
– Appealing to clients who like to get a little something back each year
• Premium Reduction
Dividend Options
• Premium Reduction
– Appealing to clients who are looking for a potentially cost-effective way to pay for their permanent insurance
• On Deposit
– Operates like a savings account
– Dividends earned are automatically deposited with Equitable Life® and earn a competitive
Dividend Options
with Equitable Life® and earn a competitive interest rate
• Paid-Up Additions (PUAs)
– Dividends are used to purchase PUAs which are added to the basic
Dividend Options
are added to the basic permanent insurance
– The Cash Value of PUAs accumulate on a tax-deferred basis
• Enhanced Protection
– Consists of a mix of permanent life insurance and one-year term insurance
– Two guarantee options:10 Year and Life
Dividend Options
– Two guarantee options:10 Year and Life
• Enhanced Protection
– Dividends are used to purchase One Year Term Insurance and PUAs
– PUAs replace the One
Dividend Options
– PUAs replace the One Year Term Insurance
– Cash value of PUAs accumulate on a tax-deferred basis
• Enhanced Protection
– Two Enhancement Guarantees
• 10-Year Guarantee
• Lifetime Guarantee
Dividend Options
• Lifetime Guarantee
• Other difference is the ratio of basic permanent insurance to one-year term enhancement
• 10-Year Guarantee = smaller basic permanent insurance = lower premium
How are dividends calculated?
• Mortality and lapse experience
– Cancelled policies (lapse assumptions)
– Paid Death Benefits
The Participating Account
• Taxes and expenses
– Difference between expected and actual
– Can result in either a positive or negative impact to dividends
Investment performance
The Participating Account
As of September 30, 2011
Strong performance of the PAR Account
*data as of December 31, 2010
NEW! Understanding PAR whole life
1038
How dividends affect par whole life insurance
Impacts of Dividends
Actual results will vary.
Premium offset can “potentially” occur
– Dividends may be sufficient to pay the required premiums at some point in the future
– Policy can “pay for itself”
Premium Offset
– Policy can “pay for itself”
– Dividends are NOT GUARANTEED. Watch for dividend scale changes
• Dividends may result in tax reporting:
– At the time they are paid or credited
Taxation of Dividends
credited
– Annually as income is generated on accumulated dividends on account
– Upon disposition (of either the dividend or the policy)
Equimax – What’s New?
Choice of two plan types
Equimax – Plan types
Equimax Estate Builder
Equimax Wealth Accumulator
Higher long-term value. Ideal for covering estate taxes and fees.
Higher early cash values within the first 20 years. Ideal for building wealth to access to fund education, cover business expenses or as an emergency fund.
Which plan type is right for your client?
Choice of two premium payment options– Life
• Level premiums guaranteed for life and payable for the life of the policy
Equimax – Payment options
life of the policy
– 20 Pay • Level premiums guaranteed and payable for 20 years
• Excludes premiums for additional Riders and benefits that may extend beyond 20 years.
Paid-Up Additions• Total death benefits and
cash values increase as soon as the extra deposits
Enhanced Protection• Policy may reach
the Dividend Conversion point earlier
Excelerator Deposit Option (EDO)
are madepoint earlier
• Single Life
• Joint First-to-Die (2 lives, adults only)
• Joint Last-to-Die (2 lives, adults only)
Coverage Options
• Joint Last-to-Die (2 lives, adults only)
Guarantees– Death Benefit– Premiums– Cash Values – Reduced Paid-Up Insurance
Guarantees & Flexibility
– Reduced Paid-Up Insurance
Flexibility– Premium Holidays– Cash Accessibility
• Withdrawals• Policy Loans• Collateral Loans
Riders or Benefits Available on:Disability Waiver of Premium Adult plans only; option to add for children
at age 21
Applicant’s Death and Disability Waiver of Premium
Children’s plans only
Additional Accidental Death Benefit Adult plans only
Optional Riders and Benefits
Additional Accidental Death Benefit Adult plans only
Guaranteed Insurability Option Adult plans only (18+)
Flexible Guaranteed Insurability Option Children’s plans only
Children’s Protection Rider Adult plans only
10/20 YRCT Life Insurance Rider Adult plans only
• Estate Creator
• Tax Protector
• The Lasting Gift
Sales Concepts
• The Lasting Gift
• Use a tax-sheltered vehicle to create aninstant estate
• Preserve an estate
Estate Creator
• Preserve an estateby covering tax bills
The Situation– Male age 52, Non-Smoker– Maximizing his RRSP (in
GIC’s)– Conservative investor– Looking to leave an estate
for his 3 children to share
Estate Creator – Case Study
for his 3 children to share
The ChoicesConservative Investment
• GICs
• Invests $9,492.50/year 20 years, 6% before tax interest rate
Equimax Estate Builder
• $250,000 Death Benefit, PUAdividend option
• Premiums $9,492.50/year for 20years
Equimax
Estate Builder
20-Pay
Alternative
Investment
@ 6% (pre-tax)
Estate
Advantage
Age Total Death Benefit*
Total Estate Value
53 $250,256 $9,777 $240,479
60 $264,428 $86,943 $177,485
65 $310,350 $152,699 $157,651
70 $391,619 $228,929 $162,690
75 $487,993 $287,080 $200,913
85 $694,062 $385,812 $308,250
100 $1,036,947 $601,082 $435,865
* Equimax values are based on the current dividend scale
Proceeds used to cover:
– Final expenses
– Capital gains taxes
Tax Protector
– Income taxes
– Probate fees
The Situation– A couple:
• Male, non-smoker, age 51 • Female, non-smoker, age 53 • $300,000 tax liability on the last death
Tax Protector – Case Study
• $300,000 tax liability on the last death• Already own life insurance to cover funeral expenses
– Assets• $325,000 Non-Registered Assets• $400,000 RRSP/RRIF Assets• Cottage…Paid $75,000 Worth $275,000
The Solution– $300,000 Equimax Estate Builder, Joint Last-to-
Die with Life Pay Premium– Enhanced Protection with Lifetime Guarantee– Premium of $4,277 annually (This is less than 2% of their
Non-Registered Assets)
Tax Protector – Case Study
Non-Registered Assets)
– Clients protect their estate by transferring taxable non-registered assets to a tax-exempt life insurance plan
Why it works?
– Tax liability occurs on the death of the surviving spouse
– Using Enhanced Protection makes the coverage more affordable. The premium is based on the
Tax Protector – Case Study
more affordable. The premium is based on the amount of basic insurance coverage not the total amount, offering more total coverage for a lower premium.
– Using the Lifetime Guarantee means that as long as the premiums are paid, the total death benefit will be at least equal to the $300,000 needed
The Lasting Gift
Target Market
– Policy Owner = Grandparents or Parents
– Insured = Child or Grandchild– Insured = Child or Grandchild
– Provide a paid-up insurance policy with values their child or grandchild can use in any they wish
• Funding Education
• Inheritance
The Situation– Proud grandmother of 2 year
old Natalie
– $100 a month budget
Lasting Gift – Case Study
The Need– Locking in insurability at child rates
– Guarantee their right to purchase additional insurance without evidence
Other considerations– Allow access to the cash value if needed
The Solution– Equimax Estate Builder 20 Pay plan with PUAs
– Flexible Guaranteed Insurability Options($125,000 at age 21; $125,000 at age 25, $250,000 at age 30)
Lasting Gift – Case Study
Guaranteed Cash Value Total Cash Value Total Death Benefit
At issue 0 0 89,676
Age 20 10,582 18,968 184,977
Age 30 19,818 48,536 314,036
Age 65 56,765 368,164 791,025
We put policyholders first!
– No shareholders demanding short-term gains at expense of long-term focus
– All Par policyholders are eligible to share in the
Why a mutual insurance company?
– All Par policyholders are eligible to share in the success of the company
– Par Account is not diluted by shareholder transfers
• The largest federally regulated mutual life insurance company in Canada.
• Our Par policyholders are eligible to share in the success of the company
Why Equitable Life?
success of the company
– Paid dividends every year since first launched Par whole life in 1936
• Strong history of positive yield in Par Account
Marketing material – Client facing
Marketing/sales tools – Advisor Guide
ADVISOR USE ONLY
1128 (available in English, pdf only)
How Equitable Life can help
– Equitable Sales Illustrations system
• Easy to use
Equitable Life Advantage
• Easy to use
• Includes an on-screen summary
• Multiple Scenarios/reports
– Dedicated Underwriters
– Support is in your own “backyard” via your local Regional Office!
Whole Life a great enhancement to
your business
Whole Life, Equitable Life & You
This presentation is for educational purposes only. It should not be construed as legal, tax or accounting advice.
Equitable Life has made every effort to ensure the accuracy of this presentation, however accuracy is not guaranteed. If the information presented here differs from that contained in any Equitable Life policy contract, the policy contract prevails in all cases.
If this presentation contains competitive information, we've made every effort to ensure its accuracy as of the date of the original oral presentation. We cannot,
Disclaimer
If this presentation contains competitive information, we've made every effort to ensure its accuracy as of the date of the original oral presentation. We cannot, however, guarantee the accuracy and, if you have any questions regarding this information, you should contact the competitor directly.
® denotes a trademark of The Equitable Life Insurance Company of Canada. Reproduction or redistribution of this presentation, in whole or in part, without permission from Equitable Life is forbidden.
© 2012 The Equitable Life Insurance Company of Canada. All Rights Reserved.
Questions?Questions?