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all about life protection: an introduction to life protection strategies

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important notes

Please be advised that this presentation is for educational purposes only. It is not intended as legal or tax advice. Accordingly, any tax information provided in this presentation is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer. The tax information was written to support the promotion or marketing of the transaction(s) or matter(s) addressed, and you should seek advice based on your particular circumstances from an independent tax advisor.

AXA Equitable life insurance products are issued by AXA Equitable Life Insurance company, NY, NY. AXA Equitable variable life insurance products are distributed by an affiliate, AXA Advisors, LLC. All guarantees are based on the claims-paying ability of AXA Equitable Life Insurance Company.

AXA Equitable, AXA Advisors, LLC, and their agents and representatives do not provide tax and legal advice. You should consult with your attorney and/or tax advisor before making final investment or planning decisions.

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overview

The role of life insurance

What life insurance provides that no other financial product is able to deliver by itself

How much life insurance do you need or want?

Understanding different types of life insurance

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what is life insurance?

A life insurance policy is

… a contractual agreement

… in which premiums are paid

… to an insurance company

… in return for a benefit

… to be paid to a beneficiary if the policy remains in force

… until the insured’s death

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the role of life insurance

Life insurance can potentially:

CREATE an “estate” to help provide financial dignity and independence for loved ones, or to create a legacy for heirs or for a charity

PRESERVE an estate or the vitality of a business by helping to settle financial obligations that arise at death, such as estate and state death taxes, and to fund the transition of a business interest to a successor owner

PROTECT from income taxation (permanent policies only) the potential accumulation of cash value within the policy

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the role of life insurance

What life insurance cannot do:

NOT an investment — First and foremost, it is primarily a protection product

NOT a tax shelter — Life insurance is accorded certain tax advantages, but there are restrictions

NOT a speculation or a gamble — The risk is certain: everyone will eventually die, but no one can be sure of when. Life insurance transfers the “economic risks” associated with death to the insurance carrier, which in turn spreads the risk among all insureds

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no other financial product delivers all these benefits

Prudent and economical assurance of a cash estate at death

Federal- and state-income-tax-free death benefits (if paid lump-sum)

Estate-tax-free death benefits (if owned by a named party other than the estate of the insured and payable to a beneficiary other than the estate)

Not subject to probate (if paid to a beneficiary other than the estate)

Generally not subject to the lien of creditors of the insured or beneficiary (subject to state variation)

Fast payment (usually within days of receipt of notice and death certificate if death occurs after two years)

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beneficial tax treatment of cash value

If premiums and transactions keep within certain IRS guidelines...

Tax deferral of policy cash value

Tax-free withdrawals until basis (cumulative premiums) is recovered, if not a modified endowment contract

Tax-deferred loans of policy cash value — even if total policy loans exceed basis

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Under current federal tax rules, you generally may take income-tax-free withdrawals up to your basis (total premiums paid) in the policy or loans for a life insurance policy. If the policy is a modified endowment contract (MEC), all distributions (withdrawals or loans) are taxed as ordinary income to the extent of gain in the policy, and may also be subject to an additional 10% premature distribution penalty, prior to age 59 1/2, unless certain exceptions are applicable. Withdrawals reduce the policy’s cash value and death benefit and increase the chance that the policy may lapse.

beneficial tax treatment of cash value

Tax-free stream of retirement income using withdrawals up to basis, and then switching to loans — this assumes the policy remains in effect until the insured’s death, with any loan balance being repaid from the policy’s death proceeds.

No set IRS limit on premiums (unlike qualified plan retirement savings vehicles) or cash value limits as long as minimum death benefit amounts are met in order to satisfy IRS prescribed ratio of premiums to death benefit.

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how much life insurance do

you need?

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the “quick” answers

“Quick” answers…

5 to 7 times your gross income, as a bare minimum1

The U.S. Department of Justice used the following criteria to calculate the amount of compensation to distribute to the families of 9/11 victims:2

12 times annual income to couples without children

20 times earnings to those who were survived by a spouse and minor children

Sources: 1) Based on industry associations, including the American Council of Life Insurance and Life Underwriter Training Council. 2) Explanation of Process for Computing Presumed Economic Loss (Revised April 2, 2002), Department of Justice, September 11th Victim Compensation Fund of 2001.

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the “short” answer

The “short” answer…

Life Insurance Needs Analysis

A self-assessment of needs worksheet

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the “short” answer

Take into consideration…

Income Needs

Current Income

Family Income Goal

Other Income

Survivor’s Earned Income

Income-Producing Capital

Liquid Assets

Existing Life Insurance

Cash Needs Final Expenses Emergency Funds Education Funds Mortgage Other Debt

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the “comprehensive” answer

The “comprehensive” answer…

Requires completion of a comprehensive questionnaire

A detailed analysis is then prepared

Financial professional can then present you with the printed analysis showing and explaining:

The financial risks you are exposed to

The recommended strategies for those risks

The options that are available to you to address your needs

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types of life insurance

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types of life insurance products

TERM:

Level Term

Annual Renewable Term

PERMANENT:

Universal Life

Variable Universal Life

Survivorship Life

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the role of term insurance

For temporary protection needs

Temporary does NOT mean how long you can keep policy in effect, but how long is it economically efficient to keep

Typical examples of temporary needs

To cover specific debts

Until the youngest child reaches age 21

Additional coverage while dependent parent is still alive

Alternative role: When the budget simply will not allow consideration of an adequate amount of permanent life insurance

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level term

Premiums remain level and are guaranteed for a period of time, usually 10, 15 or 20 years depending on choice of plan; thereafter, premiums increase dramatically every year

Generally, 10- and 15- year plans are best suited to temporary protection needs that will last between 7 and 14 years

Generally, 15- and 20- year plans are best suited to situations when itis unlikely that the policy holder can ever afford an adequate amount of permanent life insurance

Many insurance companies allow policy holders to convert Term policies to other plans

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annual renewable term

Initial premium is generally the lowest

Premiums increase every year and will become very expensive over time

Most offer conversion to Permanent Life within limited time

Evidence of insurability may be required depending on policy terms and amounts of insurance, and the addition of optional benefits

Best used

For the shortest-term needs (5–7 years) and/or

IF conversion to permanent is likely in 5–7 years

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the role of permanent life insurance

For people who need or want…

Long-term death protection — usually 15 or more years; AND

A guaranteed level premium for guaranteed level protection for a longer period than is practical or economical using term insurance; AND/OR

To accumulate cash value, tax deferred, over a period of 15 or more years; AND

Who are currently in at least a 15% income tax bracket and expect to remain there or in a higher bracket over the long term.

* Guarantees are based on the claims-paying ability of the individual insurance carrier.

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Universal Life Insurance (UL)

Premium flexibility within company and IRS limits

Choice of death benefit options — Level or Face Amount + Policy Account Value

Ability to increase face amount, decrease face amount and change death benefit options (subject to policy limits, insurability requirements and potential charges)

Policy Account Value subject to “surrender charges” if policy is surrendered or values withdrawn; typically during the 10th to 20th years, varying by the type of policies of insurance carriers

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Universal Life Insurance (UL)

Cash Value (Policy Account Value less surrender charges, if any) may be withdrawn or “borrowed”

Variety of riders, features and optional benefits may be added for additional cost

Coverage lasts for as long there is enough cash value in the “Policy Account” to cover the monthly deductions

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Variable Universal Life Insurance (VUL)

Just like universal life insurance, but allows you to allocate a portion of your premium dollars to a separate account comprised of various investment portfolios

Variety of investment subaccount choices and can change investment choices — usually liberally, subject to reasonable restrictions

Values fluctuate based on the underlying investments

Best for:

People who are willing to take investment risks for the long-term potential rewards of the equity market

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Variable Universal Life Insurance (VUL)

Variable universal life insurance is a security.

You should not send money or make an investment without first carefully reading the prospectus, which contains:

The investment accounts into which you may allocate your premiums and accumulated value

The investment objectives of the investment subaccounts

The investment fees and expenses that will be deducted from the investment accounts

Important information, terms, conditions and limitations of the investment accounts and the policy, as well as any services that may be offered within the product

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before purchasing a variable life insurance policy

Variable life insurance investors should carefully consider the charges, risks, expenses and investment objectives of these products before making their purchases and investments. For a prospectus containing this and other information, please ask your financial professional. Read it and consider this information carefully before you invest or send money.

Investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original value. All guarantees, including death benefits, are subject to the claims-paying ability of the issuing company.

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survivorship life insurance

For two co-insureds — on one policy — who want long-term death protection to meet those financial liabilities or special needs that arise only upon the death of both co-insureds.

Estate Preservation

Business Insurance Needs

“Special Needs”

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optional riders and benefits

Availabilities of optional riders and benefits vary from company to company at additional cost. The most common ones are:

Long-Term Care Benefit — Enables insured to receive a portion of death benefit during lifetime in the event insured is unable to perform 2 or more “Activities of Daily Living” (ADLs)*

Disability Premium Waiver — Waives the monthly deduction charges if the insured meets the definition of disability and other conditions stated in the policy

Accidental Death Benefit — Pays mostly twice the death benefit if death occurs by accident

Children’s Term Rider — Provides convertible term life insurance protection on juvenile (0–17) children of the insured

There are conditions and limitations that apply. All should be carefully reviewed before purchase.

* ADLs include bathing, dressing, eating, continence, toileting, and transferring.

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summary

No BEST solution for all

But most appropriate strategy

for YOU

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where do you go from here?

Do it yourself

Work with others

Work with us

Don’t procrastinate; timing is important

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workshop evaluation

Please complete evaluation form and hand it in before you leave

Schedule time to meet for a personal consultation

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thank you