Insurance Community University Insight on Life Insurance The webinar will begin shortly. There is no audio at this time. This presentation is being recorded

Insurance Community University

Insight on Life Insurance

•The webinar will begin shortly.•There is no audio at this time.•This presentation is being recorded for your viewing pleasure at a future date.•The attendance and proctor forms are available under ‘Materials’ in the Webinar’s Console to the right.•The PowerPoint presentation is also available under ‘Materials’.•You will receive the course number for your state near the end of class.•Use the ‘chat’ window for questions on the content.

Good things you should know…


Welcome to your Insurance Community University

• All of you are currently on mute – Un-mute your own system– Telephone Option

• Select Telephone on your screen• Dial in the PIN number so that your number becomes active

– Microphone and/or Speaker Option• You can use this option if you have a headset that you use with

your computer

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Audio


Participation & Chat Window

• You will receive information from the monitor via the ‘Chat’ window. – Please locate window in the control panel

• Q & A is welcomed during the presentation and at the end of the presentation

• You will find the question box on your control panel– Write your question in that box and send it to the presenter/organizer

• The presenter will take those• questions in the order submitted

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DOI Requirements

• When you see a slide with the hand up symbol, touch the “hand” icon on your control panel– Click ONCE only

• If you do not raise your hand, the monitor will be in contact with you in the chat box

• If you are in a group, the designated proctor is responsible to make certain you are all in attendance at all times

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= Hand is down


Polling

• Throughout the class we will be conducting periodic polls

• We need 100% participation on the polls• The polls are intended to check

participation but also to create discussion topics throughout the presentation

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Forms To Complete for CE

• After class ends– Return attendance form– Proctors – return your form to email

address

• Email address is in chat window or in email sent to you today

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DOI Requirements

• We will file your hours with the DOI after the completion of this webinar and we have received the attendance form.

• You have 48 hours to return the form• You will be sent a Certificate of

Attendance/Completion by email. Please retain this for your records for five years.

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Disclaimer

Insurance forms and endorsements vary based on insurance company; changes in edition dates; regulations; court decisions; and state

jurisdiction. This instructional materials provided by Insight is intended as a general guideline and any interpretations provided by

Insight do not modify or revise insurance policy language. The authors of these materials, Insight Insurance Consultants is a

division of Insight Consulting and Management Inc. and Quick Life. In providing these materials, Insight assumes neither liability nor responsibility to any person or business with respect to any loss

that is alleged to be caused directly or indirectly as a result of the instructional materials provided.

Copyright 2010 – 2013 All Rights Reservedwww.insurancecommunitycenter.com

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Your Instructor Today

Presented by: George Fraser, Director of Annuities

Quick Life, a strategic partner of the Insurance Community Center

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About George Fraser, III• George Fraser has over 40 years of Life

and Annuity sales experience. In that time, he has acted as an agent, General Agent and Vice President of Retail Sales for leading Insurance providers.

• George has served as National President of GAMA International, Chairman of the Board for AMTC as well as committee work for LIMRA. He also serves as a Director for Rainmaker Advisory LLC a leading consulting firm within the retail insurance broking sector.


Polling Question #1

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What this course will cover:

• Types of Life Insurance– Term Insurance– Universal Life Insurance– Whole Life Insurance– New Product design

• Personal uses for Life Insurance• Business uses for Life Insurance• Marketing Programs


Types of Life Insurance

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Term Life

• Level term for a specific period• Contracts are written for specific periods

of time

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Term Life• 5 year, 10 year, 15 year, 20 year and 30

year term• At the end of the written term premiums

increase dramatically or the insured can rewrite with evidence of insurability

• Many contracts have a conversion option• Most carriers give volume discounts

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Term Life

• Carriers typically issue in 4 underwriting classes

• Super preferred• Preferred• Standard• Multiple substandard classes

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Decreasing Term Life

• Written for specific periods• Reduces at a uniform rate• Level premium

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Universal Life Insurance

• Two policy forms• Fixed universal life• Variable universal life

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Universal Life InsuranceBasic Policy Design • The life Insurance policy is unbundled• Policy holder retains the risk

– Premiums can be variable as long as enough money in subaccount to cover cost of insurance

– Minimum premium– Target premium– Maximum premium

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Universal Life InsuranceBasic Policy Design • Cost of Insurance is not guaranteed and

can be changed by company• Death benefit is typically has two

options– Level death benefit– Face amount plus cash value of contract

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Polling Question #2

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Modified Endowment Contract (MEC)• Law changed in 1988 to curb abuses in

contract• The 7 pay test determines MEC status• If contract fails MEC test it looses its tax

advantage features• Once a MEC always a MEC• Substandard ratings only applied to cost

of insurance

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Fixed Universal Life

• Insurance company determines annually the crediting rate to policy

• Contract will have a minimum guaranteed crediting rate

• Only requires a state life Insurance license to sell

• Typically will have a higher premium need in low interest rate environment

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Variable Universal Life

• Requires a securities license to sell• Stock and bond sub-accounts are

created in contract• If sub-accounts have large losses could

require a premium call• Typically sold to younger insureds

because of longer investment time frames

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Whole Life

• Two forms of Whole Life• Participating• Non-Participating

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Participating Whole Life

• Fixed premium• Guaranteed death benefit• Guaranteed cost of Insurance

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Participating Whole Life

• Pays an annual dividend– Accumulate with interest– Accumulate with the purchase of paid up additions– Used as a single premium to purchase one year

term rider– Used to reduce premium payment– Paid in cash

• Sold by mutual insurance company• Cash value increases at prescribed rate

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Non Participating Whole Life

• Fixed premium• Guaranteed death benefit• Guaranteed cost of Insurance• Sold by stock Insurance company• Excess interest determined yearly by

Insurance company

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New Product Designs

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Index Universal Life

• A fixed universal Life product• Crediting rate is determined by

performance of the index• Cash value cannot decrease in value due

to poor index performance• Does not require a securities license• Designed to compete with Variable

Universal Life

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Polling Question #3

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Guaranteed Death Benefit Universal Life• Contract will guarantee payment of a

death benefit as long as minimum premium payments are made

• Will pay death benefit even if no cash value in contract

• Basically allows the creation of a level term contract to specific ages in the future

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Personal Uses of Life Insurance

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Family Needs

• Cover risk for dependent children– Typically level term is used to cover the

income loss caused by premature death of husband or wife

• Used as savings plan for long term needs such as college expense

• Gifts of policies from Grand Parents to Grand Children

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Family Needs

• Estate Planning– To cover settlement costs at death– Payment of potential estate tax costs– Estate equalization– Provide income in non-liquid estates

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Family Needs

• Retirement planning– To insure retirement benefit– Accumulation vehicle using the tax deferred

benefits of a life insurance contract– Create income stream at retirement

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Business Insurance Needs

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Key Man Life Insurance

• Insures company against loss of revenue because of premature death of key employee

• Proved company with funds to replace key employee

• Required by a lending institution• Amount of coverage determined by

need being covered

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Buy Sell Agreements

• Two methods: funded and unfunded• Funded provides money in advance to

executed agreement• Unfunded means that funds out of

current earnings will be used to fund agreement

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Buy Sell Agreements

• Valuation methods• Agreed on in advance in agreement• Agreement calls for valuation at death• Periodic valuation

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Buy Sell Agreement

• Two types of agreements– Cross Purchase Agreement– Stock Redemption Agreement

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Cross Purchase Agreement

• Typically no more than 3 partners• The remaining partner agrees to purchase

decedents interest at death• Business value gets a “step up in basis”• Reduces possibility of litigation• Provides certainty of value for family of

decedent• Partners purchase life Insurance on each other

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Stock Redemption Agreement

• Typically used with more than 3 partners• Sometimes used as part of a section 303

strategy• Company purchases decedents interest of

death and retires stock• Remaining interest do not have “step up in

basis”• Company purchases Life Insurance on all

participants

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Types of Life Insurance Used to Fund Agreements• In a cross purchase sale many times

Universal Life is used because funds are created for a “living” buyout

• Term Life Insurance is mostly used large amounts of Insurance are needed with limited cash flow as premiums are paid by the individual partner

• Amount of premium can be given as bonus to participant

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Types of Life Insurance Used to Fund Agreements• In a stock redemption plan company can

purchase Universal Life and set funds aside to augment retirement plan of participant

• Since the need is long term in redemption plans some type of cash value life Insurance or Guaranteed Premium Life Insurance is typically used to fund agreement

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Polling Question #4

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Non-Qualified Deferred Compensation Plans• In a stock redemption plan company can

purchase Universal Life and set funds aside to augment retirement plan of participant

• Since the need is long term in redemption plans some type of cash value life Insurance or Guaranteed Premium Life Insurance is typically used to fund agreement

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Non-Qualified Deferred Compensation Plans• Participant is not taxed currently on the

contribution• Plans can be funded or unfunded• In a funded plan money is typically held in

a life Insurance contract or some other type of accumulation vehicle

• Unfunded means that the company is agreeing to pay out a benefit at a later date and will fund it out of current earnings

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Non-Qualified Deferred Compensation Plans• Assets of the plan are owned by the company

and therefore subject to the creditors of the company

• Assets of the plan are reflected on the company’s balance sheet

• Company takes a tax deduction when the benefit is paid to the participant

• Life Insurance is the preferred funding vehicle as the money accumulates tax deferred

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ESOP Plans

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ESOP Plans

• A trust is created to purchase the business interest from the owner with the employee being the beneficiary of the trust

• The trust is a qualified plan trust• Owner still controls business as the

trustee of the plan

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ESOP Plans

• Life Insurance is used to insure the owner during the payout to have funds to complete purchase in the event of premature death

• Life Insurance is used as keyman Insurance to cover successor management while buyout is occurring.

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Polling Question #5

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Marketing Life Insurance

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• Cross market to existing clients who have businesses that involve partnerships or corporations with multiple owners

• Include family need questions as part of your client annual review

• Create your own webinar program and invite existing clients to join in

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• Look at existing clients who own businesses and are over age 55 most are thinking about creating an exit plan

• Look at available online support programs for the sale of life Insurance you do not need to recreate the wheel

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Contact Information

• George Fraser III• Main Phone: 925 634 4914 (main)• Cell Phone: 408 313 1165• Email: [email protected]• www.quicklifecenter.com

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Upcoming Classes

Upcoming University/Paid CE Classes

FREE to University Members$50.00/charge for non university members

4/18 Business Income Worksheets

4/23 Personal Auto

4/25 & 26 Insight on Errors and Omissions

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Upcoming Community Classes FREE to University Members$25.00/charge for non university members

To Be announced

Join the University TODAY. www.insurancecommunitycenter.comClick Join University at the top of the bar

Documents

Insurance Community University Insight on Life Insurance The webinar will begin shortly. There is no audio at this time. This presentation is being recorded