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Life Insurance Overview

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Life Insurance Overview – PowerPoint PPT presentation

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Title: Life Insurance Overview


1
Life Insurance Overview
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2
Why Life Insurance For Planning
  • What are your financial goals in life?
  • Will you have enough to satisfy your retirement
    needs?
  • Will you be able to pay for your childrens
    college education with and without an early
    demise?
  • How will you protect your 401(k), IRA, 457, or
    other tax-deferred assets from the tax bill due
    on withdrawal?
  • How will you provide your family with lost
    income, mortgage, and unpaid bills should you
    die?
  • How will you leave a legacy to your heirs?

3
The Solution . . . Life Insurance
  • Pay debts without putting additional strain on
    the family.
  • Fully fund college savings and retirement plans
    with a death benefit and tax free loans.
  • Provide the extra money to pay the tax burden of
    401(k), IRA, 457, and any other tax-deferred
    accounts.
  • Leave a legacy to heirs by leveraging your
    investment life insurance is the single best
    option for wealth transfer.

4
The Solution . . . Life Insurance
  • Life Insurance designed to meet the need
  • Term
  • ROP (Return of Premium) Term
  • Fixed Universal Life (UL)
  • Single Premium UL
  • Variable Universal Life
  • Index Universal Life

5
Term Life Insurance
  • Policy provides life insurance protection for a
    limited period of time (typically between 10 and
    30 years).
  • Policies can be non-medical or fully
    underwritten.
  • Riders can include disability income, waiver of
    premium, child rider, critical illness, and
    others.
  • On most policies, can convert from a term to a
    permanent policy at higher cost.
  • Often used to protect current liabilities such as
    mortgages, income replacement, college tuition,
    etc.

6
Term Life Insurance
  • Advantages
  • Temporary insurance protection
  • Low cost initially, higher cost later
  • Guaranteed for term period
  • Lowest cost insurance
  • Disadvantages
  • Temporary insurance protection
  • Not flexible
  • Can extend term, but very expensive

7
ROP Term
  • Just like term insurance, but at the end of the
    term, all premiums are refunded (tax free) to the
    owner.
  • Cash from refund can be used to pay for a
    converted, permanent policy.
  • This policy is more expensive than term, but on
    younger ages is most often a better choice than
    regular term because of the small price
    difference with return of premium.

8
(No Transcript)
9
Universal Life Concept
Death Benefit
  • Used For
  • Wealth Transfer
  • Tax-free savings
  • Pension Maximization
  • Qualified funds replacement

Universal Life Insurance
Cash Value
10
Fixed Universal Life Insurance
  • Policy provides guaranteed life insurance
    protection regardless of when death occurs.
  • Policy can build up cash value with a fixed
    interest rate that may change annually.
  • On some policies, part or all of the premiums can
    be refunded after a period of time (typically at
    least 10 years).
  • Often used to provide guarantee death benefit for
    wealth transfer or permanent income replacement.

11
Fixed Universal Life Insurance
  • Advantages
  • Provides insurance protection for entire lifetime
    of insured.
  • Provides nonforfeiture values that can be used as
    a savings plan, used for financial emergencies,
    and borrowed against (growing at a declared rate
    of return).
  • Premium level for life of product.
  • Death benefit guaranteed for life.

12
Fixed Universal Life Insurance
  • Disadvantages
  • Not flexible to meet changing needs in early
    years.
  • Must be willing to pay premiums greater than
    required guarantee premium in order to fund cash
    value build-up.
  • Cash accumulation is the typically the slowest of
    all permanent insurance policies.

13
Single Premium Universal Life
  • Policy typically provides guaranteed life
    insurance plus accelerated benefits.
  • These accelerated benefits can include terminal
    illness, long term care needs, return of premium,
    and greater liquidity.
  • These policies typically have lower cash
    accumulation in return for death benefit and
    accelerated benefits.
  • Typically used for wealth transfer, especially
    with safe money funds like CDs and annuities.

14
Single Premium Universal Life
  • Advantages
  • Insured makes one lump sum deposit instead of
    regular premium payments.
  • Guarantees a specified death benefit at the time
    of policy activation.
  • Is often simplified issued (no medical exams).
  • Disadvantages
  • Designed for death benefit, not cash value
    build-up.

15
Variable Universal Life
  • Policy permits a policyholder to allocate a
    portion of each premium payment to one or more
    investment options (mutual funds).
  • Can offer the best cash accumulation based on
    market performance.
  • This product is not made for minimum premium
    plans typically the owner will overfund the
    policy to build cash.
  • Typically used for supplemental income in the
    future by utilizing tax free loans while
    providing a death benefit to cover an early
    demise.

16
Variable Universal Life
  • Advantages
  • Policy owner chooses from among investment
    options has control over how premiums and cash
    values are invested.
  • Flexible premium payments.
  • Policyholders may withdraw a substantial portion
    of the cash value without surrendering the
    policy.
  • Earnings on the assets underlying the policy cash
    values accumulate tax-free or tax-deferred.

17
Variable Universal Life
  • Disadvantages
  • Buyer must be willing to give up guarantee of
    stated cash value in exchange for possibility of
    enhanced cash value and/or death benefit.
  • Owner chooses from among investment options and
    bears all investment risk.
  • Must be willing to pay premiums greater than base
    policy premium to fund cash value build-up.

18
Index Universal Life
  • Policy provides life insurance protection with
    cash value tax-deferred interest based on
    interest credits linked to the performance of one
    or more stock market indices (with very high
    caps).
  • Can offer very good cash accumulation based on
    market performance.
  • This product is not made for minimum premium
    plans typically the owner will overfund the
    policy to build cash using variable loans.
  • Typically used for supplemental income in the
    future by utilizing tax free loans while
    providing a death benefit to cover an early
    demise.

19
Index Universal Life
  • Advantages
  • Provides insurance protection for entire lifetime
    of insured.
  • Flexible premium payments.
  • Variable loan.
  • Minimum interest rate guarantees.
  • Disadvantages
  • Must be willing to pay premiums greater than base
    policy premium to fund cash value build-up.

20
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