Life%20Product%20Introductions%20%20and%20Enhancements%20May%202003 - PowerPoint PPT Presentation

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Life%20Product%20Introductions%20%20and%20Enhancements%20May%202003

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To ensure that all clients have the best possible life ... Pref. Plus Underwriting Classes. Policy Loan Provisions. Improved Loan Rates. Zero Net Cost Loans ... – PowerPoint PPT presentation

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Title: Life%20Product%20Introductions%20%20and%20Enhancements%20May%202003


1
Life Insurance Professional Analysis and Review
Presented By Matt Woodson Zenith Marketing
Group, Inc. Charlotte, NC
2
Is your clients insurance up to P.A.R?
Paramount Principle
  • To ensure that all clients have the best possible
    life insurance solutions available.

3
Purpose
  • Assure that the insurance need hasnt changed
  • Uncover changes in underwriting status, good or
    bad
  • Review policy performance
  • Review policy provisions
  • Review beneficiary status
  • Review loan status (if appropriate)

4
Who Needs A Review?
  • Personal Clients
  • Younger and Middle-Aged Clients
  • Changing Family Needs
  • Supplemental Income, make insurance permanent
  • Older Clients
  • Need to keep policies in-force
  • Estate Planning and TOLI

5
Who Needs A Review?
  • Business Clients
  • Benefits need to support promises
  • Deferred Comp.
  • Sec. 162 Bonus Plans
  • SERP
  • Business Continuation and Key Person
  • More or Less Owners
  • Ownership Properly Structured?
  • Buy-Out Possibilities
  • Business Properly Valued?

6
Who Needs A Review?
  • Trust Owned Life Insurance (TOLI) Survey
  • Professional Trustees
  • 83.5 - No Procedures or Guidelines for TOLI
  • 95.3 - No Procedures for Variable Life Policies
  • Family and Friends as Trustees
  • 94.7 - No Procedures for Variable Life Policies
  • 71.2 - Have not reviewed Life Policies in past 5
    years.
  • Survey published in Trusts Estates magazine,
    May 2003, page 63.

7
Who Needs A Review?
  • Code of Federal Regulations Title 12 Sec. 9.6
  • Mandates requirements for National Banks dealing
    with Trust Assets, including Life Insurance.
  • Reviews
  • Pre-Acceptance, Post Acceptance, Ongoing Annual

8
Issues You May Uncover
  • Some Policies May be in Danger of Lapsing
    Because
  • Low interest rate environment/ low interest
    crediting rate
  • Lower than anticipated investment performance
    (VUL)
  • review subaccount allocations
  • Increased Cost of Insurance

More premium may be needed to fulfill the
original goal.
9
Interest Rate History
10
Issues You May Uncover
  • Some Policies May be in Danger of Lapsing
    Because
  • Reduction in Dividend Rates (WLP)
  • Increasing Premium (Term)
  • Policy Loans
  • Excessive Withdrawals
  • Skipped Premium Payments

More premium may be needed to fulfill the
original goal
11
If Under-Funded
  • Possible Solutions
  • Increase the future premiums to make up for the
    shortfall.
  • Improve underwriting class, if eligible
  • Drop unnecessary riders
  • Decrease face if need has decreased

12
If Under-Funded
  • Problems With These Solutions
  • Clients may not want to pay more
  • Increased premiums to ILITs may create taxable
    gifts
  • Reluctance to contribute to policy in economic
    environment of low interest rates (UL) or low
    subaccount growth (VUL)

13
If Under-Funded
  • Problems With These Solutions
  • If policy has existing loan and client making
    further loans to make premium and interest
    payments, problem only becomes worse
  • Need for current level of insurance remains
  • Desired changes may not be available nor meet
    planning objectives

14
Potential Solutions
  • Reasons to Keep Current Policy
  • Surrender of an existing policy may incur a
    surrender charge purchase of a new policy would
    impose yet another surrender schedule
  • Need for life insurance is temporary
  • Higher guaranteed minimum interest crediting
    rates may not be available

15
Potential Solutions
  • Reasons to Keep Current Policy
  • Adverse health change
  • New contestable and suicide periods
  • Limits on transferring loans
  • Tax consequences
  • Tax benefits issues
  • New acquisition costs

16
Potential Solutions
  • Reasons to Consider Exchange or Replacement
  • Company strength has the existing
  • Insurer had significant recent drops in
  • ratings
  • Extended maturity
  • Available since _at_ 1999
  • New benefits/riders may not be available on older
    plans
  • Term insurance getting expensive and need
    continues

17
Why a Review?
Policy Options/Benefits Not Previously Available
  • Secondary No-Lapse Guarantees
  • Extended Maturity
  • Riders features
  • Long Term Care
  • Critical illness coverage
  • Return of Premium
  • Estate Tax Repeal Riders/Options
  • Pref. Plus Underwriting Classes
  • Policy Loan Provisions
  • Improved Loan Rates
  • Zero Net Cost Loans

18
Why a Review?
  • Re-evaluation of Underwriting
  • More history since health occurrence
  • Improved health, lost weight, healthier lifestyle
  • Change in smoking status
  • Do they qualify for one of the new, improved
    underwriting classes available today?
  • Table Shave Programs (whats left)
  • Change in avocation status
  • More experience (Example pilots, divers)
  • Age of traffic violations

19
Why Review Now?
  • Reinsurance The 800lb. Gorilla
  • 8 Major Reinsurers left in the North American
    market.
  • Less Reinsurers Less Risk Diversification
    Higher Pricing and Stricter Underwriting
  • Very difficult to get exceptions, especially in
    Preferred and better categories.
  • Max capacity _at_ 125 Million
  • Immediate Effect on Ages 70

20
Why Review Now?
  • Actuarial Guideline 38
  • Sets higher reserve requirements for extended
    guarantee plans.
  • Retro-active to July 1, 2005
  • 2001 CSO Mortality Rates
  • Extends premiums beyond age 100
  • Helps offset impact of AG38
  • Especially helpful for lower ages

21
Potential Solutions
  • Case Study Loan Rescue
  • Situation
  • Age 50 Male, Preferred Non-Smoker, has 250k face
    policy (non-guaranteed), paying 2,475/yr, cash
    value of 40,000, with 20k of loan against the
    cash value.
  • Wants to get rid of loan and maintain the
    250,000 face on a guaranteed basis.

22
Potential Solutions
  • Case Study Loan Rescue
  • Solution
  • 1035 Exch. Cash and loan into new policy with
    face of 273,000
  • Take withdrawal in year 2 to pay off loan and
    loan interest
  • Nets a guaranteed death benefit of 250,000 with
    new premium of 2,000/yr.

23
Case Study
  • Jumbo Loan Rollover
  • Male, Age 66, SNT, 75M face policy, 25M CV
  • 12.5M outstanding loan
  • Policy reprojections show lapse within 5 years on
    current factors
  • Goals avoid phantom income and maintain net
    level db of 62.5M
  • 1035 in Legend 300LR no loan repayment

24
Case Study
  • Jumbo Loan Rollover
  • Results
  • Maintained guaranteed net level db of 62.5
  • No phantom income with guaranteed db!
  • Annual Cash outlay to keep guaranteed level death
    benefit at 62.5M (75M - 12.5M) 855,255
  • Paid as primarily loan interest (687,500)
    premium 167,755 in years 1-20

25
Potential Solutions
  • Leveraging Strategies
  • Putting Turbo in the 1035
  • Exchange to SPIA
  • Other options
  • Installment Refund or Cash Refund to protect
    principal
  • Age rated if adverse health conditions
  • Can be paid directly from carrier to carrier

26
Potential Solutions
  • Leveraging Strategies
  • Example Male, Preferred Non-Smoker age 70 with
    250,000 cash value
  • Traditional 1035 Exch. Into another life policy
    produces 722,400 face amount
  • 1035 Exch. Into SPIA creates 22,896 gross annual
    payout, or 20,575 net taxes (at 28)
  • 22,896 purchases 842,948 face amount
  • 20,575 purchases 757,047 face amount

27
Potential Solutions
  • Leveraging Strategies
  • Life Settlements
  • Submit health records for L.E. projection
  • Gather Offers
  • Play the Game
  • Be mindful of capacity limits
  • At least 6-8 week process

28
The Review Process
29
The Review Process
30
The Review Process
Needs Analysis Quick Estimator
31
The Review Process
Policy Evaluation Guide
32
The Review Process
Inforce Request Form
33
PAR Presentation
34
PAR Presentation
35
PAR Presentation
36
PAR Presentation
37
PAR Presentation
38
PAR Presentation
39
Life Insurance Professional Analysis and
Review...Why offer one?
  • Deliver Value ? Client satisfaction
  • Deliver Value ? Client retention
  • Deliver Value ? More referrals
  • Deliver Value ? Enhance your professionalism

40
Life Insurance Professional Analysis and Review
Ensuring youre up to PAR.
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