AIA EIUL Presentation
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This document provides an overview of indexed universal life (IUL) insurance, including its history and growth since 1997, typical target clients, key features such as indexed accounts and floors, comparisons of IUL products, reasons to use IUL, and effective applications. The document is intended for insurance producers and provides details to help them understand and sell IUL policies.
AIA EIUL Presentation
- 1. YOU CAN COUNT ON USFor Producer Use Only
- 2. In The Next 4 Minutes, You Will Learn… History of the IUL Market and the leading product carriers
- 3. Target client characteristics
- 4. Features and benefits of IULs
- 5. Equity Indexed Universal Life Product Comparisons
- 6. Reasons to use IUL for your clients
- 7. Effective Sales Solutions for EIULFor Producer Use Only
- 8. The IUL MarketThe first indexed universal life insurance policies were issued in 1997, closely following in the footsteps of equity-indexed annuities. IUL started slowly, with early insurance carriers of the product attracting less than $65 million in premium in its first full year. Sales remained at similar levels until 2004 when IUL started growing consistently.In 2009, Indexed Universal Life accounted for $488.5 million in premiums paid despite a difficult time for the industry.Our Top IUL Carriers by Marketshare Aviva $113MM 23.2% Pacific Life $ 82MM 16.9% Minnesota Life $ 38MM 7.8% Allianz $ 19MM 4.0%For Producer Use Only
- 9. After 2008 and 2009, Why is IUL An Attractive Product? No principal risk on part or majority of retirement income oriented assets but the upside of the market’s potential.
- 10. The ability to manage and accumulate wealth for retirement in a tax-efficient manner.
- 11. Provide a predictable base retirement income
- 12. Provide an alternative to traditional market based plans which suffer the complete volatility of the stock market
- 13. Provide additional asset and tax based diversification
- 14. Provide an option for obtaining tax advantaged income during retirement income phase.For Producer Use Only
- 15. Capture the Indexed Universal Life Opportunity.The shifting winds of fluctuating markets are keeping many would-be clients grounded. Before they commit to buying a permanent life insurance product, they want reassurance that it can help them reach their financial and insurance goals, while still providing a comfortable level of stability.Variable Universal Life (VUL) – high potential accumulated values, limited downside protection, possibly considered too high riskUniversal Life (UL) – safer, lower crediting rate potential, given today’s low interest rate environment possibly considered too low risk Indexed Universal Life (IUL) – market-paced growth potential with guaranteed minimum interest ratesFor Producer Use Only
- 16. The Typical IUL Target ClientNeeds flexible life insurance protection.Is concerned about losing money in the market.Wants higher crediting potential than may be available through UL.Is not confident that their investing expertise will outperform the market.Wants the opportunity for high upside and limited downside potential.Could benefit from potentially tax free policy distributions through policy loans and withdrawals.Risk vs. Reward Trade Off(By Types of Permanent Life Insurance Product)HighVariable Universal LifeGrowth Potential(Cash Accumulation)Indexed Universal LifeUniversal LifeLowHighVolatility (Risk)For Producer Use Only
- 17. Unique IUL Features.Indexed AccountsFeature the following components:Indexed SegmentsOffer rolling returns for wider market exposure.Index – The component that provides the basis for Indexed Accounts’ interest crediting. Examples of indexes that may be available are the S&P 500, Russell 2000, and NASDAQ 100.
- 18. Growth Cap (Cap) – Provides an upper limit to the interest earned.
- 19. Floor (Guaranteed Minimum Interest Rate) – Provides a lower limit to the interest earned.
- 20. Participation Rate – Determines what percentage of Index performance will be used in the interest crediting calculation, before Growth Caps of Floors are applied.
- 21. Segment Term – Period of time a Segment must wait before it is credited interest or becomes liquid.How Segments Work:Transfers from Fixed Account to Indexed Account(s) create separate Indexed Segments (Segments) within each Indexed Account.
- 22. Each Segment tracks a separate time frame of the Index’s performance and will mature at the end of the Segment Term.
- 23. Once a Segment is created, the money is locked up for the Segment Term.
- 24. At the end of the Segment Term, it is credited interest, if due.
- 25. At Segment maturity, the Segment’s value can then be reallocated to any choice of accounts or remain in its current Indexed Account.
- 26. Any new transfers or maturing Segments can go through the same process, as outlined above.For Producer Use Only
- 27. Protect Through the Power of the Floor.Perhaps the most important and distinctive element of an IUL is its Floor, which limits downside exposure and prevents market-based losses. Though the term ‘Floor’ is used interchangeably with ‘Guaranteed Minimum Interest Rate’, there are some differences.Both ensure a minimum return and prevent against market-based losses.Guaranteed Minimum Interest Rate:Available with Fixed and Indexed Accounts.Contractually is the lowest rate that will be credited to the Account.Most common rate ranges from 0-3%.Interest is calculated and credited on an ongoing basis, according to a schedule the carrier sets.Floor:Available with Indexed Accounts only.Contractually limits a negative Growth Rate to stated Floor rate.Most common rate is 0%.Interest is calculated and credited at the end of the Segment Term.For Producer Use Only
- 28. Indexed Accounts Credit Interest Based on More Than Just Market Fluctuations.To provide strong growth opportunity with protection, Indexed Accounts credit interest based only in part of an index without directly participating in any stock or equity markets. The actual interest credited will never be less than the Floor or greater than any Caps imposed by the carrier. See below of typical interest crediting model.Typical Interest Crediting Process:The performance of the index, as a percentage, is measured over the Segment’s Term.The Index Performance Rate is then multiplied by the Segment’s Participation Rate. The Participation Rate is the percentage of the Index Performance Rate that will be used in the calculation. The product of the Index Performance Rate times the Participation Rate is called the Growth Rate.The Growth Rate is applied to the Segment’s Growth Cap, which limits it on the upside, and its Floor (Guaranteed Minimum Interest Rate), which limits it on the downside.}Growth CapIndex Performance Rate(measured change in index as a %)Participation Rate(% of Index Interest Rate used in calculation)Growth RateSubject to…Index Performance Rate(measured change in index as a %)FloorFor Producer Use Only
- 29. A Premier Benchmark – S&P 500® IndexThe S&P 500 is considered a premier benchmark of U.S. stock market performance because it represents the stock of 500 of the country’s leading companies of various sizes and industries. Companies tracked by the S&P 500 Index are carefully selected by committee and the amount of each stock used in proportion to its market value. Because of the width and breadth of its coverage, the S&P 500 is viewed as the preeminent hallmark of American economic progress.The S&P 500 can offer significant upside, returning an average of 16.06% from 1989 to 1998. However, it can also offer prolonged periods of economic downturn. From 1999 to 2008, it averaged a -0.68% return. To prevent market-based losses, many IULs provide protection by eliminating market loss with a 0% floor. So even if the index return is consistently negative, no account will lose value (excluding policy deductions). When the market eventually rebounds, the Indexed Accounts will be there with competitive Growth Caps to capture its upside potential. The chart below is for illustrative purposes only and does not include any insurance charges.For Producer Use Only
- 30. Equity Index Universal Life Product ComparisonsFor Producer Use Only
- 31. 8 Reasons To Use EIULThe safety of no negative returnsThe carrier absorbs the investment risksThe possibility of high positive returnsThe ability to create a tax free income streamThe death benefit provides a self-fulfilling funding in case of deathAn ability to take advantage of the design of insurance productsIRC Sec. 101(a) (1) Potentially* Tax-Free Death BenefitIRC Sec. 72(e) (1) Potentially* Tax-Free AccumulationIRC Sec. 72(e) (5) Potentially* Tax-Free Income * Current tax law provides for the allowable tax benefits mentioned.Guaranteed return of premiumInsurance for a lifetime without paying for a lifetimeFor Producer Use Only
- 32. Effective Applications for EIUL Executive Compensation
- 33. 401(k) Mirror Voluntary Deferral Plans
- 34. Executive Bonus and Life Insurance
- 35. Key Person Life Insurance
- 37. Retirement Strategies
- 40. Premium Financing
- 42. Life Insurance Premium Financing
- 43. Estate Planning
- 44. Charitable Gifts
- 45. Maximizing IRA Assets to Heirs
- 47. General
- 48. Life Insurance Policy Review
- 49. How Business Owners Can Get the Most Out of Their Business
- 50. Life Insurance NeedsFor Producer Use Only
- 51. Are You Utilizing The Most Innovative and Dynamic Product in the Industry Today?Here Are 3 Ways To Get Started…1. Download a quote request form from www.abacusinsadvisors.com2. Email us at illustrations@abacusinsadvisors.com3. Call us at 877.672.1401 For Producer Use Only
- 52. EXCEED BEYOND YOUR EXPECTATIONS.Join Abacus Insurance Advisors.Established relationships with carriers, expert guidance and exceptional service are just a few of our concierge level offerings.At AIA, we take care of your back office needs so you can focus on building your business. We invite you to leverage our comprehensive resources and become another AIA success story.Our promise is that your experience with AIA will surpass your expectations.ABACUS INSURANCE ADVISORS, LLCYou Can Count On Us.Phone 864.672.1400Toll Free 877.672.1401Fax 864.281.9662Website www.abacusinsadvisors.com109 Block House RoadGreenville, SC 29615Abacus Insurance Advisors, LLC is an insurance marketing subsidiary of Asset Management, Inc. Neither Abacus Insurance Advisors, nor its employees or agents are authorized to give legal, accounting or tax advice. You should consult your own legal or tax professional regarding the purchase of any life insurance policy.For Producer Use Only