IUL Starter Kit INDEXED UNIVERSAL LIFE. A Product Whose Time Has Come

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1 INDEXED UNIVERSAL LIFE A Product Whose Time Has Come IUL Starter Kit Designed to educate advisors on Indexed Universal Life and the many great features of this unique product! TBA works with advisors to help find opportunities for their clients and deliver solutions that protect their future.

2 Indexed Universal Life Is now the right time for your client... What if you could get the flexibility of adjustable premiums and face value, and an opportunity to increase cash value; would you go for it? What if you could get this without the inherent downside risk of investing in the equities market? It's your lucky day: All of this is possible with an indexed universal life insurance policy. These policies aren't for everyone, so read on to find out if this combination of flexibility and investment growth is a good fit for you. What's Indexed Universal Life (IUL)? IUL policies offer tax-deferred cash accumulation for retirement while maintaining a death benefit. People who need permanent life insurance protection but wish to take advantage of possible cash accumulation via an equity index might use IULs as key-person insurance for business owners, premium financing plans or estate-planning vehicles. IULs are considered advanced life insurance products in that they can be difficult to adequately explain and understand. They are generally reserved for sophisticated buyers. How Does It Work? When a premium is paid, a portion pays for annual renewable term insurance based on the life of the insured. Any fees are paid, and the rest is added to the cash value. The total amount of cash value is credited with interest based on increases in an equity index (but it is NOT directly invested in the stock market). Some policies allow the policyholder to select multiple indexes. IULs usually offer a guaranteed minimum fixed interest rate and a choice of indexes. Policyholders can decide the percentage allocated to the fixed and indexed accounts. The value of the selected index is recorded at the beginning of the month and compared to the value at the end of the month. If the index increases during the month, the interest is added to the cash value. The index gains are credited back to the policy either on a monthly or annual basis. For example, if the index gained 6% from the beginning of June to the end of June, the 6% is multiplied by the cash value. The resulting interest is added to the cash value. Some policies calculate the index gains as the sum of the changes for the period. Other policies take an average of the daily gains for a month. If the index goes down instead of up, no interest is credited to the cash account. The gains from the index are credited to the policy based on a %, referred to as the "participation rate". The rate is set by the insurance company. It can be anywhere from 25% to more than 100%. IUL policies typically credit the index interest to cash accumulations either once a year or once every five years. What's Good About a IUL Policy? Low Price: The policyholder bears the risk, so the premiums are low. Cash Value Accumulation: Amounts credited to the cash value grow tax deferred. The cash value can pay the insurance premiums, allowing the policyholder to reduce or stop making out-ofpocket premiums payments. Flexibility: The policyholder controls the amount risked in indexed accounts vs. a fixed account; the death benefit amounts can be adjusted as needed. Most IUL policies offer a host of optional riders, from death benefit guarantees to no-lapse guarantees. Death Benefit: This benefit is permanent. Less Risky: The policy is not directly invested in the stock market, thus reducing risk. What's Bad About a IUL Policy? Caps on Accumulation Percentages: Insurance companies sometimes set a maximum participation rate that is less than 100%. Better for Larger Face Amounts: Smaller face values don't offer as much advantage over regular universal life policies. Based on an Equity Index: If the index goes down, no interest is credited to the cash value. (Some policies offer a low guaranteed rate over a longer period). Investment vehicles use market indexes as a benchmark for performance. Their goal is normally to outperform the index. With the IUL, the goal is to profit from upward movements in the index. Conclusion While not for everyone, indexed universal life insurance policies are a viable option for people looking for the security of a fixed universal life policy and the interest-earning potential of a variable policy. We can help you get started in IUL! Give us a call!

3 HOW AN INDEX ACCOUNT WORKS Indexed Universal Life Insurance provides two main advantages: death benefit protection and an Index Account that protects you from negative returns through a zero percent floor. Here s an example of how the Index Account works in simple terms. Rules of the Game If the Index Account were a game of football, here s how the rules would change: It s always first down. You can never lose yards. You can gain a maximum of 14 yards per play. Take a look at what happens with these new rules. The Play-by-Play Pick your favorite quarterback. His team has the ball and is starting out on the 20 yard line. Play 1: Your quarterback throws for an 11-yard gain! The ball is spotted at the 31 yard line. Play 2: Your quarterback is sacked at the 12 yard line for a 19-yard loss. But we ve changed the rules so that you can never lose yards, so the ball is spotted at the 31 yard line where the play began, and it s still first down. Play 3: Your quarterback throws for a five-yard gain. The ball is spotted at the 36 yard line, and it s still first down. Play 4: Your quarterback throws for a 20-yard gain. The 14-yard maximum kicks in so your team has to give back six of the yards. The net result is a gain of 14 yards and the ball is spotted squarely on the 50 yard line. Game Summary: Under normal rules, the team would have gained a total of 17 yards (gains of 11, 5, and 20 with a loss of 19 yards) and the ball would have been spotted at the 37 yard line. However, with the new rules, the team gained 30 yards and the ball is at the 50, which is an extra 13 yards downfield! What does this mean for you? Replace your football team with an Index Selection such as the S&P 500 Annual Point-to-Point. Each play is a year and the yardage gains are locked in interest returns! The information presented is hypothetical and not intended to project or predict investment results. Indexed Universal Life products are not an investment in the market or in the applicable index and are subject to all policy fees and charges normally associated with most universal life insurance. S&P 500 is a trademark of The McGraw-Hill Companies, Inc. and has been licensed for use by North American Company for Life and Health Insurance. Indexed universal life products are not sponsored, endorsed, sold or promoted by the S&P 500 and they make no representation regarding the advisability of purchasing these contracts or investing in these products. Failure to meet premium requirements may result in a lapse in the policy and participation in the Index Accounts. The Index Accounts are subject to caps and participation rates. The surrender charge varies by product, gender, issue age, underwriting class and duration. In no case will the interest credited be less than 0 percent. Please refer to the customized illustration provided by your agent for additional detail. The policy s death benefit is paid upon the death of the insured. The policy does not continue to accumulate cash value and excess interest after the insured s death. PR /10 Executive Office 525 W Van Buren Chicago, IL 60607

4 LIFE FEATURE TITLE BY BILL K AN TER M 30 any financial planners and IMOs assumed that In spite of this, however, due to the conversion tax that 2010 would be a banner year for clients to do must be paid, many clients chose not to convert. People a Roth conversion. This was because the previous income just do not want to write a big check to the IRS no matter restrictions on doing a Roth IRA conversion were lifted on how convincing an argument to convert is presented. Jan. 1, (Also, conversions done in 2010 could have the Fortunately, indexed universal life (IUL) can offer a viable income reported in 2011 and 2012 so as to defer the tax). alternative to the Roth IRA conversion. InsuranceNewsNet Magazine July

5 LIFE IRA RESCUE WITH INDEXED UL The way I begin discussing this strategy with a client is to tell the following story. Let s say you are at a party and there is an IRS agent in the room (OK, it is not a very exciting party) and the agent overhears you tell your friend that you have $100,000 in your IRA or 401(k). The agent has every right to go over to you and point out the fact that if you are in a 25 percent tax bracket, your IRA is really worth only $75,000 to you because $25,000 belongs to your IRA partner, i.e., the IRS. Now is the time to fire that partner. The Problem: Taxes (which could go higher) The top tax rate in this country is 35 percent. But considering that the average top tax rate since 1913 has been 69 percent, it is very possible that we will see significantly higher taxes in the future. All of your retirement accounts will be subject to these tax rates when you or your spouse or your heirs take out the money. Given this fact, the question you should ask yourself is Why is saving money in a tax-deferred account a good thing if there are better tax-free alternatives? The Too-Costly Solution: A Roth IRA Conversion One possible solution is to convert your IRAs/401(k)s to Roth IRAs and Roth 401(k)s. This will achieve a tax-free retirement, but you will have to report the conversion amount as income and pay taxes on that income. So the cost of this conversion strategy is usually too much for most people. The Better Solution: IUL with a Policy Loan Indexed universal life insurance has been around for about 25 years, and many of the major insurance companies offer a version. The basic concept is that the policy takes advantage of the IRS tax code sections 101, 7702 and 72(e), which say that the cash value inside a life insurance policy grows tax free and can be withdrawn tax free as well. Due to the way the product is priced, the returns in the policy cash value are much better than the market, usually between a floor of 0 to 2 percent and a cap of 13 to 15 percent. Even if the index that the policy is tied to (e.g., the S&P 500) goes down, you cannot lose any money (and in some policies you will actually make money). On the other hand, if the market goes up, the policy cash value will gain up to the cap. These accounts have averaged better than 7 percent tax free over the past 10 years even in this volatile market. More important for this strategy is the fact that the insurance company will allow you to take a nonrecourse loan from your policy to pay the tax. (Note: IRA/401(k) money cannot be used to purchase life insurance. The funds must first be withdrawn from the IRA/401(k) and then the policy can be purchased. This withdrawal will be considered income and will incur tax.) This loan will accrue with interest in the policy, but it does not have to be repaid until you die, at which time the insurance company will deduct the loan balance before it sends your beneficiary the taxfree death benefit. As stated before, the cash value account in the policy grows tax free at a better-than-market rate, and policy loans (even annual loans used as income) are tax-free. Basically, with this strategy, you are converting your taxable (and required minimum distribution-liable) IRA or 401(k) to a tax-free cash value life insurance policy with a tax-free death benefit, and then you are borrowing against the death benefit to pay the conversion tax. The loan does not have to be paid back until you die, and the cash value growing at a better-than-market rate in the policy can be accessed anytime tax free. Target Market The target market for this strategy is the boomer market, more precisely clients years of age. This is because a withdrawal of an IRA before age 59½ will incur an additional 10 percent penalty, so the loans from the policy to pay the income tax plus the penalty will be a huge drain on the policy. On the other hand, due to the need to allow time for the policy s cash value account to recover the loans, older clients who desire income for retirement may not be ideal candidates for this strategy. However, if the client is not interested in taking out income (but just interested in the death benefit and RMD removal), then this strategy can work for an older client as well. The Right Insurance Carrier Due to the fact that immediate loans are withdrawn from the policy, it is vital to use an insurance company with a product suited for this strategy. An important factor in deciding which of the many IULs to use is the cost of the loan in the policy relative to the rate credited to the policy. If the charging rate on the loan is too high, relative to the rate credited to the cash value, it will cause too much upfront drain on the policy. Bill Kanter J.D., MBA, has more than 20 years of experience in the field of estate planning, elder law and financial planning. He is a member of the National Academy of Elder Law Attorneys (NAELA). He can be reached at Bill. Kanter@innfeedback.com. 32 InsuranceNewsNet Magazine July 2011

6 O p p o r t u n i t y + A c t i o n + R e s o u r c e s = Sales Success A Retirement Supplement A Retirement Supplement SELLING OPPORTUNITY FOR Guarantee BUILDER IUL sm Indexed Universal Life Insurance Richard, 45, is a recent widower with two teenaged daughters. He and his wife planned accordingly for their kid s college funding needs, but without his wife s additional income, Richard is now concerned about his financial security during his retirement. Richard knows he d feel more secure if he had some life insurance Plan of Action North American s Guarantee Builder IUL sm will give Richard a significant opportunity for cash value growth and a solid death benefit guarantee, meeting Richard s needs. Cash Value Accumulation and guaranteed death benefit protection Richard decides to purchase a policy with a death benefit value of $250,000, which should cover the cost of his daughters educational needs should something happen to him within the first several policy years. With the Guarantee Builder IUL sm, Richard also gets the protection of the No Lapse Guarantee Rider 1, which guarantees his coverage to age 120 with timely premium payments. Even if Richard misses a premium payment, as long as he has sufficient cash value to meet the No Lapse Guarantee premium requirements, he can exercise the catch-up provision to ensure his guaranteed coverage as a legacy for his daughters. Richard chooses to have his funds linked to the performance of the Standard & Poor s 500 with a Point-to-Point Index Crediting Method (which is currently illustrating a 20-year look back of 7.9%). He decides to put $6,100 per year into the Cash Accumulation Value Test version of the product for 20 years to build some cash value. PR-1020 R1 2/08 coverage to help ensure his kids are financially protected during their college years. He would like to be able to leave an estate to his kids as well. An added benefit would be to find a plan that can build cash value to help supplement his expenses during retirement years. At the end of the 20-year period (when Richard is 65 and considering retirement), using the currently illustrated rate of 7.9%, Richard s projected cash surrender value would be $237,065, and he would have only paid in a total of $122,000 in premiums. That s nearly a 94.3% gain using life insurance! If Richard finds himself needing additional income at retirement, his $237,065 cash accumulation value would illustrate an annual income stream via variable loans of $21,161 per year from age 66 through age 120. If Richard finds himself comfortable in retirement, he can be pleased in knowing that his $250,000 death benefit is guaranteed to age 120 without further premium payments. Many ways to access funds are available to Richard including variable loans, fixed loans, preferred loans, or withdrawals. Additional solace is provided through a Paid Up Protection Rider (Life Protection Rider in TX) which assures once he reaches age 70 that the policy will not lapse causing an undesired tax effect due to heavy loan amounts. The earning potential on Richard s policy is substantial! At age 45 as a Super Preferred Non-Tobacco risk, Richard s target premium on his $250,000 level death benefit policy is $2,

7 A Retirement Supplement Sales Booster Resources North American s Builder IUL series plans have the added benefit of daily allocations to the client s index selections. Daily allocations along with 100% allocation of premiums in the indexed option from day one give the client that extra edge when building their cash accumulation values. + Illustrate the case with ease on North American s software, NACIS version 8.0 or above. Annual index selections with a wide variety of index options including a Dow Jones Euro STOXX 50 index give the clients flexibility of choice. + Learn more about Indexed Universal Life with North American Company. Visit go to Sales Support and complete our Indexed Universal Life Certification. For a few dollars extra, Richard can add his daughters to his policy with the Children s Term Rider or the Additional Insured Rider (depending on their ages). + Obtain state required forms and application through Forms Factory at + Questions? Contact Sales Support at , ext , or salessupport@nacolah.com Need marketing materials to boost your sales? Visit go to Sales Support and check out the Marketing Materials section. Visit the Supply Warehouse for professionally printed sales materials! 1 Coverage can be guaranteed up to age 120 with a minimum guarantee of 10 years through issue age 75 (5 years at issue ages 76-80): no lapse guarantee premium must be paid; total of the No Lapse Guarantee Rider accounts must equal or exceed policy debt to keep the policy in force. Standard & Poor s, S&P, S&P 500, Standard & Poor s 500, 500 are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by North American Company for Life and Health Insurance. The Dow Jones Euro STOXX 50 is the intellectual property of (including registered trademarks) Stoxx Limited, Zurich, Switzerland and/or Dow Jones & Company, Inc., a Delaware corporation, New York, USA (the Licensors ), which is used under license. The securities based on the Index are in no way sponsored, endorsed, sold or promoted by the Licensors and neither of the Licensors shall have any liability with respect thereto. Dow Jones, DOW JONES INDUSTRIAL AVERAGEsm, DJIAsm are service marks of Dow Jones & Company, Inc. and have been licensed for use for certain purposes by North American Company for Life and Health Insurance. Indexed Universal Life products are not an investment in the market or in the applicable index and are subject to all policy fees and charges normally associated with most universal life insurance. The Guarantee Builder IUL from North American Company for Life and Health Insurance is not sponsored, endorsed, sold or promoted by Standard & Poor s or Dow Jones, and Standard & Poor s and Dow Jones make no representation regarding the advisability of purchasing this contract or investing in this product. In some situations loans and withdrawals may be subject to federal taxes. North American does not give tax or legal advice. Clients should be instructed to consult with and rely on their own tax advisor or attorney for advice on their specific situation. Guarantee Builder IUL is issued on policy form series LS164A, Additional Insured Rider is issued on form series LR371A, Children s Term Rider is issued on form series LR372A, No Lapse Guarantee Rider is issued on form series LR436A, Paid Up Protection Rider (Life Protection Rider in TX) is issued on form series LR419A by North American Company for Life and Health Insurance, Executive Office, Chicago, IL. Not all products, features, riders, endorsements or issue ages are available in all jurisdictions. Limitations and restrictions may apply. For agent use only. Not to be used for consumer solicitation purposes. Not for use in Indiana. PR-1020 R1 2/08 Indexed Universal Life gives you the opportunity to preserve the past and protect the future! Tennessee Brokerage Agency We re Here for Life nacolah.com

8 SALES IDEA Control Your Destiny With a degree in finance, 30 year-old Jason Green understands that successful people have the ability to control debt and use credit wisely. He understands the necessity of having control of his financial future. Situation: Jason has concerns about the uncertainty of financial markets and he desires to be financially independent of these uncertainties. His professional insurance agent offered to show him an idea called Control Your Destiny. Solution: Lifetime Builder Series III with the Wellness for Life Rider v2 Male, age 30, preferred, non-tobacco $3,000 annual premium, $350,000 initial face amount End of Year Age Annual Outlay Non-Guaranteed Cash Surrender Value Non-Guaranteed Death Benefit 1 31 $3,000 $0 $350, $3,000 $5,672 $350, $3,000 $23,010 $350, $3,000 $53,702 $350, $3,000 $96,652 $350, $3,000 $159,526 $350, $3,000 $252,700 $350, $3,000 $391,471 $469,765 Can borrow from the cash value at any time, or use the cash value as collateral for a loan Can be converted to a retirement income stream Benefits of an Indexed Universal Life policy like the Lifetime Builder Series III Upside potential, downside protection. Credited interest linked to S&P 500 Index. Two loan provisions, fixed interest or variable. Can use policy as collateral with outside lending. Flexibility to use cash value for family needs such as college education, emergencies, and retirement. Variable Loan vs. Fixed Loan: All cash value, including that borrowed, continues to receive the interest crediting with a variable loan. When the variable loan rate is favorable, it is possible to create a type of arbitrage. (If Jason thinks the S&P 500 will grow more than the variable loan interest rate, he will probably use it since it would give him greater cash accumulation.) A fixed loan costs less, which means not as much to repay. (If Jason believes the S&P 500 is going to go down or be flat, he can use the fixed rate, which will be less expensive.) Conclusion: Life insurance is one of the most flexible properties one can own. It can provide dollars when they are needed most. After learning about the ways he can use his Indexed Universal Life policy, Jason expressed surprise, I didn t know life insurance could do all of these things. Life insurance can be much more than just a death benefit. For Agent Use Only

9 SALES IDEA Pay the Mortgage Early When Kevin Smithson and his wife, Gloria, purchased their new house, he approached his insurance agent about getting additional life insurance to cover the mortgage in the event of his untimely death. He assumed his agent would suggest an inexpensive term life policy. However, Kevin was surprised when the agent presented a permanent life insurance policy with a Mortgage Balance Analysis run on the Sales Solutions illustration software. Situation: Kevin could either purchase a term life policy to cover the mortgage in the event of his death, or a permanent life policy and use the income tax savings to more than just cover the mortgage. The agent gave Kevin the following options: 1. In the event of his death, Kevin s mortgage could be paid off. 2. Sometime between years 20 and 21, the cash value of the permanent policy is projected to be greater than the remaining mortgage balance. At that time, Kevin could use the cash value to pay the mortgage balance. This would save him approximately $37,000 in future interest payments. It would also allow Kevin to have the mortgage paid before he retired. 3. In the event Kevin and Gloria decided to move into another house, the policy could be used to cover a new mortgage. It could also be used as a source of down payment if needed. 4. If Kevin decided not to pay off the mortgage balance, he and Gloria could continue to use the policy as life insurance protection, supplemental retirement income, or a source of emergency funds in later years. If Kevin purchased the term policy, only option #1 would apply. If Kevin purchased a permanent policy, such as Lifetime Builder Series II Indexed Universal Life, options #1, #2, #3 and #4 apply to his situation. Conclusion: Kevin could see the obvious benefits that the permanent policy had over the term policy, since it offered him greater planning opportunities for mortgage payoff, insurance needs and retirement planning For Agent Use Only

10 Solution: Lifetime Builder Series III Male, age 43, standard, non-tobacco, 3,600 annual premium until age 65 $250,000 initial face amount Mortgage Information Mortgage Amount: $250,000 Loan Interest Rate: 6% Monthly Payment: $1, Term: 30 Years End of Year Age Annual Outlay Years to Pay Mortgage Sum of future mortgage payments Sum of future interest payments Mortgage balance Non- Guaranteed cash surrender value Non- Guaranteed Death Benefit 1 44 $3, $521,607 $274,677 $246,930 $0 $250, $3, $359,727 $150,514 $209,214 $27,022 $250, $3, $179,862 $44,855 $135,007 $109,211 $250, $3,600 9 $161,875 $37,031 $124,845 $121,054 $250, $0 7 $125,902 $23,302 $102,600 $143,910 $250, $0 0 $0 $0 $0 $242,848 $264, $0 0 $0 $0 $0 $526,727 $553, $0 0 $0 $0 $0 $1,111,025 $1,133, $0 0 $0 $0 $0 $1,859,279 $1,896,465 At age 100, the policy has approximately $1.8 million in death benefit Amount saved in interest payments if mortgage was paid off early Between policy years 20 and 21, the cash value is projected to be greater than the mortgage balance, which would allow the mortgage to be paid off If Kevin chooses to not pay off the mortgage, the cash value is available for a down payment on another home or for supplemental retirement income For Agent Use Only

11 Using Permanent Life Insurance Cash Value to Supplement Retirement Income A strategy for small business owners Quick look Life insurance provides your clients with death benefit protection, but it may also help with financial needs during their retirement years due to its cash value growth potential. Indexed universal life insurance (IUL) in particular may provide additional security for those nearing retirement. In addition to death benefit protection, IUL offers an opportunity for significant cash value growth, downside protection in a poorly performing market, and the potential for generally tax-free income. 1 The situation James is a 52 year old owner of a small restaurant. His wife Sue takes care of their two kids and helps to host at the restaurant in the evenings. The slow economy was a wake-up call for James. He realizes now that good times come and go and he may not be able to fully rely on the success of the business for his future needs. The restaurant doesn t offer a retirement plan because of the cost and administration that s involved in offering a plan for a small business. As James thinks ahead, he s concerned about retirement and the potential of outliving his assets. He s counting on the value of his business to fund retirement. The value of the restaurant is unpredictable and he won t know what the final figure will be until he tries to sell. Also, there s no certainty that a buyer will be available when he reaches retirement. Adding to these concerns, James realizes that his family would have a difficult time continuing their lives should he die prematurely. Is there a way to help James financially protect his family now while helping him supplement his retirement dreams later? FOR AGENT USE ONLY. NOT TO BE USED FOR CONSUMER SOLICITATION PURPOSES. PR /11

12 The solution James decides on a life insurance policy that will offer both death benefit protection should he die prematurely along with the potential to accumulate cash values that may be accessed during retirement. The life insurance provides James with flexibility and peace of mind. He gains immediate death benefit protection and diversifies his sources of retirement income outside his restaurant. With flexible premiums, he s in control and he likes that any accumulated cash values grow tax-deferred 2 and that upon retirement the distributions are generally tax free. 1 Also, should he die prematurely, the funds pass to his family generally income tax free. 1 Considerations Immediate death benefit protection. James gains immediate peace of mind from the start with death benefit protection. The policy also provides death benefit protection in retirement as long as the policy stays in effect. Less restrictive. Life insurance is not a qualified plan, so James doesn t have to comply with funding limits or non-discrimination rules. James can make premium contributions that are not subject to the limitations associated with tax-qualified plans. Also, any cash values grow on a taxed-deferred basis. 2 Avoid Modified Endowment Contract status (MEC). 5 A policy that is considered a MEC may be subject to tax when a client accesses the cash values with loans or withdrawals. 3,4 Avoid this structure when putting together a supplemental retirement income strategy. Non-guaranteed perfomance. Cash values for loans and withdrawals 3, 4 in later years may be more or less than originally illustrated. Need help with your supplemental retirement income cases? Contact Sales Development today at (800) , ext or salessupport@nacolah.com. Generally tax free distributions. 2 James can access any accumulated cash values within his policy generally income tax-free in the form of loans and withdrawals 3,4, as long as the policy is not a Modified Endowment Contract (MEC). 5 Withdrawals are income tax free up to the cost basis. No penalties for early access and no required minimum distributions. Should James need to access the policy s cash value before retirement he can do so without a tax penalty associated with certain tax-qualified plans. 1 Plus, should James later discover that he doesn t need to access the cash values, he s not required to take distributions and may then leave the full death benefit as a legacy for his two children. Specified amount of coverage. Two items: 1.) be sure the specified amount is enough to meet your client s pre-retirement life insurance needs, and 2.) make sure the client has room to add more premium in the future if desired. However having a specified amount larger than necessary may limit potential cash value growth for retirement income. Cost of insurance. Permanent life insurance policies require monthly deductions, which include cost of insurance, expense charges, and potentially other charges. These deductions may reduce the cash value of the policy. Index Universal Life products are not an investment in the market or in the applicable index and are subject to all policy fees and charges normally associated with most universal life insurance. 1 Neither North American Company for Life and Health Insurance nor its agents give tax advice. Please advise your customers to consult with and rely on a qualified legal or tax advisor before entering into or paying additional premiums with respect to such arrangements. 2 The tax-deferred feature of universal life or indexed universal life insurance is not necessary for a tax-qualified plan. In such instances, your client should consider whether other features, such as the death benefit and optional riders make the policy appropriate for the client s needs. Before purchasing a policy, your client should obtain competent tax advice both as to the tax treatment of the policy and the suitability of the product. 3 In some situations, loans and withdrawals may be subject to federal taxes. Clients should be instructed to consult with and relay on their own tax advisor or attorney for advice on their specific situation. 4 Income and growth on accumulated cash values is generally taxable only upon withdrawal. Adverse tax consequences may result if withdrawals exceed premiums paid into the policy. Withdrawals or surrenders made during a Surrender Charge period will be subject to surrender charges and may reduce the ultimate death benefit and cash value. Surrender charges vary by product, issue age, sex, underwriting class, and policy year. 5 There is not a specific limit on dollars that can be paid to purchase life insurance, however there are maximum premium limits determined by a specified amount of coverage. A policy will qualify as life insurance if it meets the requirements of IRC Sec 7702, which includes limits on the amount of premium that may be paid into a specified amount of coverage and still qualify as life insurance. Tax consequences may result if withdrawals exceed premiums paid into the policy. There is not a specific limit on dollars that can paid to purchase life insurance, however there are maximum premium limits determined by a specified amount of coverage. A policy will qualify as life insurance if it meets the requirements of IRC Sec 7702, which includes limits on the amount of premium that may be paid into a specified amount of coverage and still qualify as life insurance. Policy loans from life insurance policies generally are not subject to income tax, provided the contract is not a Modified Endowment Contract, as defined by Section 7702A of the Internal Revenue Code. A policy loan or withdrawal from a life insurance policy that is a Modified Endowment Contract is taxable upon receipt. Policy loans and withdrawals will reduce cash value and death benefit. Policy loans are subject to interest charges. Tax advantages may be subject to modified endowment contract rules, which may cause taxes and penalties. Tax advantages may be subject to the Alternative Minimum Tax, which may cause taxes and penalties. Executive Office 525 W Van Buren Chicago, IL FOR AGENT USE ONLY. NOT TO BE USED FOR CONSUMER SOLICITATION PURPOSES. PR /11