An Educational Guide for Consumers. The Cost of Waiting. Advantages of buying whole life now. Insurance Strategies

Transcription

1 An Educational Guide for Consumers The Cost of Waiting Advantages of buying whole life now Insurance Strategies

2 Table of Contents 1 The Cost of Waiting Means Paying More and Getting Less 2 Protecting Sean s Family 3 Sean s Cost of Waiting The decision to purchase life insurance should be based on long-term financial goals and the need for a death benefit. Life insurance is not an appropriate vehicle for short-term savings or short-term investment strategies. The information in this brochure is not written or intended as specific tax or legal advice. MassMutual, its employees and representatives are not authorized to give tax or legal advice. Individuals are encouraged to seek advice from their own tax or legal counsel. NOT A BANK OR CREDIT UNION DEPOSIT OR OBLIGATION NOT FDIC OR NCUA INSURED NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT GUARANTEED BY ANY BANK OR CREDIT UNION

3 The Cost of Waiting Means Paying More and Getting Less We ve all heard the expression never put off until tomorrow what you can do today. The fact is that many people wait to put plans into action, even when they know that delaying goes against their own best interest. Whether it is beginning a program of regular exercise or saving for your children s college education, there are advantages to starting sooner rather than later. The same is true with purchasing life insurance. Buying the right amount and the right type of life insurance early in life may offer substantial long-term benefits. This guide illustrates the advantages of buying permanent, participating whole life insurance at a younger age in order to avoid the cost of waiting. Whole life insurance offers guaranteed level premiums that are based on your age when the policy is issued. As your issue age increases, the annual premium needed to purchase the same amount of whole life insurance also increases. In addition, your total policy cash value and death benefit may be less than if you had bought the policy at a younger age. The following hypothetical example illustrates this cost of waiting to buy whole life insurance. MassMutual Whole Life Insurance Whole life insurance from MassMutual offers a combination of protection, guarantees, cash accumulation and income tax advantages. The generally tax-free policy death benefit can help protect your income during your working years, help provide support to a surviving spouse during retirement or assure a legacy to your family. In addition, whole life provides tax-deferred accumulation of policy cash values and the ability to access these cash values on a tax-advantaged basis via partial surrenders and policy loans. 1 MassMutual whole life insurance offers a solid long-term value to policyowners, and purchasing whole life insurance early in life makes good financial sense. 1 Distributions under a policy (including cash dividends and partial/full surrenders) are not subject to taxation up to the amount paid into the policy (the cost basis). If the policy is a Modified Endowment Contract, policy loans and/or distributions are taxable to the extent of gain and are subject to a 10% tax penalty if the policyowner is under age 59½. Access to cash values through borrowing or partial surrenders can reduce the policy s cash value and death benefit, increase the chance the policy will lapse, and may result in a tax liability if the policy terminates before the death of the insured. 1

4 Protecting Sean s Family Sean is married with an 18-month-old son and a new baby daughter. Sean and his wife have decided that she will stop working to stay at home and take care of their children on a full-time basis. With only Sean s income supporting the family, he wants to be sure that they would be financially secure if he were to die unexpectedly. As part of his overall protection plan, Sean s financial professional determines that he needs an additional $500,000 of life insurance to protect his family. He suggests the purchase of a MassMutual Whole Life Legacy 100 SM policy. Sean can see the value in purchasing a participating whole life policy, but he s not sure if it fits within their budget right now. Sean s situation is common to many growing families. They have a lot going on, with many new expenses and limited income. However, this is also the time when financial protection for the family can be most important. The Buy Term and Convert Later Alternative Sean s financial professional explains that, as an alternative, he could buy less expensive term life insurance now, and convert all or part of the term coverage to whole life insurance later. However, he also explains that this option has a potential cost that Sean should consider. He shows Sean the following comparison: Sean is currently 35 years old and in excellent heath. If he were to purchase the $500,000 Whole Life Legacy 100 policy today, the guaranteed annual premium for the policy would be $6,105, including the cost for a Waiver of Premium Rider. If instead, Sean chose to purchase a $500, year term policy that is convertible to whole life, the guaranteed annual premium over the first 10 years would be only $290. If Sean purchased the $500, year term policy, and converted the term policy to a $500,000 Whole Life Legacy 100 in five years when he turns age 40, the whole life annual premium would increase to $7,725. 2

5 Sean s Cost of Waiting The following table summarizes the cost of waiting to purchase whole life insurance. By age 65, Sean would pay an extra $11,425 in premiums and his policy s cash value will be lower by $50,148. That s a total of $61,573. In addition, the policy death benefit at age 65 is reduced by $62,287 if Sean waits to buy whole life. The Cost of Waiting to Purchase Whole Life Insurance 2 The Age at Which Sean Purchases Whole Life Insurance Whole Life Annual Premium Cumulative Premiums to Age 65 Policy Cash Value 3 at Age 65 Policy Death Benefit 3 at Age $6,105 $183,150 $357,257 $771, $7,725 $194,575 4 $307,109 $709,044 Difference $1,620 $ 11,425 $ 50,148 $ 62,287 As this example demonstrates, buying whole life at an earlier age will allow you to take advantage of lower premium rates and gives you the potential to accumulate more total cash value and a larger total death benefit in the future. 2 Comparison based on Whole Life Legacy 100 SM, Male, Issue Ages 35 and 40, Select Preferred Non-Tobacco, $500,000 Policy Face Amount. Assumes dividends are applied to purchase paid-up additions. These supplemental illustrations are not valid unless accompanied by the following Whole Life Legacy 100 illustrations. Refer to them for assumptions, explanations, guaranteed elements and additional information. They represent hypothetical participating policies with premiums payable to age 100 issued by MassMutual. These illustrations should only be used as a reference that supports the values in this brochure. They are not meant to represent any particular individual s situation. If you d like to learn more, ask your financial professional for a personalized illustration based on your specific situation. 3 These values include dividends which are neither estimates nor guarantees, but are based on the 2017 dividend schedule. The dividend schedule is reviewed annually and it is likely that dividends in future years will be lower or higher depending on the Company s actual experience. For this reason, we strongly recommend that you look at a hypothetical lower schedule illustration available upon request. 4 Equals the sum of the Vantage Term -10 term premiums of $290 for 5 years from age 35 through age 39 ($1,450), plus the sum of the annual whole life premiums of $7,725 for 25 years from age 40 to age 65 ($193,125) for a total of $194,575. 3

6 Massachusetts Mutual Life Insurance Company (MassMutual) Whole Life Legacy 100 Life Insurance Illustration Narrative Summary Whole Life Legacy 100 is a permanent life insurance policy providing a guaranteed face amount. Premiums are payable to Age 100. The duration of premiums for riders varies according to the terms of the rider. This illustration is neither projection nor estimate of future benefits and assumes that the currently illustrated non-guaranteed elements will continue unchanged for all years shown. This is not likely to occur and values are subject to change. Actual results may be more or less favorable than those shown. For this reason, we strongly recommend reviewing an illustration specific to your situation showing a lower dividend schedule to see the impact this would have on policy values. Changing the premium payment mode from annual may increase the overall cost of the policy. Based on the illustrated dividend schedule, this policy would not become a Modified Endowment Contract (MEC) under the Internal Revenue Code based on the assumptions in this illustration. Changes to the policy could cause the policy to become a MEC or change the year that the policy is illustrated to become a MEC. Once a policy is classified as a MEC, it receives less advantageous federal income tax treatment than a non-mec policy. Policy Limited Payment Whole Life with Premiums Payable to Age 100 Generic Policy Name Whole Life Policy Policy Form Number WL-2007 Initial Base Dividend Option Paid-Up Additions Annual Base Premium $5, Annual Waiver of Premium (WP) Rider Premium $ Initial Death Benefit $500, Additional Coverage Provided by Rider(s) Accelerated Death Benefit for Terminal Illness Rider (ABR): The Accelerated Death Benefit for Terminal Illness Rider allows the policyowner to receive an advance of policy death benefits when MassMutual receives satisfactory proof the insured has a terminal illness expected to result in death within the period set forth in the Rider. There is no cost for the addition of this rider however there is a fee if the rider is exercised. Transfer of Insured Rider (TIR): The Transfer of Insured Rider provides the policyowner with the right to transfer or exchange a new insured in place of the current insured under the policy, provided an insurable interest exists between the owner and the new insured, the new insured is not older than age 75 and evidence of insurability is provided. There is no annual premium for the rider however there is a cost due if exercised. Waiver of Premium Rider (WP): This rider waives the policy premiums for certain periods if the insured becomes totally disabled, as defined in the rider prior to age 60 and remains disabled for at least six months. Temporary waiver benefits also are available for total disability beginning after age 59, but prior to age 65. Premiums are payable to age 65 or the end of the premium paying period of the policy, if earlier. Column Heading Definitions Age End Year: The age of the insured at the end of the policy year. Contract Premium Beg Year: The gross premium required to be paid at the beginning of the policy year. Guaranteed Cash Value End Year: The cash value which is guaranteed under this policy based upon the illustrated Contract Premium for Guaranteed Values as of the end of the policy year. Guaranteed Death Benefit End Year: The amount of death benefit which is guaranteed to be payable at death based upon the illustrated Contract Premium for Guaranteed Values as of the end of the policy year. Cash Value End Year: The total cash value as of the end of the policy year including all guaranteed and non-guaranteed values. These values are based on the illustrated dividend schedule and are not guaranteed. Death Benefit End Year: This is the amount that would be payable if death occurred at the end of the policy year. These values are based on the illustrated dividend schedule and are not guaranteed. Year: The number of years the policy is assumed to have been in force at the end of the policy year. Prepared for: Sean Client (Male, 35, Select Preferred Non Tobacco) Prepared by: MassMutual Financial Professional Prepared on: November 7, 2016 Page 1 of 3

7 Massachusetts Mutual Life Insurance Company (MassMutual) Whole Life Legacy 100 Life Insurance Illustration Numeric Summary Dividends are not guaranteed and are subject to significant fluctuations over the lifetime of the policy. Changes in dividends will change all Non-Guaranteed values shown in this illustration. To help you understand how changes in non-guaranteed dividends may affect your future policy values, this Numeric Summary shows how your policy would perform based on each of the following dividend scenarios: 1) Guaranteed: The guaranteed policy values, i.e., zero dividends. 2) Non-Guaranteed Midpoint: 50% of the Company's currently illustrated dividend. 3) Non-Guaranteed Current: The Company's currently illustrated dividend. Guaranteed Values Midpoint Assumptions Current Assumptions Cash Value Death Benefit Cash Value Death Benefit Cash Value Death Benefit Contract Premium Year 5 6,105 15, ,000 17, ,981 18, ,079 Year 10 6,105 47, ,000 51, ,939 56, ,053 Year 20 6, , , , , , ,006 Age 70 5, , , , , , ,714 Prepared for: Sean Client (Male, 35, Select Preferred Non Tobacco) Prepared by: MassMutual Financial Professional Prepared on: November 7, 2016 Page 2 of 3

8 Year Massachusetts Mutual Life Insurance Company (MassMutual) Whole Life Legacy 100 Life Insurance Illustration Age End Year Contract Premium Beg Year Guaranteed Cash Value End Year Tabular Values Guaranteed Values Guaranteed Death Benefit End Year Non-Guaranteed Values* Cash Value Death Benefit End Year End Year , , , , , , ,105 4, ,000 5, , ,105 10, ,000 11, , ,105 15, ,000 18, , ,105 21, ,000 25, , ,105 28, ,000 32, , ,105 34, ,000 40, , ,105 41, ,000 48, , ,105 47, ,000 56, , ,105 84, , , , , , , , , , , , , , , , , , , , , , , , , , , ,582 1,047, , , , ,093 1,231, , , ,000 1,168,881 1,454, , , ,000 1,479,341 1,721, , , ,000 1,825,618 2,018, , , ,000 2,301,268 2,301,268 *Non-guaranteed values include dividends, which are neither estimates nor guarantees, but are based on the 2017 dividend schedule. This illustration assumes that non-guaranteed elements will continue unchanged for all years shown. Non-guaranteed elements are subject to change by the insurer. The dividend schedule is reviewed annually and it is likely that dividend schedules will be more or less favorable. Factors that may affect future policy performance include mortality experience, investment earnings, company expenses and other company experience and expectations. We strongly recommend that you request a hypothetical lower schedule illustration specific to your situation. Prepared for: Sean Client (Male, 35, Select Preferred Non Tobacco) Prepared by: MassMutual Financial Professional Prepared on: November 7, 2016 Page 3 of 3 Massachusetts Mutual Life Insurance Company, Springfield, MA

9 Massachusetts Mutual Life Insurance Company (MassMutual) Whole Life Legacy 100 Life Insurance Illustration Narrative Summary Whole Life Legacy 100 is a permanent life insurance policy providing a guaranteed face amount. Premiums are payable to Age 100. The duration of premiums for riders varies according to the terms of the rider. This illustration is neither projection nor estimate of future benefits and assumes that the currently illustrated non-guaranteed elements will continue unchanged for all years shown. This is not likely to occur and values are subject to change. Actual results may be more or less favorable than those shown. For this reason, we strongly recommend reviewing an illustration specific to your situation showing a lower dividend schedule to see the impact this would have on policy values. Changing the premium payment mode from annual may increase the overall cost of the policy. Based on the illustrated dividend schedule, this policy would not become a Modified Endowment Contract (MEC) under the Internal Revenue Code based on the assumptions in this illustration. Changes to the policy could cause the policy to become a MEC or change the year that the policy is illustrated to become a MEC. Once a policy is classified as a MEC, it receives less advantageous federal income tax treatment than a non-mec policy. Policy Limited Payment Whole Life with Premiums Payable to Age 100 Generic Policy Name Whole Life Policy Policy Form Number WL-2007 Initial Base Dividend Option Paid-Up Additions Annual Base Premium $7, Annual Waiver of Premium (WP) Rider Premium $ Initial Death Benefit $500, Additional Coverage Provided by Rider(s) Accelerated Death Benefit for Terminal Illness Rider (ABR): The Accelerated Death Benefit for Terminal Illness Rider allows the policyowner to receive an advance of policy death benefits when MassMutual receives satisfactory proof the insured has a terminal illness expected to result in death within the period set forth in the Rider. There is no cost for the addition of this rider however there is a fee if the rider is exercised. Transfer of Insured Rider (TIR): The Transfer of Insured Rider provides the policyowner with the right to transfer or exchange a new insured in place of the current insured under the policy, provided an insurable interest exists between the owner and the new insured, the new insured is not older than age 75 and evidence of insurability is provided. There is no annual premium for the rider however there is a cost due if exercised. Waiver of Premium Rider (WP): This rider waives the policy premiums for certain periods if the insured becomes totally disabled, as defined in the rider prior to age 60 and remains disabled for at least six months. Temporary waiver benefits also are available for total disability beginning after age 59, but prior to age 65. Premiums are payable to age 65 or the end of the premium paying period of the policy, if earlier. Column Heading Definitions Age End Year: The age of the insured at the end of the policy year. Contract Premium Beg Year: The gross premium required to be paid at the beginning of the policy year. Guaranteed Cash Value End Year: The cash value which is guaranteed under this policy based upon the illustrated Contract Premium for Guaranteed Values as of the end of the policy year. Guaranteed Death Benefit End Year: The amount of death benefit which is guaranteed to be payable at death based upon the illustrated Contract Premium for Guaranteed Values as of the end of the policy year. Cash Value End Year: The total cash value as of the end of the policy year including all guaranteed and non-guaranteed values. These values are based on the illustrated dividend schedule and are not guaranteed. Death Benefit End Year: This is the amount that would be payable if death occurred at the end of the policy year. These values are based on the illustrated dividend schedule and are not guaranteed. Year: The number of years the policy is assumed to have been in force at the end of the policy year. Prepared for: Sean Client (Male, 40, Select Preferred Non Tobacco) Prepared by: MassMutual Financial Professional Prepared on: November 7, 2016 Page 1 of 3

10 Massachusetts Mutual Life Insurance Company (MassMutual) Whole Life Legacy 100 Life Insurance Illustration Numeric Summary Dividends are not guaranteed and are subject to significant fluctuations over the lifetime of the policy. Changes in dividends will change all Non-Guaranteed values shown in this illustration. To help you understand how changes in non-guaranteed dividends may affect your future policy values, this Numeric Summary shows how your policy would perform based on each of the following dividend scenarios: 1) Guaranteed: The guaranteed policy values, i.e., zero dividends. 2) Non-Guaranteed Midpoint: 50% of the Company's currently illustrated dividend. 3) Non-Guaranteed Current: The Company's currently illustrated dividend. Guaranteed Values Midpoint Assumptions Current Assumptions Cash Value Death Benefit Cash Value Death Benefit Cash Value Death Benefit Contract Premium Year 5 7,725 19, ,000 21, ,810 23, ,754 Year 10 7,725 57, ,000 63, ,230 70, ,945 Year 20 7, , , , , , ,416 Age 70 7, , , , , , ,096 Prepared for: Sean Client (Male, 40, Select Preferred Non Tobacco) Prepared by: MassMutual Financial Professional Prepared on: November 7, 2016 Page 2 of 3

11 Year Massachusetts Mutual Life Insurance Company (MassMutual) Whole Life Legacy 100 Life Insurance Illustration Age End Year Contract Premium Beg Year Guaranteed Cash Value End Year Tabular Values Guaranteed Values Guaranteed Death Benefit End Year Non-Guaranteed Values* Cash Value Death Benefit End Year End Year , , , , , , ,725 5, ,000 6, , ,725 12, ,000 14, , ,725 19, ,000 23, , ,725 26, ,000 31, , ,725 34, ,000 40, , ,725 41, ,000 50, , ,725 49, ,000 60, , ,725 57, ,000 70, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,174 1,133, , , ,000 1,072,490 1,344, , , ,000 1,368,884 1,600, , , ,000 1,701,290 1,885, , , ,000 2,157,752 2,157,752 *Non-guaranteed values include dividends, which are neither estimates nor guarantees, but are based on the 2017 dividend schedule. This illustration assumes that non-guaranteed elements will continue unchanged for all years shown. Non-guaranteed elements are subject to change by the insurer. The dividend schedule is reviewed annually and it is likely that dividend schedules will be more or less favorable. Factors that may affect future policy performance include mortality experience, investment earnings, company expenses and other company experience and expectations. We strongly recommend that you request a hypothetical lower schedule illustration specific to your situation. Prepared for: Sean Client (Male, 40, Select Preferred Non Tobacco) Prepared by: MassMutual Financial Professional Prepared on: November 7, 2016 Page 3 of 3 Massachusetts Mutual Life Insurance Company, Springfield, MA

12 MassMutual. We ll help you get there. There are many reasons to choose a life insurance company to help meet your financial needs: protection for your family or business, products to provide supplemental income and the confidence of knowing you will be prepared for the future. At Massachusetts Mutual Life Insurance Company (MassMutual), we operate for the benefit of our participating policyowners. We stand strong in the fundamental belief that every secure future begins with a good decision. And when choosing a life insurance company ownership, strength and stability matter. Learn more at Whole Life Legacy 100 (WL-2007 and WL-NC-2007) is a level-premium, participating, permanent life insurance policy issued by Massachusetts Mutual Life Insurance Company, Springfield, MA Vantage Term Life Insurance Policies (Policy Form TL-2009 and ICC09TL in certain states, including North Carolina) are participating, annually renewable term life insurance issued by Massachusetts Mutual Life Insurance Company, Springfield, MA Dividends are not expected to be paid Massachusetts Mutual Life Insurance Company, Springfield, MA All rights reserved. MassMutual Financial Group is a marketing name for Massachusetts Mutual Life Insurance Company (MassMutual) and its affiliated companies and sales representatives. LI CRN