YOUR GUIDE TO. Understanding life insurance

Transcription

1 YOUR GUIDE TO Understanding

2 Making life less complicated. Most people know that can provide their families with a death benefit if the unexpected should happen. But they may not know that it can also be used to meet a number of future planning needs for both their families and themselves. We understand that choosing the right type and amount of coverage may seem a little daunting. So we designed this brochure to make it easier for you to get the right protection for your specific planning needs. WHAT S INSIDE?» Who should have and why?» How much do you need?» What kind of is best for you?» Why choose Nationwide? Be sure to choose a product that meets long-term needs, especially if personal situations change for example, marriage, birth of a child or job promotion. Weigh the costs of the policy, and understand that has fees and charges that vary with sex, health, age and tobacco use. Riders that customize a policy to fit individual needs usually carry an additional charge.

3 Who should have life insurance and why? Generally, anyone who has people who are financially dependent on them is a good candidate for, including:» People with children» Married couples or soon-to-be married couples» Single people who support siblings, aging parents or who have debt they wouldn t like passed on to relatives» Someone who was recently promoted or changed jobs and may now have a higher income and greater financial obligations» Business owners thinking about business succession or keeping key employees If something were to happen to you, may help your family:» Maintain their standard of living» Pay off your funeral or other final expenses» Pay off the mortgage so they don t have to sell their home» Pay off your other debts» Establish a college savings account for your children 3

4 How much do you need? Everyone is different, but a general rule of thumb is to purchase enough to cover five to seven times your current salary (up to 10 times if you re the breadwinner in the family). This calculation is pretty general, though. So, if you d like to find an amount more tailored to your specific needs, talk to your insurance professional or use the following needs worksheet. 4

5 Life insurance needs worksheet This worksheet can help you get a general sense of how much you need to protect your family. Before buying any insurance products, you should consult with a qualified insurance professional for a more thorough analysis of your needs. This worksheet assumes you died today. Income 1. Total annual income your family would need if you died today What your family needs, before taxes, to maintain its current standard of living (Typically between 60% 75% of total income) $ 2. Annual income your family would receive from other sources For example, spouse s earnings or a fixed pension 1 (Do not include income earned on your assets, as it is addressed later in the calculation) $ 3. Income to be replaced Subtract line 2 from line 1 $ 4. Capital needed for income Multiply line 3 by appropriate factor in Table A Factor $ Expenses 5. Funeral and other final expenses Typically the greater of $15,000 or 4% of your estate $ 6. Mortgage and other outstanding debts Include mortgage balance, credit card balance, car loans, etc. $ 7. Capital needed for college ( average 4-year cost: Private $158,072, Public $71,440 2 ) Estimated 4-year Cost Appropriate Factor in Table B Net Present Value Child 1 x = Child 2 x = + Child 3 x = 8. Total capital required Add items 4, 5, 6 and 7 $ Assets 9. Savings and investments Bank accounts, money market accounts, CDs, stocks, bonds, mutual funds, annuities, etc. $ 10. Retirement savings IRAs, 401(k)s, SEP plans, SIMPLE IRA plans, Keoghs, pension and profit-sharing plans 3 $ 11. Present amount of Including group insurance as well as insurance purchased on your own $ 12. Total income-producing assets Add lines 9, 10 and 11 $ 13. Life insurance needed Subtract line 12 from line 8 $ $ TABLE A Years Income Needed Factor TABLE B Years Before College Factor Note: These tables help you determine Net Present Value (NPV), the amount of capital required today to satisfy future income or college cost needs, given an assumed investment return of 6%, inflation of 3% for living costs and 5% for college costs. 1 Social Security benefits, which may be available, have not been factored into this calculation. 2 Trends in College Pricing, The College Board (2012). Costs reflect total charges, which include tuition, fees, room and board. 3 Distributions from most retirement savings plans are subject to ordinary income tax rates. This worksheet has been reproduced by Nationwide Life Insurance Company with the permission of Life Happens, a nonprofit organization dedicated to helping consumers take personal financial responsibility through the ownership of and related products. 5

6 What kind of is best for you? All products have certain things in common: they pay your loved ones a sum of money upon your death, and that money, called a death benefit, is typically income tax-free. But, where term offers you affordable, temporary coverage, permanent provides life-long protection. Your insurance or investment professional can help you decide what type of insurance is best for your needs, but here is a quick reference guide to help you get started. Term Whole Universal Variable universal Temporary coverage Permanent coverage Stock market participation 4 Death benefit Designed for low cost Access to your money 5 Guaranteed cash value 6 Tax advantages Flexible payments 7 4 Stock market participation The underlying investment options you select for the variable universal life (VUL) policy participate in the market; there is no direct participation by the policyowner. Please keep in mind that the underlying investment options offered by VUL policies are subject to market risk, including possible loss of principal. These funds are only available in variable insurance products issued by companies. They re not available to the general public. 5 Access to your money This assumes that the contract qualifies as under Section 7702 of the Internal Revenue Code (IRC) and is not a modified endowment contract (MEC) under Section 7702(A). Most distributions are taxed on a first-in/first-out basis as long as the contract meets non-mec definitions under Section 7702(A). Loans and partial withdrawals from a MEC generally are taxable, and if taken prior to age 59½, may be subject to a 10% tax penalty. 6 Guaranteed cash value All guarantees are subject to the claims-paying ability of the issuing insurance company. 7 Flexible payments This assumes there is sufficient cash value to cover monthly policy charges. Keep in mind that variable universal is subject to market volatility, so it s possible that you may need to pay an additional premium on your policy. 6 If you re interested in a VUL policy, we want to make sure you have a full explanation of what we have to offer. Variable products are sold by prospectus. Carefully consider the investment objectives, risks, charges and expenses. The product and underlying fund prospectuses contain this and other important information. Investors should read them carefully before investing. To request a copy, go to nationwide.com or call

7 Use your policy to help cover long-term care expenses and more. Many products today also offer optional features and services, usually for an additional cost, that you can add to your policy for a more customized solution to your planning needs. One example is a long-term care rider, which can help protect against the devastating impact expenses such as home health care, assisted living or nursing home care could have on your personal finances.

8 Why Nationwide? With so many providers out there, what makes Nationwide a good choice? As a Fortune 100 company 8 with over 85 years of experience, you can trust that we ll be here when you need us. Here s what the industry s leading rating agencies have to say about our financial strength: A.M. Best A+ Rated second strongest of 16 categories as of 10/17/02; affirmed on 4/2/14 Moody s A1 Rated fifth strongest of 21 categories as of 3/10/09; affirmed on 9/12/13 Standard & Poor s A+ Rated fifth strongest of 22 categories as of 12/22/08; affirmed on 5/13/14 These ratings and rankings reflect rating agency assessment of the financial strength and claims-paying ability of Nationwide Life Insurance Company and are subject to change at any time. They are not intended to reflect the investment experience or financial strength of any variable account, which is subject to market risk. Because the dates are only updated when there s a change in the ratings, the dates above reflect the most recent ratings we have received. 8 Based on revenue, Fortune magazine (6/14). Interested in learning more? Work with your insurance or investment professional to see how affordable and easy it can be to qualify for, or visit us at nationwide.com. Not a deposit Not FDIC or NCUSIF insured Not guaranteed by the institution Not insured by any federal government agency May lose value Life insurance is issued by Nationwide Life Insurance Company or Nationwide Life and Annuity Insurance Company, Columbus, Ohio. Nationwide, Nationwide is on your side and the Nationwide N and Eagle are service marks of Nationwide Mutual Insurance Company Nationwide LAM-0669AO.9 (3/15)