INSMARK ILLUSTRATION CONCEPT

Transcription

1 What is this concept presentation about? When do I use it? What additional information is necessary? INSMARK ILLUSTRATION CONCEPT Permanent vs. Term Description This presentation compares the cash flows, surrender values and death benefit of a permanent product (e.g., IUL, VUL, even GUL) with the alternative of buying a term product and investing the difference in premium into some form of investment. The investment can be taxable or tax-advantaged. It can reflect any growth rate and expense structure. I can be as simple as a passbook savings or as sophisticated as a managed stock portfolio with a specified turnover rate generating dividend and capital gain income taxed separately. The analysis will determine which alternative makes the most sense for the client. When to Use Anytime you propose a permanent policy and are faced with the statement I can just buy term insurance for that price and invest the difference in a mutual fund or [insert investment here]. When suggesting someone convert their term policy into a permanent solution and they want to understand why they should spend the extra premium dollars. Additional Information Needed Details about the side fund investment, including taxation, turnover (if applicable). By default, we will select a side fund that matches the type of permanent insurance selected. For example, for an IUL, we will select an equity fund with industry average turnover rates and taxation; FOR FINANCIAL PROFESSIONAL USE ONLY - NOT FOR PUBLIC DISTRIBUTION. Advanced Markets is a marketing unit of American General Life Insurance Company (AGL), a member of American International Group, Inc. (AIG). The Company, its financial professionals and other representatives are not authorized to give legal, tax or accounting advice. Applicable laws and regulations are subject to change and individuals should consult an attorney, tax advisor or accountant. No representation or warranty, express or implied, is made by AGL or its affiliates as to the completeness of the information provided. AIG 215. All rights reserved. AGLC Tax bracket for the insured; Term insurance information for comparison. We can use AG policy rates, if appropriate. Or, if this is a conversion, rates for the ongoing premium payments will be required.

2 Permanent vs. Term For: [Your Client's Name Here] Presented By: [Your Name Here]

3 Important Information Illustrated policies issued by: American General Life Insurance Company (AGL), except in New York, where issued by The United States Life Insurance Company in the City of New York (US Life). Issuing companies AGL and US Life are responsible for financial obligations of insurance products and are members of American International Group, Inc. (AIG). Products may not be available in all states and product features may vary by state. Guarantees are backed by the claims-paying ability of the issuing insurance company. This is a supplemental illustration which may contain current values that are not guaranteed. This illustration and is valid only when accompanied by an American General Life illustration/quote. Please note that this supplemental illustration may not depict values for all years shown in the full policy illustration/quote. If policy illustrated is variable life insurance, these policies are distributed by AIG Capital Services, Inc., member FINRA. Investments in variable life insurance are subject to market risks, including loss of principal. Investors should carefully consider the investment objectives, risks, fees, charges and expenses before investing. Current policy and underlying fund prospectuses can be obtained from or visit The information contained in this document is general in nature and intended for educational purposes only and is not a comprehensive analysis of the topic presented. No representation or warranty, express or implied, is made by AGL, US Life and its affiliates as to the completeness of the information in this document. The information may be subject to change and should be verified for accuracy and reliability (e.g., federal and state income tax statutes, rulings, etc. that may have changed since publication) and may be subject to differing legal interpretations. AGL and US Life cannot and do not guarantee the applicability or accuracy of the calculations within this presentation. All results are hypothetical representations for illustrative purposes only. AGL and US Life shall not be liable for any loss or damage caused by the use of, or reliance on, the tax, accounting, legal, investment or financial items contained in this material. The Company, its financial professionals and other representatives are not authorized to give legal, tax or accounting advice. For advice concerning your situation, consult your professional attorney, tax advisor or accountant. Page 1 of 7

4 vs. Term Insurance and a Preface A decision to acquire additional life insurance can represent one of several significant phases in your overall financial planning. An important part of this decision will involve your selection of the appropriate life insurance policy. There are several important factors to consider which include: 1. The time frame for the insurance need; 2. Your available cash flow; 3. Your alternative uses for the cash flow; 4. The income tax considerations. An integrated analysis of these points creates useful information that helps guide your purchasing evaluation. The precision of the conclusions, however, is contingent upon the accuracy of the data utilized. You should be positive that all premises and conditions accurately reflect your goals and expectations. The accompanying analysis contrasts a cash value policy to a term insurance alternative. Any difference in premiums between the two choices has been evaluated regarding time/use of money. The study produces information which should form a basis from which you and your advisors can draw informed conclusions. Based upon the results of the analysis, we recommend funding your life insurance requirement with the cash value policy illustrated rather than a term life insurance policy. Cumulative Payments $2,k Cum. Net Payments 1,5k 1,k 5k $371,78 Yrs Term Insurance $2,k 1,5k $2,k 1,5k Surrender Value $1,666,144* $1,557,144* 1,k 1,k 5k $99,12 Yrs k Yrs *This is a supplemental illustration and is valid only when accompanied by an American General Life illustration. Benefits and values are not guaranteed. Page 2 of 7

5 vs. Term Insurance and a Comparison Yield 5.% Income Tax Rate 3.% Interest Rate 9.24% Initial 1,, Payment Allocation Matching Term Insurance Along with a Year Male Age (1) Cost of the Proposed Policy (2) Alternative Term Policy Premium (3) Net to (1) (2) (4) After Tax Investment Income (5) Values (6) Matching Term Death Benefit (7) Combined Death Benefit (5) + (6) (8) Year End Accum Value* (9) Year End Surrender Value* (1) Death Benefit ,589 1,415 17, , ,225 1,, 11,2 2 1,, ,589 1,39 17,199 1,224 36, ,82 1,, 21,742 1,742 1,, ,589 1,364 17,225 1,87 55, ,77 1,, 32,471 21,471 1,, ,589 1,336 17,253 2,539 75,85 924,915 1,, 43,217 28,217 1,, ,589 1,38 17,281 3,233 95,599 94,41 1,, 6,418 43,418 1,, ,589 1,279 17,31 3, , ,139 1,, 82,63 67,63 1,, ,589 1,248 17,341 4, , ,12 1,, 13,746 91,746 1,, ,589 1,217 17,372 5, ,74 838,26 1,, 125, ,481 1,, ,589 1,184 17,45 6,27 185, ,585 1,, 147, ,271 1,, ,589 1,15 17,439 7,1 29,954 79,46 1,, 181,12 181,12 1,, ,589 1,115 17,474 7,96 235, ,612 1,, 214,84 214,84 1,, ,589 1,79 17,51 8, ,75 738,25 1,, 248, ,468 1,, ,589 1,41 17,548 9, ,73 71,927 1,, 282, ,122 1,, ,589 1,2 17,587 1, , ,67 1,, 315, ,674 1,, , ,628 11, , ,253 1,, 367,95 367,95 1,, , ,669 12, , ,829 1,, 419, ,452 1,, , ,713 13,821 48,74 591,296 1,, 47,91 47,91 1,, , ,758 14, , ,611 1,, 522, ,373 1,, , ,85 16,72 475, ,735 1,, 573, ,843 1,, , ,853 17,259 51, ,622 1,, 654, ,738 1,, ,911-2,911 17,131 56, ,42 1,, 717,46 717,46 1,, ,458-23,458 16,91 5,5 499,95 1,, 78,44 78,44 1,, ,427-26,427 16,577 49,2 59,8 1,, 843,82 843,82 1,, ,654-33,654 15, , ,374 1,61,899 97,65 97,65 1,61, ,652-45,652 14, , ,446 1,168,259 1,7,12 1,7,12 1,168, ,822-6,822 13, , ,38 1,271,634 1,15,768 1,15,768 1,271, ,725-8,725 1, ,577 1,36,558 1,361,135 1,24,545 1,24,545 1,361, ,769-13,769 7, ,536 1,218,39 1,446,927 1,33,537 1,33,537 1,446, ,23-136,23 3,238 95,751 1,432,996 1,528,747 1,42,521 1,42,521 1,528, ,351 99,12 99,12 1,557,144 1,557,144 1,666, ,78 553, ,897 3 Year Summary *This is a supplemental illustration and is valid only when accompanied by an American General Life illustration. Benefits and values are not guaranteed. Term/Side Fund After Tax Payments 371,78 371,78 Living Values 99,12 1,557,144 99,12 1,666,144 Page 3 of 7

6 vs. Term Insurance and a Matching Values Yield 5.% Income Tax Rate 3.% Interest Rate 9.24% Initial 1,, Gross Interest Rate Required on a to Match Policy Values over 3 Years After Applying the Term Payment Illustrated Gross Interest Rate Required To match Accumulation Value of: $1,557, % To match Surrender Value of: $1,557, % To match of: $1,666, % To Match Accumulation Value $1,557, % Required To Match Surrender Value $1,557, % Required To Match $1,666, % Required Income Tax Considerations 1. : Interest is taxed as earned. 2. : a. including available cash value component is income tax free. b. Loans are income tax free as long as the policy is kept in force. c. Withdrawals and other non-loan policy cash flow up to cost basis (not in violation of IRC Section 772) are income tax free as a return of premium. d. Cash values shown assume most favorable combination of b and/or c. This is a supplemental illustration and is valid only when accompanied by an American General Life illustration. Benefits and values are not guaranteed. Page 4 of 7

7 vs. Term Insurance and a 3 Year Analysis Cumulative Payments $2,k Cum. Net Payments 1,5k 1,k 5k $371,78 Yrs Term Insurance $2,k $2,k Surrender Value 1,5k 1,5k $1,666,144* $1,557,144* 1,k 1,k 5k 5k $99,12 Yrs Yrs This is a supplemental illustration and is valid only when accompanied by an American General Life illustration. Benefits and values are not guaranteed. Page 5 of 7

8 vs. Term Insurance and a 3 Year Analysis $1,6, $1,557,144 $1,2, $8, $4, $371,78 $ $99, Years At Year 3 Net Payments (Cumulative) $371,78 Values $99,12 Surrender Values $1,557,144 This is a supplemental illustration and is valid only when accompanied by an American General Life illustration. Benefits and values are not guaranteed. Page 6 of 7

9 vs. Term Insurance and a 3 Year Analysis $2,, $1,666,144 $1,5, $1,, $5, $371,78 $ $99, Years At Year 3 Net Payments (Cumulative) $371,78 Policy $1,666,144 Term Plus $99,12 This is a supplemental illustration and is valid only when accompanied by an American General Life illustration. Benefits and values are not guaranteed. Page 7 of 7