Life Insurance Funding Options

Transcription

1 Life Insurance Funding Options Designed for: Client Male, 50 Non Smoker Date: Designed by: June 24,2010 British Columbia Bernie Geiss, TEP, FEA, CLU, CFP

2 Introduction There are two general types of life insurance policies, term and permanent. Term insurance products provide temporary coverage. Permanent insurance products offer lifetime coverage. One of the most popular forms of permanent insurance is universal life.

3 Term 10 Insurance Funding Term insurance provides short term protection, usually until age 75 or 85. Term insurance has the advantage of low initial premiums, but offer very little payment flexibility and no prepayment options. Every premium must be paid until the end of the coverage period. In many cases the life insured outlives the duration of the coverage. Term policies are usually the most expensive of the funding alternatives on a longterm basis. Annual Cost Company Plan Simply Preferred Term 10 Face Amount $1,000,000 Annual Cash Flow Requirement , ,

4 Term 20 Insurance Funding Term insurance provides short term protection, usually until age 75 or 85. Term insurance has the advantage of low initial premiums, but offer very little payment flexibility and no prepayment options. Every premium must be paid until the end of the coverage period. In many cases the life insured outlives the duration of the coverage. Term policies are usually the most expensive of the funding alternatives on a longterm basis. Annual Cost Company Plan Simply Preferred Term 20 Face Amount $1,000,000 Annual Cash Flow Requirement 1 1, , , , , , , ,

5 Term to 100 Insurance Funding Term to 100 provides coverage on a level, guaranteed cost of insurance basis until the death of the insured. As long as all premium payments are paid on time the insurance policy will remain in force. Owners of Term to 100 products must continue to pay level premiums until the death of the life insured. Annual Cost Company Manulife Financial Plan Signet T100 Face Amount $1,000,000 Annual Cash Flow Requirement

6 Universal Life Insurance Funding Universal life policies offer a more flexible solution including a greater range of coverage options, insurance charge options and funding options. Funding options available include minimum level funding and quick pay funding. With minimum level funding the policy owner pays the same level guaranteed premium until death. With quick pay funding the policy owner elects to pay more than the minimum premium over a shorter period of time. There are many advantages to the quick pay option. The coverage will remain in force, as long as there are sufficient funds available within the policy. Income generated from excess funds inside the policy is not immediately subject to taxation. The policy owner can withdraw excess funds from the policy in case of an emergency; however, these withdrawals may be taxable. If amounts are taken from the cash value as a disability benefit, these funds are not taxable. Company Plan Millennium Universal Life Face Amount $1,000,000 Deposit Options Annual Cash Flow Requirement Pay Annual Cost

7 T10 T20 T100 UL Assumptions: Insurance Amount: $1,000,000 Tax Rate assumed to be % Present Value rate assumed to be 3.00 % All cash flows assumed to occur at beginning of year No termination cost factored in this cash flow analysis Canada Life guaranteed guaranteed 1/ , / , / , / , / , / , / , / , / , / , /60 4, , /61 4, , /62 4, , /63 4, , /64 4, , /65 4, , /66 4, , /67 4, , /68 4, , /69 4, , /70 11, , /71 11, , /72 11, , /73 11, , /74 11, , /75 11, , /76 11, , /77 11, , /78 11, , /79 11, , /80 32/81 33/82 34/83 35/84 36/85 37/86 38/87 39/88 40/89 After 30 s Total Outlay Policy expires at age 80 Policy expires at age 80 Manulife Financial guaranteed Deposits continue for life 10 Pay Policy is paid up after 10 years 169, , , , NPV of Cash 3.00 % IRR if death occurs at life expectancy (year 30) before tax 92, , , , % % % %

8 Some Important Notes This presentation discusses many elements concerning features of various life insurance policies. This presentation is for general information purposes only. Please refer to the Policy Information Package of the individual policies for further details. This presentation includes examples that are based on the facts and assumptions noted. The illustrated values are neither estimates nor a guarantee of future performance. Actual performance will vary over time and may differ from the example illustrated.