Versa-Flex NLG. Guaranteed Protection for an Evolving Legacy. Flexible Premium Universal Life Insurance Client Guide VFNLG-1E

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1 Pacific Life Insurance Company Versa-Flex NLG Flexible Premium Universal Life Insurance Client Guide Guaranteed Protection for an Evolving Legacy VFNLG-1E

2 VERSA-FLEX NLG As Your Life Changes, Your Life Insurance Policy Should Always Be There For You. What a difference a few years can make in your life. Anything can change: Having a baby Buying a bigger house Growing your business Retiring early or semi-retiring When changes alter your life, they also impact the amount and scope of your life insurance needs. They can also affect your life insurance policy. This is why universal life insurance offers an advantage. Versa-Flex NLG (Policy Form #P08VN1) universal life insurance lets you revise your policy without surrendering or exchanging it to better meet new financial and life insurance needs as they arise. It also guarantees your policy will stay in place, even if your accumulated value (cash value) drops below zero. 1 With Versa-Flex NLG, security doesn t have to be inflexible. Endnotes on page Investment and Insurance Products: Not a Deposit Not Insured by any Federal Government Agency Not FDIC Insured No Bank Guarantee May Lose Value

3 PACIFIC LIFE One Product Many Uses Death benefit protection for your family Tax-free* death benefit Business continuity planning Cash value potential for supplemental income Versa-Flex NLG Features G Adjust your death benefit to meet ongoing needs G Guarantee your death benefit up to a lifetime, regardless of policy performance 1 G Receive at least a 3% guaranteed interest rate credited to your accumulated value annually G Help meet unexpected cash flow needs via policy loans and withdrawals G Choose riders 2 to increase or convert your coverage without providing additional evidence of insurability or help keep your policy in force if disabled * For federal income tax purposes, life insurance death benefits generally pay income tax-free to beneficiaries pursuant to IRC Section 101(a)(1). In certain situations, however, life insurance death benefits may be partially or wholly taxable. Situations include, but are not limited to: the transfer of a life insurance policy for valuable consideration unless the transfer qualifies for an exception under IRC Section 101(a)(2) (i.e. the transfer-for-value rule); arrangements that lack an insurable interest based on state law; and an employer-owned policy unless the policy qualifies for an exception under IRC Section 101(j). 2

4 VERSA-FLEX NLG Adjust Your Death Benefit Your death benefit is dynamic and can be adjusted, within policy limits, to meet a lifetime of needs. Work with your life insurance producer to help you structure and manage the right coverage for your ongoing needs. Build Protection for Now Your life insurance producer can help you choose from among the following coverages to help you meet your current life insurance needs. Choose... Basic Coverage on the primary insured (you). Consider adding optional coverage on any member of your immediate family: G Cost-effective Annual Renewable Term Rider (Form #R08RTP) (ARTR) 2 Coverage on yourself. G Cover any member of your immediate family with Annual Renewable Term Rider Additional Insured (Form #R08RTA). 2 G Include coverage on your children ages 14 days to 25 years with Children s Term Rider (Form #R84-CT). 2 G Boost Early Cash Surrender Values with Specialty Coverage (on primary insured) Increase your coverage and help boost your policy s cash surrender values in its early years for improved balance sheet reporting and other financial needs with the Surrender Value Enhancement Rider-Individual Rider (SVER-I) Coverage (Form #R08SEI). 2,3 Adjust Your Coverage Amounts After policy issue, you may increase or decrease your death benefit amount, within certain limits. You may schedule increases of ARTR Coverage at policy issue to occur later without requiring additional underwriting approval. However, no other types of Coverages may be increased. Decreases are allowed after the first policy year. Your Basic Coverage amount after all decreases have been taken must be at least $1,000. Policy charges and premiums may be affected. 3

5 PACIFIC LIFE Death Benefit Death Benefit Adjust the Payout Structure Throughout Choose one of the following Death Benefit Options at issue and you may switch it as often as yearly, subject to certain policy limits: A (Level) B (Increasing) C (Return of Premium) 4 Death Benefit Death Benefit Death Benefit Premium Withdrawals Amount Death Benefit Equals... plus accumulated value Good for... Death Benefit Cost Efficiency Minimizes policy charges as accumulated value grows Growing Protection Premium Captures power of Withdrawals accumulated Amount value to increase death benefit protection Death Benefit plus sum of premiums, less any withdrawals Estate or Business Planning Turns potentially taxable premium dollars into taxfree* death proceeds for beneficiaries Death Benefit is the sum of all coverages on the primary insured. * For federal income tax purposes, life insurance death benefits generally pay income tax-free to beneficiaries pursuant to IRC Section 101(a)(1). In certain situations, however, life insurance death benefits may be partially or wholly taxable. Situations include, but are not limited to: the transfer of a life insurance policy for valuable consideration unless the transfer qualifies for an exception under IRC Section 101(a)(2) (i.e. the transfer-for-value rule); arrangements that 4 lack an insurable interest based on state law; and an employer-owned policy unless the policy qualifies for an exception under IRC Section 101(j). Premium Withdrawals Amount

6 VERSA-FLEX NLG Guarantee Your Death Benefit Versa-Flex NLG features a guarantee to help keep your policy in force even if your policy s cash value drops to zero. To provide the security of guaranteed coverage at predictable premiums, the Flexible Duration No-Lapse Guarantee III Rider (Form #R03FNL) 2 guarantees that your policy will stay in force for the duration you choose, even if your accumulated value drops to zero. 1 All you have to do is choose how long you want your no-lapse protection to last. Up to a lifetime or for just a few years, the rider allows you flexibility. As long as your net no-lapse guarantee value stays above zero, your policy s death benefit will be guaranteed. Choose your no-lapse guarantee duration and pay your premiums as planned. It s that easy. Life t ime You Choose Your No-Lapse Guarantee Duration Examples of No-Lapse Guarantee Durations To Age 110 To Age 105 To Age 100 To Age 95 Premiums This hypothetical chart illustrates that longer no-lapse guarantee periods will require higher premiums. 5

7 PACIFIC LIFE No-Lapse Guarantee Considerations What is the net no-lapse guarantee value? The net no-lapse guarantee value is not an actual policy value and may not be accessed through loans, withdrawals, or a policy surrender. It is simply a calculation used to determine whether the no-lapse guarantee is in effect. What is the impact of policy loans and withdrawals? You may take withdrawals and loans from your policy s cash value, but doing so may shorten or negate your no-lapse guarantee. If you plan on taking withdrawals or loans from your policy, you should request illustrations from your life insurance producer to understand the potential impact. Note that in addition to policy loans and withdrawals, any changes in coverage may also affect your net no-lapse guarantee value. What is the impact of premium payments? As long as your net no-lapse guarantee value is greater than zero, your premiums may be flexible enough to meet your needs. Keep in mind, if no-lapse protection is of primary importance, the easiest way to maintain a positive no-lapse guarantee value (and thereby maintain your illustrated no-lapse guarantee duration) is to pay your planned premium on or before your policy monthiversary date. 6

8 VERSA-FLEX NLG Choose Your Premiums You set the pace with Versa-Flex NLG. Pay as little as your planned no-lapse premiums or pay up to the policy limits. Each premium you pay, less a premium load, is applied to your policy s cash value. With sufficient cash value, you may be able to suspend premiums and enjoy cost-effective death benefit protection. Or you may choose to access your cash value to help supplement your income. With flexible premiums, you determine your policy s ultimate flexibility. Each premium you pay is reduced by premium load, then applied to accumulated value. Adjustable Death Benefit G Earnings grow tax-deferred G Pays monthly policy charges Income Potential Tax-free policy loans and withdrawals may be taken from the accumulated value. Guarantee Your Interest Rate Each year, we will credit your policy s accumulated value by a current interest rate we will declare periodically. This rate will never be less than 3% annually we guarantee it. The current interest rate is guaranteed for one policy year at a time and may be increased by an Interest Rate Bonus of +0.60% to your current rate in policy years 21+. This Interest Rate Bonus is not guaranteed. 7 See page 11 for policy charges.

9 PACIFIC LIFE Access Your Policy s Your policy s accumulated value grows tax-deferred. Later, you can access this accumulated value through tax-free withdrawals and loans to supplement your income. Withdrawals G Tax-free up to sum of premiums paid G Available after first policy year G Minimum Amount: $200 G Maximum Amount: Accumulated value minus total policy debt, $500, and any applicable surrender charges G $25 fee for each withdrawal (currently waived) Policy Loans G Generally tax-free G Minimum Amount: $200 (in most states) G Maximum Amount: Accumulated values less three times the most recent monthly deductions, less any applicable surrender charges and policy debt. G Loan interest rate charged is offset by interest rate credited. See chart below. 0% Net-Cost Loans in Policy Years 6+ (based on current rates) Policy Year Annual Interest Charged Annual Interest Credited Annual Net Cost All (guaranteed) 3.25% 3.00% 0.25% 6+ (current) 3.25% 3.25% 0.00% Tax-free income assumes, among other things: (1) withdrawals do not exceed tax basis (generally, premiums paid less prior withdrawals); (2) policy remains in force until death; (3) withdrawals taken during the first 15 policy years do not occur at the time of, or during the two years prior to, any reduction in benefits; and (4) the policy does not become a modified endowment contract. See IRC Sections 72, 7702(f)(7)(B), 7702A. Any policy withdrawals, loans and loan interest will reduce policy values and may reduce benefits. 8

10 VERSA-FLEX NLG Options to Enhance and Protect You may elect optional riders 2 to enhance the protection and flexibility of your policy. For details, request a rider and see your illustration. 9

11 PACIFIC LIFE Freedom to Exchange Your Policy for a New One With the automatically included Conversion Rider (Form #R06CON), you may convert to any other life insurance product we make available for such conversions at any time during your eighth policy year. No new evidence of insurability will be required and any applicable surrender charges on this policy will be waived. Flexibility for Growing Families The Guaranteed Insurability Rider (Form #R93-GI) allows the policyowner to buy a new policy without providing new evidence of insurability upon reaching certain ages from 22 to 40 or within 31 days of a qualifying event, such as a marriage or birth or adoption of a child. Help Keeping Your Policy In Force If Disabled Choose the Waiver of Charges Rider (Form #R84-WC) or Owner Waiver of Charges Rider (Form #R84-OWC) to have all policy charges waived upon a total disability. Or, choose the Disability Benefit Rider (Form #R84-DB) to have a monthly disability benefit added to your accumulated value up to age 65. Increases Death Benefit for Accidental Death The Accidental Death Rider (Form #R84-AD) pays a multiple of your death benefit up to $200,000 if your death is due to an accident, subject to certain exclusions. Access Death Benefit if Terminally Ill The Terminal Illness Rider ** allows the policyowner to accelerate payment of a portion of the death benefit if the insured is diagnosed with a terminal illness (12 month or fewer to live). ** Accelerated Death Benefit Rider for Terminal Illness (Policy Form #R12TIU or ICC12 R12TIU form # based on state in which policy is issued). Benefits paid by accelerating the policy s death benefit may or may not qualify for favorable tax treatment under Section 101(g) of the Internal Revenue Code of Tax treatment of an accelerated death benefit may depend on factors such as life expectancy at the time benefits are accelerated, the amount of benefits, the amount of qualified expenses incurred, or if similar benefits are being received under other contracts. Tax laws relating to accelerated death benefits are complex. Receipt of accelerated death benefits may affect eligibility for public assistance programs such as Medicaid. Clients are advised to consult with their qualified and independent legal and tax advisors for more information. The cost of exercising the rider is that the death benefit is reduced by an amount greater than the rider benefit payment itself to reflect the early payment of the death benefit. Rider benefit payments will reduce the death benefit, cash surrender value, and any policy debt. Additionally, rider benefit payments may adversely affect the benefits under other riders. 10

12 VERSA-FLEX NLG Policy Charges The cost of the life insurance and benefits provided through the policy is deducted monthly in the form of policy charges, which include an Administrative charge, Coverage Charge, Cost of Insurance Charge, and the cost of the riders issued with your policy. Additionally, a premium load is deducted from each premium payment. To understand how the policy charges will affect your policy s cash value, request a personalized illustration that includes the Breakout of Charges report. Guaranteed Cost of Insurance Charges We guarantee that the current Cost of Insurance rates for your Basic and SVER-I Coverages will not increase for at least the first five policy years for insureds issue ages and for at least the first three policy years for insureds issue ages 76+. For insureds issue ages 20 60, we extend the option to increase your guarantee period to 10 years as long as the policy is not issued with a substandard rating. There is no charge for this benefit. 11

13 PACIFIC LIFE Pacific Life The Power to Help You Succeed A product is more than its illustrated policy values. It s a commitment forged with the life insurance company that issues it. When you buy a life insurance policy from us, you become a voting member of the Pacific Mutual Holding Company, so decisions made in support of our overall financial strength are also made with the policyowners best interests in mind. We take this commitment to our policyowners seriously, as shown in our history of honoring and making improvements to our existing policies over time. Buying life insurance is a long-term commitment. Go with the company with a history of 124 policy improvements since

14 VERSA-FLEX NLG Endnotes Universal Life Insurance generally requires additional premium payments after the initial premium. If either no premiums are paid, or subsequent premiums are insufficient to continue coverage, it is possible that coverage will expire. 1 The Flexible Duration No-Lapse guarantee, depending on how you structure your policy, has a maximum duration of the insured s lifetime, subject to certain limits. If your net no-lapse guarantee value is zero, the no-lapse feature terminates. If the no-lapse feature terminates, additional premiums would be required to resume the no-lapse guarantee. If policy performance is such that your policy is being maintained solely by the no-lapse guarantee, your policy will not build cash value. 2 Riders will likely incur additional charges and are subject to availability, restrictions, and limitations. When considering a rider, request a policy illustration from your life insurance producer to see the rider s impact on your policy s values. 3 In Pennsylvania, this rider is titled the Term Insurance Rider. 4 The maximum issue age for Death Benefit Option C is 80. The maximum Death Benefit calculated will not exceed the amount shown in the Policy Specifications as the Option C Death Benefit Limit except as described in the Death Benefit Qualification Test, Tax Qualification as Life Insurance, and Modified Endowment Contract Tax Status sections of the Policy. 13

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16 This material is not intended to be used, nor can it be used by any taxpayer, for the purpose of avoiding U.S. federal, state or local tax penalties. This material is written to support the promotion or marketing of the transaction(s) or matter(s) addressed by this material. Pacific Life Insurance Company, its distributors and their respective representatives do not provide tax, accounting or legal advice. Any taxpayer should seek advice based on the taxpayer s particular circumstances from an independent tax advisor. Pacific Life Insurance Company Newport Beach, CA (800) Pacific Life Insurance Company is licensed to issue insurance products in all states except New York. Product availability and features may vary by state. Insurance products and their guarantees, including optional benefits and any fixed subaccount crediting rates, are backed by the financial strength and claims-paying ability of the issuing insurance company. Look to the strength of the life insurance company with regard to such guarantees as these guarantees are not backed by the broker-dealer, insurance agency, or their affiliates from which products are purchased. Neither these entities nor their representatives make any representation or assurance regarding the claims-paying ability of the life insurance company. Non-guaranteed elements are not guaranteed by definition. As such, Pacific Life Insurance Company reserves the right to change or modify any non-guaranteed element. This right to change non-guaranteed elements is not limited to a specific time or reason. Pacific Life Insurance Company s individual life insurance products are marketed exclusively through independent third-party life insurance producers, which may include bank affiliated entities. Some selling entities may limit availability of some optional riders based on their client s age and other factors. Your life insurance producer can help you determine which optional riders are available and appropriate for you. VFNLG-1E /14