Life Insurance Review. Ensuring life insurance coverage meets today s goals. Life. your way

Transcription

1 Life Insurance Review Ensuring life insurance coverage meets today s goals Life. your way SM

2 Life. your way Strive to live your dream and plan for the if in life. Discover the flexibility of life insurance protect, accumulate and transfer wealth now and in the future. Be free to live life, your way.

3 ARE YOU CONCERNED ABOUT preserving the assets THAT YOU SPENT YEARS ACCUMULATING? HAVE YOU RECENTLY had a life changing event? ARE YOU ADEQUATELY protecting the economic value OF YOUR LIFE? HAVE YOU PROPERLY PLANNED for the unexpected? Life insurance offers unique benefits. A life insurance death benefit can avoid probate and income tax and can provide considerable leverage. With the appropriate life insurance policy, you may have a source of income tax-free funds that can be used to satisfy a variety of objectives. With life insurance, you may be fulfilling your promises to yourself, your family and your business. THE BENEFITS LIFE INSURANCE MAY PROVIDE: A substantial benefit in exchange for a relatively low amount of premium dollars Tax-free distributions assume that the life insurance policy is properly structured, is not a Modified Endowment Contract (MEC) and distributions are made up to the cost basis and policy loans thereafter. If the policy is a Modified Endowment Contract (MEC), income taxes are due upon withdrawal and if withdrawn before age , a 10% penalty tax may apply. For a non-mec contract, income taxes are due upon withdrawal only to the extent that they exceed basis. Loaned amounts are generally not subject to income taxation. Loans and withdrawals will decrease the cash value and death benefit. Should the policy lapse or be surrendered prior to the death of the insured, there may be tax consequences. An income tax-free death benefit to your beneficiaries Estate tax-free proceeds, with proper planning 1 Cash death benefit for taxes, or living expenses while estate is settled The potential to accumulate assets on a tax-deferred basis A source of tax-free funds 2 to satisfy a variety of objectives, including education and retirement 1 Properly structured and funded inside of an Irrevocable Life Insurance Trust. 2 Cash value accumulation may not be guaranteed depending on the type of product selected. Investments in variable life insurance are subject to market risk, including loss of principal. * You should consult with your independent tax and legal advisors regarding this technique. 1

4 What is a LIFE Changing? Event HAVE YOU FULLY EVALUATED THE ECONOMIC VALUE OF YOUR LIFE? Over time, the economic value of your life may have increased. Do you understand the factors that you may need to consider? Some of these factors may include the following: Continuing financial responsibilities to your family or community Debts or other financial obligations Educational funding for children or grandchildren Changes in income or net worth Divorce, child support or blended family obligations Continuation of your family or community responsibilities Desire to protect your business assets, partners or key persons 2

5 COMMON LIFE CHANGING EVENTS INCLUDE: 1. MARRIAGE OR DIVORCE 2. BIRTH OF A CHILD OR GRANDCHILD 3. PURCHASE OF A NEW HOME 4. DISABILITY 5. OWNING A BUSINESS 6. CHANGE IN BUSINESS VALUATION 7. RETIREMENT 8. EDUCATION FOR YOUR CHILDREN 9. ELDER CARE FOR YOUR PARENTS 3

6 Having already purchased life insurance, you understand that there are expenses your loved ones have that they may be counting on you to provide after your death, or that you simply wish to provide for them. Even though you may have used great care and forethought when purchasing your coverage, life insurance isn t an asset that can be purchased and forgotten. You should review all the aspects of your policy approximately every 1-2 years as well as any time you experience a life changing event. You may find that the coverage you have already purchased still meets your needs, but you may need to make certain changes like investment subaccounts or beneficiary designations. Sometimes you will find that your need for insurance coverage has either increased or decreased. You may occasionally find that due to changes in your health, medical advances or industry competition you may be able to purchase the same death benefit for less premium. It is extremely important to review your life insurance coverage with your financial professional regularly to ensure that the coverage you have purchased is still providing the intended protection at a reasonable cost. *When replacing an existing life insurance policy with another policy, it is important to confer with your independent tax and legal advisors regarding various tax and non-tax issues and implications. case study #1 YOUNGER CLIENTS Jim & Laurie Our lifestyle has changed so quickly in the last few years that we didn t consider our life insurance needs. the concern the solution Jim and Laurie bought a term contract to pay off their mortgage in the event Jim died unexpectedly. Since then, the couple had two children and Laurie stopped working. Due to changed circumstances, their financial professional recommends a life insurance review and points out several things to them. The term policy they purchased and Jim s group term contract through his employer are not enough to pay off the mortgage, help Laurie raise the children and pay college tuition. Moreover, their term coverage, even though level, will likely have an increase in premium when the current term expires. Finally, they need to add their children to their policies as contingent beneficiaries. 4

7 the benefit Through a life insurance review, their financial professional shows them how they can meet more of their needs by purchasing coverage at appropriate levels. Jim and Laurie now understand the importance of reviewing their insurance coverage periodically and have committed to meet with their financial professional with greater frequency. This example is hypothetical, actual results may vary. 5

8 case study #2 BUSINESS OWNERS George & Spencer Building this business has been our focus. Now that we have a financial professional to focus on our business planning needs, we can get back to what we do best. the concern the solution George and Spencer are co-owners in a business. Some years ago they established a cross-purchase business continuation plan where each planned to buy-out the other in the event of a death. They funded the insurance with a combination of permanent and term coverage. The permanent coverage was variable universal life, intended to provide a source of supplemental income if the policies were not needed by retirement. The term was intended to cover any gaps in the cost of the business. Now, the business has increased tremendously in value. Their financial professional discovers that their current coverage is not sufficient to accomplish their goals. He also points out that the variable universal life insurance is underperforming and recommends reviewing current investment options. 6 Because George and Spencer have each decided to sell their share of the business to the surviving partner, even after retirement, a term policy designed to expire at retirement is no longer suitable for their needs. Fortunately, their current term policy has a conversion privilege that can be used to fund part of a new universal life insurance policy with a higher death benefit to fund their plans for the continuation of the business. At this time, they also review the investment options in the variable policies and make some changes to the subaccounts they have chosen.

9 the benefit By converting their existing term insurance to universal life insurance policies that will last for their lifetimes, the survivor will be able to purchase the other half of the business no matter when the first partner dies. They are also hopeful that the changes they have made to the variable policies subaccounts will provide the potential for higher returns 3. 3 Returns are not guaranteed. Variable life products are subject to market risk and may lose value. This example is hypothetical, actual results may vary. 7

10 case study #3 CLIENTS UTILIZING A TRUST Paul & Margaret We thought our trust was on auto-pilot, but our financial professional opened our eyes to the need for a regular review. the concern the solution Paul and Margaret set up their estate plan ten years ago. As part of the plan they set up an irrevocable trust and the trustee purchased two second-to-die policies on their lives from two different companies. One was a participating whole life contract; the other was a universal life contract. The couple has diligently made gifts for premium payments each year and the trust is in good shape. However, no one including the trustee has reviewed the life insurance policies since the trust was set up. At the urging of their financial professional and CPA, Paul and Margaret contacted the trustee and asked to have the policies reviewed. After a thorough analysis, it was determined that both policies were not performing as expected. Both were sold using assumptions that, while normal for life insurance policies ten years ago, are unrealistically high in today s environment. The participating whole life policy had experienced dividend cuts over the last ten years. Because the universal life policy was being credited over 500 basis points (5%) lower than the illustration upon which the policy was sold, the policy would now require premiums be paid an additional 12 years over the original period. 8

11 the benefit By evaluating the newer policies on the market, it is determined that they can obtain more coverage than the original policies while preserving the original premium schedule illustrated ten years ago. Paul also quit smoking about seven years ago. As a result, Paul s moderately high blood pressure and cholesterol levels are within normal ranges for his age. They were then pleased to discover that Paul is now eligible for the preferred nonsmoker class where the existing contracts had rated him Table B and as a smoker. He had never thought of informing his existing carriers of these positive changes in his health. With the new policy and improved ratings from under writing, Paul and Margaret s trust now owns life insurance with an approximately 20% higher death benefit and a reduced period of premium payments. This example is hypothetical, actual results may vary. 9

12 Pursuant to IRS Circular 230, MetLife is providing you with the following notification: The information contained in this document isnot intended to (and cannot) be used by anyone to avoid IRS penalties. This document supports the promotion and marketing of insurance products. You should seek advice based on your particular circumstances from an independent tax advisor. MetLife, its agents, and representatives may not give legal or tax advice. Any discussion of taxes herein or related to this document is for general information purposes only and does not purport to be complete or cover every situation. Tax law is subject to interpretation and legislative change. Tax results and the appropriateness of any product for any specific taxpayer may vary depending on the facts and circumstances. You should consult with and rely on your own independent legal and tax advisers regarding your particular set of facts and circumstances. Prospectuses for Equity Advantage Variable Universal Life, and for the investment portfolios offered thereunder, are available from MetLife. The policy prospectus contains information about the policies features, risks, charges and expenses. The investment objectives, risks and policies of the investment options, as well as other information about the investment options, are described in their respective prospectuses. Clients should read the prospectuses and consider this information carefully before investing. Product availability and features may vary by state. MetLife variable life insurance policies have limitations, exclusions, charges, termination provisions and terms for keeping them in force. There is no guarantee that any of the variable investment options in this product will meet its stated goals or objectives. The cash value is subject to market fluctuations so that, when withdrawn, it may be worth more or less than its original value. Guarantees are based on the claims paying ability and financial strength of the issuing insurance company. Guarantee Advantage Universal Life is issued by MetLife Investors USA Insurance Company on Policy Form Series 5E and in New York, only by Metropolitan Life Insurance Company on Policy Form Series 1E NY. Legacy Advantage Survivorship Universal Life is issued by MetLife Investors USA Insurance Company on Policy Form Series 5E and in New York, only by Metropolitan Life Insurance Company on Policy Form Series 1E NY. Equity Advantage Variable Universal Life is issued by MetLife Investors USA Insurance Company on Policy Form Series 5E and in New York only by Metropolitan Life Insurance Company, Policy Form Series 1E NY-1. Whole Life is issued by Metropolitan Life Insurance Company on Policy Form Series 8-90(08). Guaranteed Level Term is issued by MetLife Investors USA Insurance Company on Policy Form Series 5E and in New York, only by First MetLife Investors Insurance Company on Policy Form Series 5E NY. All guarantees are based on the claims-paying ability and financial strength of the issuing insurance company. All products are distributed by MetLife Investors Distribution Company (MetLife Investors), 5 Park Plaza, Suite 1900, Irvine, CA April 2009 Insurance Products: Not A Deposit Not FDIC Insured Not Insured By Any Federal Government Agency Not Guaranteed By Any Bank Or Credit Union May Go Down In Value MetLife Investors Distribution Company 5 Park Plaza, Suite 1900 Irvine, CA metlife.com CLVL20612 L [0511] A 2009 METLIFE, INC. PEANUTS United Feature Syndicate, Inc.