Nationwide YourLife Indexed UL. Give clients a balanced life FOR INSURANCE PROFESSIONAL USE ONLY NOT FOR DISTRIBUTION WITH THE PUBLIC

Transcription

1 advisor GUIDE Nationwide YourLife Indexed UL Give clients a balanced life FOR INSURANCE PROFESSIONAL USE ONLY NOT FOR DISTRIBUTION WITH THE PUBLIC

2 Preparing for the future can be stressful for your clients. While many of them may want growth, they may also be wary of market volatility. Nationwide YourLife Indexed UL may help you ease their concerns and get them on a path they can feel comfortable with. Our indexed universal life (IUL) product was designed to offer your clients a calm approach to planning with the proper balance of potential for growth and protection from loss. And it s all backed by the strength and stability of Nationwide, so you can both breathe a little easier. As your clients personal situations change (i.e., marriage, birth of a child or job promotion), so will their life insurance needs. Care should be taken to ensure this product is suitable for their long-term life insurance needs. They should weigh any associated costs before making a purchase. Life insurance has fees and charges associated with it that include costs of insurance that vary with such characteristics of the insured as sex, health and age, and has additional charges for riders that customize a policy to fit their individual needs. Indexed universal life insurance policies are not stock market investments, do not directly participate in any stock or equity investments and do not receive dividend or capital gains participation. Past index performance is no indication of future crediting rates. Also, be aware that interest crediting fluctuations can lead to the need for additional premium in your clients policy. Not a deposit Not FDIC or NCUSIF insured Not guaranteed by the institution Not insured by any federal government agency May lose value

3 What s inside? 1 What is indexed universal life insurance? 2 2 What does Nationwide YourLife Indexed UL offer? 3 3 Which strategy is right for your clients? 4 4 How do the interest crediting strategies work? 6 5 How is it different? 8 6 Where is the sweet spot? 12 7 What are the details? 14 8 Why Nationwide? 18 9 Glossary Give us a call 21 Let s take a closer look. 1

4 1 What is indexed universal life insurance? Indexed universal life insurance (IUL) is a fixed life product offering all the traditional advantages of a universal life product including permanent death benefit protection, tax advantages and minimum guarantees with the added benefit of potential cash value accumulation. Please note that guarantees are subject to the claims-paying ability of the issuing insurance company. It uses interest crediting strategies that are based, in large part, on the movement of specific market indexes. Because traditional universal life products have an interest rate set by the carrier, IUL offers clients the opportunity for greater cash value accumulation. When your clients purchase an IUL product, they are subject to a cap on the interest they can earn. But this is fixed life insurance and not a security, so money is never actually invested in the market and your clients are protected from loss during market declines. Permanent life insurance scale Death benefit guarantees Nonregistered products Registered products Whole life NLG-UL Current Assumption UL Accumulation UL Indexed UL Protection VUL Accumulation VUL Cash value accumulation 2

5 2 What does Nationwide YourLife Indexed UL offer? Nationwide YourLife Indexed UL was specifically designed using feedback we received from professionals, just like you, and offers your clients an approachable strategy for planning for the future. Flexible death benefit guarantees a 20-year base policy death benefit guarantee (declining from issue ages 56 to 70) plus the optional Extended Death Benefit Guarantee rider Two interest crediting options annual point-to-point and monthly average help customize the policy to your clients individual preference An indemnity-style long-term care rider that gives your clients more control of their money while maintaining their independence A way to help clients maximize their potential for growth and minimize their loss with a competitive cap rate (current) and a 0% floor (current and guaranteed) Competitive underwriting including simplified issue and guaranteed issue 1 for corporate-owned and corporate-sponsored arrangements helps you get the case sold 1 Available only on Nationwide Executive Indexed UL. 3

6 3 Which strategy is right for your clients? Each client has a different comfort level when it comes to financial risk. So, Nationwide YourLife Indexed UL offers them the flexibility to take on more or less risk based on the interest crediting strategy they select. 1 - Monthly average This strategy may work better for clients who are wary of market volatility and believe it will continue in the near future. The monthly averaging interest crediting strategy tracks the performance of three indexes the S&P 500, NASDAQ-100 and Dow Jones Industrial Average SM each month for one year and averages numbers to determine the percentage of change within each index. It then weights and blends these averages to determine the final rate your clients receive. Using more points of measure can help provide a more representative interest credited to their policy, which can be especially helpful during volatile markets. However, the result may or may not be favorable, depending on market volatility. 2 Month Annual point-to-point This strategy is a good fit for clients who anticipate steady market growth in the near future. Annual point-to-point simply compares the initial and ending values of the S&P 500 Index over a one-year period to determine the percentage of change in the index. Because it s not an average, the point-to-point method can potentially result in higher interest credited when markets are stable and experiencing steady growth. However, it relies on only two points of time. initial value ending value The illustrations used above are hypothetical. Different time scenarios will produce varying results which could be less favorable or more favorable depending on the performance of each entity. 4

7 3 - Fixed Clients also have the option of allocating all or some of their premium dollars to the fixed interest strategy. The fixed interest strategy is generally considered a more conservative choice because the interest rate is fixed and declared in advance. 4 - Allocating to multiple strategies And clients have the ability to allocate their funds however they like between the strategies even within the same segment period. For example, your clients could allocate 50% of their funds to the annual point-to-point interest strategy and the other 50% to the monthly averaging interest strategy. 5

8 4 How do the interest crediting strategies work? Let s look at the details of both the annual point-to-point and monthly average interest crediting strategies more closely. Please note that the dates and values used here were selected to help demonstrate situations where each strategy resulted in a higher interest crediting rate than the other strategy. Different time periods will produce varying results which could be less or more favorable depending on the performance of the applicable index(es). Allocating to the indexed interest strategies An index segment is created when the allocated cash value is moved from fixed interest strategy into an indexed interest strategy on the sweep date which occurs on the 15th of each month. Cap, floor and participation rates for each segment are locked in place for the duration of the segment. There must be enough money in the fixed interest strategy to cover 12 months worth of policy charges. This figure is determined automatically for the client. Annual point-to-point interest crediting strategy Gross premium Fixed interest strategy Declared interest credited Minus fees and charges Net premium Indexed interest strategy Index-linked interest credited Reallocation at segment maturity (according to policyholder instructions) Step 1 The initial value of the S&P 500 (see Dec 15, 2009 in example to the right) is compared to the index value one year later to determine the index performance. Step 2 The index performance is multiplied by the participation rate (100% current and guaranteed.) Step 3 Then the cap or floor rates (currently 12% and 0%, respectively) are applied, if needed, to determine the rate that will be credited to the cash value in the annual point-to-point interest crediting strategy. Step 1 S&P 500 value Dec 15, , Dec 15, , Gain/loss 11.49% Step 2 and 3 Participation rate 100% x 11.49% = 11.49% Cap rate/ Floor rate 12% 2 /0% Credited rate 11.49% 6

9 Monthly average interest crediting strategy Step 1 NASDAQ-100 Dow Jones Industrial Average SM S&P 500 Dec 15, , , , Jan 15 2, , , Feb 15 2, , , Mar 15 2, , , Apr 15 2, , , May 15 2, , , Jun 15 2, , , Jul 15 2, , , Aug 15 2, , , Sep 15 2, , , Oct 15 2, , , Nov 15 2, , , Dec 15, , , , Average 2, , , Step 1 For the monthly average interest crediting strategy, the initial value is noted. Then, the value of the three indexes is noted on the 15th of each subsequent month. At the end of the segment period (which is one year), these 12 values are averaged for each index. They are then compared to the initial values on the sweep date to determine the index performance. Step 2 The performance in each index is then ranked best, second best and third best and then weighted so the bestperforming index counts for 50% of the total average rate, the second best counts for 30% and the third best counts for 20%. Step 3 These three index averages are added together to arrive at the total average rate. Step 2 and 3 NASDAQ-100 Dow Jones Industrial Average SM S&P 500 Gain/loss 2, , = , , = , , = Index growth (Rounded up) /2, = 4.74% /11, = 4.52% 35.93/1, =2.91% Weight 50% 30% 20% Return 2.37% 1.36% 0.58% Total average rate 2.37% % % = 4.31% Step 4 and 5 Participation rate 140% 2 x 4.31% = 6.03% Cap rate/ Floor rate 12% 2 /0% Credited rate 6.03% 2 Current rate, subject to change. Step 4 The total average rate is multiplied by the participation rate (140% current 2, 60% guaranteed). Step 5 Then cap or floor rates (currently 12% 2 and 0%, respectively) are applied, if needed, to determine the rate that will be credited to the cash value in the monthly average interest crediting strategy. Past performance is no guarantee of future performance or of values of indexed life insurance. Cap rates are illustrative in nature, are not guaranteed, are subject to change. Cap rates and participation rates may vary. Indexed universal life policies are not stock market investments and do not directly participate in any stock or equity investments. 7

10 5 How is it different? Competitive product design Nationwide YourLife Indexed UL enables your clients to get the growth they need with competitive cap, floor and participation rates. This design, which includes a guaranteed floor of 0%, helps maximize the benefit clients receive during up markets, while still protecting them from loss during times of market decline. Monthly average interest crediting strategy: Clients choosing this strategy receive one of the most competitive current participation rates in the industry 140% 3 (60% guaranteed). This means these clients could potentially receive 140% of the weighted index returns subject to the cap rate, which is currently 12%. Annual point-to-point interest crediting strategy: Clients choosing this strategy receive the benefit of a 100% current and guaranteed participation subject to the 12% cap rate (current). Flexible death benefit guarantee options 4 Every Nationwide YourLife Indexed UL policy comes with a death benefit guarantee that lasts up to 20 years (declining from issue ages 56 to 70). If your clients want a little more protection, they can purchase the Extended Death Benefit Guarantee rider, which allows them to choose: A longer guarantee period from policy year 21 to lifetime coverage; and The amount of protection from 50% to 100% of the base policy specified amount 3 Subject to change. 4 Riders may not be available in every state, may be known by different names in different states and may be available for an additional charge. 8

11 A way to plan for possible long-term care expenses Help clients maintain control of their money and their independence with our indemnity-style long-term care rider. Rather than requiring clients to submit receipts to receive benefits, we send payments once deemed eligible directly to the policyowner, or if held in trust, the trustee, allowing clients to maintain control of their money and spend it as they wish. And because beneficiaries receive the death benefit if long-term care is never needed, you eliminate the use it or lose it objection to many traditional long-term care policies. Just remember that the long-term care benefit is an acceleration of the death benefit and reduces the death benefit and cash surrender value dollar for dollar. Care should be taken to make sure each client s life insurance needs will continue to be met, even if the rider pays out in full. There is no guarantee the rider will cover the entire cost for all of the insured s long-term care since these costs vary with the needs of each insured. 9

12 Flexible loan options Select declared rate or alternative loans so you can tailor the policy to more effectively meet your clients needs and risk tolerance. Declared rate loan This is the typical loan available in most permanent life policies. It provides a fixed interest rate declared at the time the loan is issued. Declared rate loan Declared loan charge rate (current, years 1 10): 3.9% 5 Declared loan credited rate (current): 3.0% Net cost of loan 0.9% Declared loan charge rate (current, years 11+): 3.0% Declared loan credited rate (current): 3.0% Net cost of loan 0.0% 5 Other current loan rates may be subject to change. 10

13 Alternative loan option 6 The interest charged on an alternative loan is based on Moody s Corporate Bond Yield Average. So in markets where this rate is low and the assumed policy interest credited rate is high, an alternative loan can help reduce the rate your clients are charged even creating the potential to earn interest on their loan value. In the first example, the loan is being charged less than the policy is being credited, so it s more beneficial to the client. Alternative loan option Example 1: Assumed Moody's Corporate Bond Yield Average: 5.5% Assumed policy interest credited rate: 8.3% Interest charged on loan 7 : 5.5% Assumed policy interest credited rate: 8.3% Net cost of loan: -2.8% But in the second example, the loan is being charged more than the policy is credited, so the declared rate loan would have been more beneficial for the client. Example 2: Assumed Moody's Corporate Bond Yield Average: 8.5% Assumed policy interest credited rate: 6.0% Interest charged on loan 7 : 8.0% Assumed policy interest credited rate: 6.0% Net cost of loan: 2.0% Just remember that only one type of loan can be carried on a policy at one time. 6 Not available in all states. 7 Please note that the alternative loan charge rate cannot exceed 8% or drop below 3%. This graph does not take into consideration policy charges. Actual crediting rate will be less than assumed and this chart is hypothetical. Also, any money which is removed from an indexed interest strategy segment during an interest crediting period for any reason (e.g., withdrawal, certain loans, policy surrender, to pay policy charges or expenses, etc.) is not credited with any index-linked interest for such interest crediting period. 11

14 6 Where is the sweet spot? Nationwide YourLife Indexed UL was specifically designed to give clients the potential for cash value accumulation while minimizing the risk they experience. The accumulation within their policy can then be used to help meet a wide variety of income planning needs. Other design features: Focuses on the potential for growth accumulation and distribution for target clients, ages 35 to 55 Has the potential to perform well for long-term cash value accumulation and distribution performance (assuming comparable illustrative rate projections) Competes well in protection-oriented premium solves Provides flexible death benefit guarantees a 20-year base policy death benefit guarantee (declining from issue ages 56 to 70) plus the optional Extended Death Benefit Guarantee rider Offers an indemnity-style long-term care rider that gives your clients more control of their money AGE Most Competitive 8 More Competitive Competitive 8 All competitive observations are believed to be current as of April 2012 and are based on benchmarking analysis of Nationwide s price versus other indexed UL carriers. 12

15 Possible individual and business strategies Insurance-based retirement planning Supplemental funding for educational needs 162 Bonus/REBA plan Long-term care planning Split dollar Estate planning Wealth transfer Charitable gifting Income replacement Business continuation SERP funding 13

16 7 What are the details? Product type Target market Issue ages Minimum specified amount Affordable universal life insurance with minimum guarantees, strong indexed-linked cash value accumulation and flexible access for supplemental cash needs Clients ages looking for guarantees and the potential for growth 0 85; Preferred (Age nearest birthday) $100,000 for all specified amounts Underwriting classes and ages Tobacco Preferred, Tobacco Standard, Nontobacco Preferred Plus, Nontobacco Preferred, Nontobacco Standard, 0 85 (Juveniles receive Nontobacco rates) Guaranteed Issue and Simplified Issue available for corporateowned and corporate-sponsored arrangements 9 Death benefit guarantee Guarantees are subject to the claims-paying ability of the issuing insurance company Indexed interest strategies Reference indexes Indexed universal life policies are not stock market investments and do not participate in any stock or equity investments. Multi-index blend method Segment period The death benefit is guaranteed for 20 years on the base product Issue ages 0 70: Minimum of 20 years or 75 issue age Issue ages 70+: 5 years The Extended Death Benefit Guarantee rider (available at an additional cost) Allows clients to choose the duration (21 to attained age 120) and amount (50% to 100% of the base policy specified amount) of protection One-year monthly average Annual point-to-point Monthly average S&P 500 NASDAQ-100 Dow Jones Industrial Average SM Annual point-to-point S&P 500 Weighted and blended for monthly average strategy 50% from best-performing index 30% from second-best performing index 20% from third-best performing index Calculated at each segment maturity date (or segment anniversary) One year 9 Available on Nationwide Executive Indexed UL. 14

17 Participation rate Monthly average 140% 10 (current) 60% (guaranteed) Annual point-to-point 100% (current) 100% (guaranteed) The participation rate will be applied before the cap rate Cap rate Floor rate Sweep frequency Policy expenses 12% 11 (current) 3% (guaranteed) 0% (current) 0% (guaranteed) Monthly (current) Quarterly (guaranteed frequency) Sweeps scheduled on the 15th of the month Premium charges Current: 6% Guaranteed: 10% Maturity Attained age 120 Specified amount bands Band 3: $100,000 $249,999 Band 4: $250,000 $499,999 Band 5: $500,000 $999,999 Band 6: $1,000,000+ Monthly administrative fees Current: $10 Guaranteed: $20 Cost of insurance Varies by age, sex, duration, death benefit option, total specified amount, smoking status, rating and accumulated value; deducted monthly Monthly per-thousand charges Current: Varies by age, sex, death benefit option and total base specified amount; assessed for the first 15 years following policy issue and any increase in specified amount; rate per $1,000 decreases as the specified amount increases; decrease breakpoints occur at $250,000 and $500,000 Guaranteed: Varies by age and total specified amount; assessed for all policy years following policy issue and any increase in specified amount Surrender charges Maximum surrender charge varies by issue age, sex, risk classification, specified amount and rating; 15-year schedule for issue ages up to age 65, declining to a 10-year schedule for issue ages Subject to change. 11 Subject to change. 15

18 Loans 12 Please note that alternative loans are not available in all states. There are two types of loans available on this product: declared rate loans and alternative loans Only one type of loan can be carried on the policy at one time either all declared rate or all alternative loans If clients have a declared rate loan and want to take out an alternative loan, they must first pay back the declared rate loan, and vice-versa Only once during any 12-month period can clients pay off one type of loan and take out a different loan type Minimum amount of any loan is $200 Maximum amount of any loan is the net surrender value of the policy less the sum of the next three monthly deductions Declared rate loans credited rate: Current: 3% Guaranteed: 2% Declared rate loan charged rate: Current: 3.9% (years 1 10); 3% (years 11+) Guaranteed: 3.9% (years 1 10); 3.25% (years 11+) Alternative loan credited rate: There is no alternative loan interest credited. Instead, the policy s accumulated value remains allocated to the Fixed Interest Strategy and/or Indexed Interest Strategy and continues to receive interest credited to those investment options according to their interest crediting formulas. Alternative loan charged rate: Will not exceed the lesser of: 1. The maximum alternative policy loan interest charged rate: 8% 2. The greater of: a. Moody s Corporate Bond Yield Average Monthly average as published by Moody s Investor Service, or its successor, for the calendar month ending two months prior to the date the rate is determined, or: b. the Fixed Interest Strategy s guaranteed minimum accumulated value minimum interest rate, plus 1% annually Unpaid loans will reduce the cash surrender value and any death benefit proceeds payable, and if the policy lapses with a loan outstanding, it will be treated as a distribution and may be subject to income tax. 16

19 Withdrawals/ partial surrenders 12 Fixed interest strategy credited rate Optional features Riders may have an additional cost, may be known by different names in different states and may not be available in all states. $500 minimum Current: 4% 13 Guaranteed: 2% Accelerated Death Benefit rider Accidental Death Benefit rider Additional Term Insurance rider Automated Switch Notification Program Change of Insured rider 13 (only available with GI/SI corporate-owned and corporate-sponsored arrangements) Children s Insurance rider Conditional Return of Premium rider Extended Death Benefit Guarantee rider Long-term care rider Overloan Lapse Protection rider Owner-directed settlement options Premium Waiver rider Spouse Insurance rider Surrender Value Enhancement benefit 14 (only available with GI/SI corporate-owned and corporate-sponsored arrangements) Waiver of Monthly Deductions rider 12 The information regarding access to cash value assumes the contract qualifies as life insurance under Internal Revenue Code (IRC) Section Most distributions are taxed on a first-in/first-out basis as long as the contract remains in force and meets the non-mec (Modified Endowment Contract) definitions of IRC Section 7702A. But if it is a MEC, then any distributions you take from your policy will generally be taxable and subject to a 10% penalty tax if you re 59½ or younger. If you choose to take loans or partial surrenders, the cash value and the death benefit payable to your beneficiaries will be reduced. Surrender charges may apply for early surrenders and partial surrenders. Surrenders may be subject to income tax. 13 Subject to change. 14 Only available on Nationwide Executive Indexed UL. 17

20 8 Why Nationwide? We re glad you asked As a stable, Midwestern company with more than 80 years of experience, we re conservative by nature. And, because we re in the business of offering annuities, life insurance, retirement plans and mutual funds, we know risk management and take many steps to protect our customers. We re proud of the company we keep and the company we ve built: 33,793 associates you Fortune 100 company 33, associates give back to the communities they live and work in A Fortune 100 company 16 and one of the largest financial services companies in the United States Through the years, we ve worked hard to build things you can rely on: Diversified sources of earnings and cash flows A strong balance sheet A sound and disciplined investment policy A long history of maintaining a quality investment portfolio Spend some time with us and you ll quickly see a difference. Our conservative, family-based culture allows us to bring a unique brand of personalized service to our customers. We call it being On Your Side and it s what drives us to help you and your clients protect what matters most /31/11 16 Fortune magazine (May 2012). 18

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22 9 Glossary Reference index: One or more market indexes associated with an indexed interest strategy which is measured and used to help determine the interest credited rate. Index segment interest period: The period of time between the sweep date on which the segment was created and the date of the segment s maturity. The interest credited to each segment may vary. Indexed interest strategy: One or more allocation options funded by an insurer s general account and credited with index segment interest based on the performance of its reference index(es). Index performance: The percent change of the underlying index from the index segment start date and segment maturity. Index segment: Is created when the allocated cash value is moved from the fixed interest strategy into the indexed interest strategy on the sweep date. Index segment term: The length of time an index segment exists for example, one year. Cap rate: The maximum index segment interest rate credited to an index segment. Floor rate: The minimum index segment interest rate credited to an index segment. Participation rate: The percentage of the index performance used to help calculate the strategy s interest crediting rate. For example, if the participation rate is 100%, then 100% of the actual performance within the index will be used. 20

23 10 Give us a call Nationwide YourLife Indexed UL can help restore your clients confidence in the future even during volatile times. So, call us today for more information or to discuss a specific case. National Sales Desk: Nationwide Financial Network : Brokerage General Agents (BGAs):

24 FOR INSURANCE PROFESSIONAL USE ONLY NOT FOR DISTRIBUTION WITH THE PUBLIC S&P, S&P 500, Standard & Poor s, Standard & Poor s 500 TM are trademarks of Standard & Poor s and have been licensed for use by Nationwide Life Insurance Company and Nationwide Life and Annuity Insurance Company. Nationwide YourLife Indexed UL is not sponsored, endorsed, sold or promoted by Standard & Poor s and Standard & Poor s makes no representation regarding the advisability of investing in the Product. NASDAQ, OMX, NASDAQ OMX, NASDAQ-100, and NASDAQ-100 Index are registered trademarks of The NASDAQ OMX Group, Inc. (which with its affiliates is referred to as the Corporations ) and are licensed for use by Nationwide Life Insurance Company or Nationwide Life and Annuity Insurance Company. Nationwide YourLife Indexed UL has not been passed on by the Corporations as to their legality or suitability. Nationwide YourLife Indexed UL is not issued, endorsed, sold, or promoted by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE PRODUCT. The Dow Jones Industrial Average SM is a product of Dow Jones Indexes, the marketing name and a licensed trademark of CME Group Index Services LLC ( CME ), and has been licensed for use. Dow Jones, Dow Jones Industrial Average SM and Dow Jones Indexes are service marks of Dow Jones Trademark Holdings, LLC ( Dow Jones ) and have been licensed for use for certain purposes by Nationwide Life Insurance Company or Nationwide Life and Annuity Insurance Company. Nationwide s Nationwide YourLife Indexed UL based on the Dow Jones Industrial Average SM is not sponsored, endorsed, sold or promoted by CME Indexes, Dow Jones or their respective affiliates, and CME Indexes, Dow Jones and their respective affiliates make no representation regarding the advisability of trading in such product. Life insurance is issued by Nationwide Life Insurance Company or Nationwide Life and Annuity Insurance Company, Columbus, Ohio. Nationwide, the Nationwide framemark, Nationwide Financial Network, On Your Side and Nationwide YourLife are service marks of Nationwide Mutual Insurance Company Nationwide Financial Services, Inc. All rights reserved. FLM-0833AO.2 (05/12)