Comparison of Insurance Plans

Transcription

1 What is this concept presentation about? When do I use it? What additional information is necessary? INSMARK ILLUSTRATION CONCEPT Comparison of Insurance Plans Description This presentation offers a side-by-side comparison of two permanent insurance plans. It will compare values in each illustrated year, along with internal rate of return comparisons. When to Use In competitive situations, policy values and death benefits can be compared, with internal rate of return calculations levelling the playing field; When you have two policies that can meet the client s needs, you can use this presentation to show the products side-by-side. Additional Information Needed Tax bracket for the client; If the comparison is between two AG policies, then we can import the numbers into the program we ll just need the usual information for running two illustrations; If the comparison is between an AG product and a competing product, we ll need the, Surrenders, Net Loans, Accumulation Value, Surrender Value and for all years in an Excel file format allowing us to transfer those numbers into the program for comparison. 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 All rights reserved. AGLC

2 Comparison of Insurance Plans 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 9

4 Preface In the accompanying pages, you will find a financial analysis that compares and contrasts benefits of different life insurance plans. The principle utilized in making the comparison involves measuring relational rates of return. Examine the following hypothetical examples. Plan X Plan Y 10 annual payments of: $ 1,000 7 annual payments of: $ 2,000 Total payments: 10,000 14,000 20th year plan value: 30,000 40,000 Profit over 20 years: 20,000 26,000 Plan Y looks like the preferred choice since it produces a profit of $26,000 while the profit from Plan X is only $20,000. Nevertheless, when both plans are studied from an internal rate of return (IRR), Plan X is superior. Plan X 20th Year Plan Y 7.21% Net IRR 6.32% 10.30% Pre-Tax Equivalent IRR 9.03% (30% income tax bracket) The results are due to the amounts and the timing of the payments. Policy Y not only requires a larger total premium, but payment of it is scheduled over a shorter time period. A comparison of financial alternatives must take both elements into account. A mathematical evaluation is not the only important item to study when purchasing life insurance. Others are: 1. The financial strength of the company; 2. Suitability of the type of plan; 3. Plan provisions and contractual guarantees; 4. Historical results for the same or similar plans; 5. Reputation of the agent or broker. An analysis of these points, along with conclusions drawn from the accompanying reports, should be useful to you as part of the evaluation of your life insurance purchase. Below is a graphic summarizing the results of the accompanying presentation. UL II 277,017 Cumulative s 279,026 Comparative Analysis of Net Rate of Return 5.51% 3.05% Living Values % 5.48% This graphic assumes the non-guaranteed values shown continue in all years. This is not likely, and actual results may be more or less favorable. Page 2 of 9

5 Flow Chart Name of Insured: [Your Client's Name Here] UL II Name of Insured: [Your Client's Name Here] Living Living Values Values Rate of Return Rate of Return Comparative Analysis Page 3 of 9

6 vs. UL II 6.78% Income Tax Rate 30.00% 2.00% Policy Charges Guaranteed vs. Year (1) (2) Accum (3) Surrender (4) (5) (6) Cash (7) 1 6,925 1, ,000,000 6, ,000, ,925 2, ,000, , ,000, ,925 4, ,000, , ,000, ,925 5, ,000, , ,000, ,925 7, ,000, , ,000, ,925 12, ,000, , ,000, ,925 17, ,000, , ,000, ,925 23, ,000, , ,000, ,925 29,135 2,163 1,000, , ,000, ,925 35,709 9,739 1,000, ,976 5,584 1,000, ,925 42,985 22,012 1,000, ,976 5,733 1,000, ,925 50,831 35,852 1,000, ,976 5,883 1,000, ,925 59,291 49,306 1,000, ,976 5,963 1,000, ,925 68,413 63,421 1,000, ,976 6,111 1,000, ,925 78,250 78,250 1,000, ,976 6,258 1,000, ,925 88,695 88,695 1,000, ,976 6,406 1,000, ,925 99,787 99,787 1,000, ,976 6,554 1,000, , , ,560 1,000, ,976 6,701 1,000, , , ,037 1,000, ,976 6,849 1,000, , , ,241 1,000, ,976 6,996 1,000, , , ,172 1,000, ,976 7,062 1,000, , , ,826 1,000, ,976 7,208 1,000, , , ,184 1,000, ,976 11,303 1,000, , , ,212 1,000, ,976 15,726 1,000, , , ,873 1,000, ,976 20,238 1,000, , , ,130 1,000, ,976 25,257 1,000, , , ,080 1,000, ,976 30,240 1,000, , , ,699 1,000, ,976 35,840 1,000, , , ,962 1,000, ,976 41,263 1,000, , , ,831 1,000, ,976 46,857 1,000, , ,280 s and values are not guaranteed. Page 4 of 9

7 vs. UL II 6.78% Income Tax Rate 30.00% 2.00% Policy Charges Guaranteed vs. Year (1) (2) Accum (3) Surrender (4) (5) (6) Cash (7) , , ,258 1,000, ,976 52,612 1,000, , , ,377 1,000, ,976 57,783 1,000, , , ,232 1,000, ,976 62,920 1,000, , , ,824 1,000, ,976 68,000 1,000, , , ,172 1,000, ,976 72,000 1,000, , , ,263 1,000, ,976 74,606 1,000, , , ,088 1,000, ,976 74,282 1,000, , , ,676 1,000, ,976 70,355 1,000, , , ,070 1,000, ,976 59,280 1,000, , , ,230 1,000, ,976 36,572 1,000, , ,040 s and values are not guaranteed. Page 5 of 9

8 vs. UL II 6.78% Income Tax Rate 30.00% 2.00% Policy Charges Guaranteed Gross Rate of Return Required on Column (1) to Match Policy Values vs. Gross Rate of Return Required on Column (4) to Match Policy Values Year (1) (2) Surrender (3) (4) (5) Cash (6) 1 6,925 n/a ,976 n/a ,925 n/a ,976 n/a , ,976 n/a , ,976 n/a , ,976 n/a , ,976 n/a , ,976 n/a , ,976 n/a , ,976 n/a , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,280 s and values are not guaranteed. Page 6 of 9

9 vs. UL II 6.78% Income Tax Rate 30.00% 2.00% Policy Charges Guaranteed Gross Rate of Return Required on Column (1) to Match Policy Values vs. Gross Rate of Return Required on Column (4) to Match Policy Values Year (1) (2) Surrender (3) (4) (5) Cash (6) , , , , , , , , , , , , , , , , , , , , , ,040 s and values are not guaranteed. Page 7 of 9

10 40th Year Summary Analysis of Values UL II Cumulative 277,017 s 279,026 Comparative Analysis of Values 544,230 36,572 1,000,000 Living Values 1,000,000 Page 8 of 9

11 40 Year Analysis UL II $1,200k Cum. s $1,200k Cum. s 900k 900k 600k 600k 300k $277, k $279,026 0 Yrs Yrs Comparative Analysis of Values $1,200k Living Values $1,200k Living Values 900k $1,000, k $1,000, k $544, k 300k 300k 0 Yrs $36,572 Yrs Page 9 of 9