Types of Life Insurance Products

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1 Types of Life Insurance Products Page 1 of 16, see disclaimer on final page

2 Table of Contents Term Life Insurance...3 Who should buy term life insurance?...3 Advantages of term life insurance... 3 Disadvantages of term life insurance...3 Universal Life... 4 Definition...4 Prerequisites...4 Key Strengths... 4 Key Tradeoffs... 4 Variations from State to State...4 How Difficult Is It to Implement?... 4 Equity-Indexed Universal Life Insurance... 6 What is equity-indexed universal life insurance?...6 How does EIUL work?... 6 Indexing methods... 7 EIUL features similar to traditional universal life insurance... 8 EIUL Disadvantages... 9 Is EIUL right for you?... 9 Whole Life...11 What is it? When can it be used? Strengths Tradeoffs...12 How to do it...13 Tax considerations...13 Questions & Answers Page 2 of 16, see disclaimer on final page

3 Term Life Insurance Term life insurance provides life insurance coverage for a specific time period (the term). It is often referred to as pure insurance. The face amount of the policy is paid if you die during the term of the policy. When you live longer than the term of the insurance coverage, nothing is paid, as there is no cash surrender value. Who should buy term life insurance? Term life insurance is appropriate for situations when there is a high need for insurance but not much cash flow to pay for it. For example, a young family with limited cash resources may have a great need for survivor income to provide for living expenses and education needs. Term life insurance is especially helpful here, as it allows the family to buy the maximum insurance protection with minimal cash outlay. Term life insurance is also well suited to cover limited-term needs, such as coverage during your working years until you retire, while your children are dependent on you, or for the duration of a loan or mortgage. Term life insurance is also used in business to fund buy-sell agreements and to provide coverage for nonrecurring business debt security and key personnel. Advantages of term life insurance Term life insurance is generally the most efficient way to achieve maximum life insurance protection for a minimum current cash outlay. When you are young and just beginning your career or family, you may have a need for insurance but not much cash to pay for it. With a term policy, you can buy a larger death benefit for less cash than you could get with any other type of life insurance policy. Term life insurance is also pretty flexible. You can buy term insurance coverage for the time period that best suits your needs. Common term periods are 1 year with an automatic and guaranteed renewal each year (at a higher premium) up to age 95 in some states, or a level premium for periods of 5, 10, 15, 20, 25, or 30 years. Disadvantages of term life insurance The main disadvantage of term life insurance is that a term policy has an end point, like an expiration date. When the coverage period ends, you may have the option to renew the policy, depending on the specific policy and with limitations. But each time you renew the policy for an additional term of coverage or buy a new term policy, the rate increases because your age (and consequently the insurance company's risk of paying the death benefit) has increased. Eventually, the premiums can become quite high and difficult for people to pay. In addition, some states limit the age at which a person can buy life insurance. If you live in one of those states and want coverage beyond the allowable number of years (generally age 70), consider purchasing a permanent (cash value) policy such as a whole life, variable life, universal life, or variable universal life policy. Even if your state allows you to continue your term insurance policy to age 95, a cash value policy may, in the long run, be less expensive than a term policy. Note: Variable life insurance and variable universal life insurance policies are offered by prospectus, which you can obtain from your financial professional or the insurance company. The prospectus contains detailed information about investment objectives, risks, charges, and expenses. You should read the prospectus and consider this information carefully before purchasing a variable life or variable universal life insurance policy. Page 3 of 16, see disclaimer on final page

4 Universal Life Definition Universal life is a form of permanent, cash value insurance. Unlike traditional whole life policies, universal life policies are divided into three elements: protection, expense, and cash value. Your cash value receives a guaranteed minimum interest rate plus an excess interest rate when the insurance company's investments perform well, making the returns more competitive than with some other types of policies. Universal life insurance also offers you flexibility through the ability to change your level of protection, premium amounts, and payment frequency. In this way, your policy can keep pace with changes in your life and your corresponding insurance needs. Unlike other types of cash value policies, universal life policies are considered unbundled since the policies are divided into three elements: protection, expense, and cash value. This unbundling of the policy elements allows you to see the specific charges for each component of your policy, making it easier to read reports on your in-force policy and, in some cases, to compare universal policies from different insurance companies. Prerequisites You have a need for life insurance and want a flexible policy that can adapt to changing needs You have a long-term cash accumulation need (10 to 15 years) Key Strengths Provides benefits common to all cash value life insurance You can change your premiums without prior notice (with some limitations) Cash values receive guaranteed interest rate (guarantees are subject to the claims-paying ability of the insurer) Cash values may be withdrawn (withdrawals may reduce the cash value and death benefit) Key Tradeoffs Underlying cost of insurance increases with age Potential exists for policy lapse if premiums are reduced or skipped, or if policy performance does not meet original projections Variations from State to State No federal regulatory agency--insurance companies are regulated in each state by the department of insurance (or its local equivalent) State laws govern ability of creditors to access cash values How Difficult Is It to Implement? Policy application may require physical exam Can be difficult to compare policies Page 4 of 16, see disclaimer on final page

5 Tax issues relating to policy loans and surrenders can be complex Page 5 of 16, see disclaimer on final page

6 Equity-Indexed Universal Life Insurance What is equity-indexed universal life insurance? Equity-indexed universal life insurance (EIUL) is a form of universal life insurance, meaning it is permanent (cash value) insurance. Like universal life insurance, EIUL offers you the ability to change your level of protection, premium amounts, and payment frequency. Both universal life (UL) and EIUL pay interest on excess premium contributions, creating a cash value. Traditional UL and EIUL both pay a minimum guaranteed interest rate on cash accumulations. However, EIUL differs from traditional UL regarding how excess interest is determined. Typical UL insurance provides a guaranteed minimum interest rate, plus an excess interest rate when the insurance company's investments perform well. EIUL policies are different. Most EIUL policies have two separate accounts that can be used to credit interest. One account has a fixed interest rate that is declared by the insurance issuer periodically. The second account provides an equity index option that offers you the opportunity to earn rates of interest based on positive equity (stock) market returns. However, the cash value of the EIUL policy is not exposed to losses due to negative market returns. Caution: Guarantees are subject to the claims-paying ability of the life insurance issuer. How does EIUL work? Combines aspects of universal and variable life insurance EIUL combines aspects of both universal and variable life insurance. EIUL is universal life insurance since it has an interest crediting rate, and excess cash values are not exposed to the equity market as is the case with variable life insurance. However, EIUL is similar to variable life insurance because cash accumulations are based on equity market performance. Cash accumulations of variable life insurance policies are determined by the performance of the subaccounts in which your money is invested and will rise if your investments do well, or fall if your investments do poorly. Cash accumulations of EIUL policies are determined by the performance of a stock market index. However, unlike variable life, EIUL cash accumulations are not invested in subaccounts, so they are not subject to risk of loss due to poor market returns. Instead, EIUL cash accumulations earn interest based the gains, if any, in the stock market index. Interest is credited to cash accumulations within an EIUL policy in much the same way as interest is earned in an equity-indexed annuity. There are a number of facets within an EIUL policy which differ from traditional universal life and variable life insurance. Most of these items relate to how the interest is credited to the cash value of the EIUL policy. Caution: Variable life insurance and variable universal life insurance policies are offered by prospectus, which you can obtain from your financial professional or the insurance company. The prospectus contains detailed information about investment objectives, risks, charges, and expenses. You should read the prospectus and consider this information carefully before purchasing a variable life or variable universal life insurance policy. The equity index The amount of interest credited to your cash value is tied to the performance of your policy's particular equity index, so that in years where the index performs well, the interest credited to your cash value rises, whereas in years where the index performs poorly, your interest rate falls. Most EIUL policies guarantee that your interest rate will never fall below zero so that you won t lose money if the stock market index declines. EIUL policies commonly have a limit or cap on the amount of interest that is credited to your cash value. The cap on your interest earnings is applied, in part, to offset the issuer s assumption of any negative returns that may occur in the stock market index. Issuers use different equity indexes, such as the Dow Jones Industrial Average, Lehman Brothers Bond Index, and NASDAQ, but the most common index applied is the S&P 500. Page 6 of 16, see disclaimer on final page

7 Index term The interest credited to your cash value in the index account is determined by the gain, if any, realized over a pre-determined period of time, called the index period or term. Each index term has a beginning date (when the initial index value of the underlying equity-index is recorded) and an ending date (when the ending index value of the same index is recorded). The percentage change in the respective index values is then calculated. If there is a gain in the ending index value over the beginning index value, your cash value is credited with interest based on a portion (or all) of the percentage gain. If the beginning index value is higher than the ending index value no interest is credited, unless your policy provides for a minimum interest credit in spite of negative index returns. The length of index terms can range from one year to several years. The amount of index gain that is credited to your cash value as interest is based on the policy's participation rate. Example(s): Assume the index used in your EIUL is the S&P 500, the index term is one year beginning on March 1 (index anniversary date), and the point to point crediting method is used. Hypothetically, the value of the S&P 500 at the close of business on March 1is 1,200 and its value on the close of business on March 1 of the following yearis 1,300. The difference in the values of the S&P 500 is about 8.3 percent (1,300-1,200 = 100/1,200 = 8.3). This percentage is credited to your cash value as interest, subject to the policy's participation rate and cap. Thereafter, interest continues to be calculated by comparing the value of the S&P 500 on each succeeding index anniversary date to the previous years index anniversary date. Participation rate and cap The participation rate determines how much of the index's gain will be used to calculate the interest rate that is applied to your cash value. Some EIUL issuers guarantee a 100 percent participation rate for the duration of the policy, while other issuers reserve the right to change the participation rate at their discretion. If the participation rate is 100 percent, then all of the gain in the equity index will be credited as interest to your cash value, subject to a cap. The cap is the maximum percentage of interest that will be applied to your cash value during any indexing period. The participation rate and cap applied by the EIUL issuer often depends, at least in part, on the type of indexing method used. Example(s): If the equity index used in the EIUL policy gained 12 percent during the index period, and the participation rate is 90 percent, then the percentage of interest credited to your cash value is 10.8 percent (12 x.90). Furthering the example, if a cap of nine percent also applies, then the percentage interest credited to your cash value would be nine percent, not Indexing methods Different index crediting methods The index crediting method is used to measure the gain (or loss) in a stock market index within the EIUL. There are three primary index crediting methods commonly used by EIUL issuers: the annual point-to-point method, the daily averaging method, and the monthly averaging method. Annual point-to-point method The annual point-to-point method compares the value of the equity index at the beginning of the term to its value at the end of the term, disregarding market fluctuations in between. Each term is one year. If the ending index value is higher, interest is credited annually subject to the participation rate and cap. If the ending index value is lower, then no interest is credited, unless the policy guarantees a minimum interest credited to the cash value. Example(s): Your EIUL policy uses the S&P 500 index, an annual point-to-point crediting method, an 80 percent participation rate, and a 12 percent cap. Your index anniversary date is June 10 of each year. Hypothetically, on the close of business on June 10, of last year, the value of the S&P 500 was 1,250 and on the close of business on June 10 of this year, the value is 1,350. Since the S&P 500 index increased in value from June 10 of last year to June 10 of this year, interest will be credited to your cash value based on the following calculation: 1,350-1,250 = 100/1,250 = 8 percent x 80 percent participation = 6.4 percent. Since 6.4 percent is less than the 12 percent cap, the entire 6.4 percent interest is credited to your cash value for the year. Note that any changes or fluctuations in the S&P Page 7 of 16, see disclaimer on final page

8 500 during the index period (one year) are not considered, only the values on the beginning and ending dates are used. Daily averaging method The daily averaging method takes the average daily index value over the entire index term and compares this average to the beginning index value on the first day of the index term. Most index terms are one year. If the average daily index value over the entire index term is greater than the beginning index value, interest is credited subject to any applicable participation rate and cap. Example(s): Use the same information as in the previous example, except that the index method is daily averaging instead of annual point-to-point. Beginning on the close of business on June 10 of last year, the S&P 500 value is recorded at the close of each business day between June 10 of last year and June 10 of next year. These values are added together then divided by the number of days calculated. Presume the daily average value is 1,320. This value is compared to the beginning value of the index on June 10 of last year (1,250) and the same calculation as is used in the annual point-to-point method is used for the daily averaging method: 1,320-1,250 = 70/1,250 = 5.6 percent x 80 percent participation = 4.49 percent, which is the percentage of interest credited to your cash value for the year. Monthly averaging method The monthly averaging method is similar to the daily averaging method except that the index value is recorded on a particular date of each month (such as the 23rd), usually for 12 consecutive months. The average of each of the 12 monthly values is then compared to the beginning index value on the first day of the index term. If the average index value over the entire index term is greater than the beginning index value, interest is credited subject to the participation rate and cap if applicable. Example(s): Again, use the same information as in the previous examples, except that the index method is monthly averaging. Beginning on the close of business on June 10 of last year, the S&P 500 value is recorded at the close of business on the 10th of each month or the next closest business day, until June 10 of next year. These values are added together then divided by the number of months calculated (in this example, 12). Presume the monthly average value is 1,440. This value is compared to the beginning value of the index on June 10 of last year (1,250) and the same calculation as is used in the annual point-to-point method is employed: 1,440-1,250 = 190/1,250 = 15.2 percent x 80 percent participation = percent. Since is greater than the cap of 12, only 12 percent interest is credited to your cash value. EIUL features similar to traditional universal life insurance Permanent (cash value) life insurance Both EIUL and UL are permanent (cash value) insurance. Each type of insurance usually credits your cash value with a guaranteed minimum interest rate plus an excess interest rate. EIUL and UL also offer you flexibility through the ability to change your level of protection, premium amounts, and payment frequency. In this way, your policy can keep pace with changes in your life and your corresponding insurance needs. The policies' cash values can be accessed by you during your lifetime. Cash values of each type of policy grow tax deferred. Caution: Guarantees are subject to the claims-paying ability of the life insurance issuer. You can change your premium payments Generally, each policy allows you to increase, decrease, and even skip premiums after the first policy year, as long as the cash value is large enough to cover policy expense charges. You have the ability to change the amount or frequency of your premium payment without giving the insurer prior notice. Most EIUL and UL issuers suggest a target premium amount to keep the policy in force. Caution: If your cash value isn't sufficient to cover the current expense and mortality charges, you may be required to make an additional premium payment in order to prevent a policy lapse. Page 8 of 16, see disclaimer on final page

9 Policy loans As cash value life insurance, both EIUL and UL insurance allow you to borrow from cash surrender values using a policy loan. Policy loans are allowed under the terms of your insurance contract. Loan interest is charged on any amount of cash value borrowed that is not considered a withdrawal. The interest rate on a policy loan is declared by the policy issuer in advance. Caution: If you die with an outstanding policy loan against your account, your death benefit is reduced by the amount of the outstanding loan balance. Guaranteed death benefit Like most UL insurance, some EIUL policies offer a guaranteed death benefit. The insurance company guarantees that as long as a minimum premium is paid on time the coverage will not lapse. The minimum death benefit guarantee may last the first five policy years or longer. If the lifetime death benefit guarantee option is selected, the coverage can never be terminated by the insurance company as long as the policy premium is paid when due, regardless of equity-indexed or UL interest performance. Usually there is an additional cost for the lifetime guarantee which reduces your policy s cash value growth potential. EIUL Disadvantages One disadvantage of equity-indexed universal life insurance is the potential for little or no gain in cash values during periods of negative stock market returns compared to minimum interest guarantees of universal life insurance. Also, the interest rate cap limits the upside potential compared to the unlimited growth potential of variable life insurance. EIUL has more moving parts than either universal or variable life such as caps, participation rates, and crediting methods which can be confusing. Also, policy surrender charges decrease your cash values if you decide to surrender the policy prior to the end of the surrender period. Another disadvantage of UL also applies to EIUL. The cost of insurance, along with other fees and charges, reduces your policy's cash value. In addition, the cost of insurance will increase each year as your (the insured) age increases. If you choose to reduce or skip premiums, it is possible that your cash value may not be sufficient to cover the cost of insurance increases over time. When you take a policy loan, the loan proceeds you receive come from the general fund of the insurance company. The loan amount is not actually withdrawn from your cash value account. However, an amount of your cash value equal to the loan amount is marked as collateral for the loan. The collateral amount usually is credited with a lower interest rate than the remaining cash value. The reduced interest credited to a portion of your cash value will slow the growth of your cash value. Also, unpaid loans will reduce the death benefit payable to your survivors. Is EIUL right for you? EIUL may be the right choice for your life insurance needs if: You need permanent cash value life insurance. You want the flexibility of changing the policy death benefit, timing, and amount of premium payments. You intend to keep the policy for a long term (at least ten years). EIUL can be an important financial planning tool that not only provides your beneficiary with a death benefit, but also contains cash values that can be accessed during your lifetime to help meet financial goals or needs. You like the potential of cash accumulation found in variable life insurance but you don't like the risk of loss associated with investing in the equity market. Guaranteed interest accumulation is appealing to you, but you want the potential for higher rates of return than those paid by traditional universal life insurance. If these factors appeal to you, then an EIUL policy may be the right choice for your life insurance needs. Before Page 9 of 16, see disclaimer on final page

10 deciding on a particular insurance product, be sure to research the company behind it. The amount of interest you are credited and whatever guarantees the product offers are only as solid as the company offering them. Page 10 of 16, see disclaimer on final page

11 Whole Life What is it? Permanent (cash value) life insurance Whole life insurance is called permanent protection, meaning the coverage (and possibly the premiums) lasts for your entire (whole) life, as long as the premiums are paid. The death benefit is a guaranteed amount, and your premium is fixed. When you pay the premiums on a whole life policy, part of the money accumulates in a cash value account. When can it be used? You have a long-range insurance need The purpose of whole life insurance is to protect against long-range or permanent needs. The coverage extends over your entire lifetime (generally up to age 95 or 100), protecting you even after you stop working. You can lock in a premium schedule, so you won't have to worry about the rising cost of insurance as you get older or your health deteriorates. Strengths Provides benefits common to all cash value insurance Like all other permanent (cash value) policies, a whole life policy contains the following features: Cash value grows tax deferred Cash value can be borrowed against (however, unpaid policy loans will reduce the death benefit available to your survivors) Caution: With a whole life insurance policy, you may be allowed to access your cash value by surrendering (canceling) the policy (you may be subject to surrender charges). However, once you cancel the policy, you will no longer have insurance protection. See Tradeoffs for more information. Policy provides guaranteed minimum death benefit Your whole life policy provides a minimum death benefit, which is usually equal to the face amount of the policy. This death benefit is guaranteed as long as you pay your premiums when due and your policy remains in force. See Tax Considerations for more information. Caution: Unpaid policy loans will reduce your death benefit below the guaranteed minimum. See Tradeoffs. Policy cash value receives guaranteed rate and predictable growth With a whole life insurance policy, the insurance company manages your cash value and guarantees the return you will receive. The cash value that is part of your whole life policy is held in the general account of the insurance company. Even if the insurance company's investments perform poorly, you still receive the same rate of interest on your cash value. However, you should keep in mind that if the insurer faces insolvency, funds in the general account could be subject to claims by creditors of the insurer, including all other policyholders. Page 11 of 16, see disclaimer on final page

12 Your premiums are a fixed amount When you buy a whole life policy, your premium payments are a set, level amount, making budgeting for your payments easy because the premium can't be increased. Even if the insurance company's general account (through which death benefits are paid) performs poorly or your health declines, you can never be required to pay a higher premium to maintain the guaranteed minimum death benefit. Tip: If your policy pays dividends, you may choose to have the dividends applied toward your premium payment, reducing your out-of-pocket expense. Choice of premium payment periods available While whole life insurance coverage lasts your entire lifetime, your premium payments don't necessarily have to. Whole life insurance may offer a variety of premium payment options. For instance, if you want to pay a smaller premium over your lifetime, you may want to consider ordinary level premium whole life. Or, if you want to pay larger premiums for a shorter amount of time, you may want to consider limited pay whole life. Can be cost-effective form of permanent insurance protection If you expect your insurance need to last your entire life without diminishing, a whole life policy can be a cost-effective way to buy insurance protection. In the short term, whole life (or any type of permanent (cash value) life insurance, for that matter) is more expensive than term insurance. In the long term, however, whole life may be less expensive. With term insurance, you can count on your premiums increasing with each renewal. When you buy a whole life policy, however, your premiums are level and will not increase over time, an advantage if you keep the policy for many years. Tradeoffs Policy surrender in early years of policy can be costly If you want all your cash value from a whole life policy but don't want to take a policy loan, you must surrender (cancel) your policy, and you may be subject to surrender charges. In addition, policy fees and expenses are usually charged against the policy in the first few years. As a result, policy surrenders during the first few years of the policy may provide little cash value. Cash value could be subject to insurer's creditor claims The cash value that is part of your whole life policy is held in the general account of the insurance company. This means that if the insurer faces insolvency, funds in the general account could be subject to claims by creditors of the insurer, including all other policyholders. Whole life not best option if seeking competitive returns If you are seeking competitive investment returns in addition to insurance protection, a whole life insurance policy may not be your best option. With this type of policy, the insurance company controls your cash values, which are usually invested conservatively. You do receive a guaranteed return on your cash values, but you don't get the potential for higher returns that may accompany other investments. Tip: If you want to be able to control your cash value investments and participate in other types of investments such as stocks, consider a variable life or a variable universal life insurance policy. Caution: Variable life insurance and variable universal life insurance policies are offered by prospectus, which you can obtain from your financial professional or the insurance company issuing the policy. The prospectus contains detailed information about investment objectives, risks, charges, and expenses. You should read the prospectus and consider this information carefully before purchasing a variable life insurance policy. Page 12 of 16, see disclaimer on final page

13 Guarantees are subject to the claims-paying ability of the issuer Guarantees relating to the policy are subject to the claims-paying ability of the issuing insurance company. How to do it Determine your life insurance need and overall financial goals Before you buy life insurance, you need to know how much insurance you need. Insurance need is based on numerous factors, including your current age and income, marital status, number of incomes in the household, number of dependents, long-term financial goals, level of outstanding debt, and existing insurance and other assets. Your overall financial, estate, and tax planning goals and your planning time horizon should be considered as part of your insurance need evaluation. Tip: Consult your financial advisor concerning your need for insurance. Some of the analysis can be complicated. Complete the insurance application and name your beneficiary Before the insurance company can issue your policy, it must receive a completed application form. The application includes general health questions, and the process may include a physical examination, which is usually paid for by the insurance company. A critical part of the application is the beneficiary designation--the naming of the person or persons to receive the policy proceeds when you die. You must name a primary beneficiary (this can be your estate) to receive the proceeds of your insurance policy. Your beneficiary may be a person, corporation, or other legal entity. You may name multiple beneficiaries and specify what percentage of the net death benefit each is to receive. If you name your minor child as beneficiary, be sure to designate an adult as the child's guardian in your will. Generally, you can change your beneficiary at any time. Changing your beneficiary usually requires nothing more than signing a new designation form and sending it to your insurance company. If you have named someone as an irrevocable (permanent) beneficiary, however, you will need that person's permission to adjust any of the policy's provisions. Caution: Naming your estate as beneficiary will subject the policy proceeds to claims by creditors of the estate. Buy the policy and pay your premium Once your life insurance application has been approved and you pay your initial premium, you'll be issued a policy. However, because an insurance policy is a legal contract, make sure you thoroughly understand all of its provisions before signing it or paying your premiums. Ask an insurance agent or financial professional for help, if necessary. Review your insurance need periodically The amount of life insurance you need may change over time, so you should periodically review your life insurance coverage. It's especially important to review your coverage when a major life event occurs (such as the purchase of a home, birth or adoption of a child, or change in marital status). Tax considerations Income Tax Premium payments not deductible Life insurance premium payments are generally not tax-deductible expenses. Page 13 of 16, see disclaimer on final page

14 Policy loan proceeds generally not taxable When you take out a loan against your life insurance policy (except a policy classified as a modified endowment contract (MEC)), the amount you receive is not considered taxable income. This rule applies even when the loan is larger than the amount of premiums you have paid in (except in the case of a policy classified as a MEC). Example(s): You own a life insurance policy (non-mec) with a cash value of $20,000. Your basis in the policy is $14,000. You decide to take a policy loan to pay your daughter's college tuition. Under the terms of your policy, you are allowed to take a loan for an amount up to 90 percent of the policy cash value--in this case, $18,000 ($20,000 x 0.90). You are not currently subject to tax on the amount of the loan, even though the loan is larger than your basis in the policy. Caution: If you cancel your policy while there is a loan balance outstanding, you may be subject to income tax on the amount of the loan. Policy loan interest not deductible Interest you pay on a policy loan is not a tax-deductible expense when the loan is for purposes other than business or investments (plus any accrued but unpaid interest). Policy cancellation may be taxable If you cancel (surrender) your policy for cash, the gain on the policy is subject to federal income tax. The gain on a canceled policy is the difference between the net cash value and loan forgiveness amounts and your policy basis. Caution: You may be subject to surrender charges. Check your policy. Caution: Policy fees and expenses are usually charged against the policy in the first few years. As a result, policy surrenders during the first few years of the policy may provide little cash value. Caution: If you surrender your policy while there is a loan balance outstanding, you could be subject to income tax on the amount of the loan (plus any accrued but unpaid interest). Policy lapse may be taxable If you allow your policy to lapse, you could be subject to income tax even if you don't receive any cash from the policy. A policy lapse can occur when you stop paying premiums and don't have cash values available that can be used to pay the premiums. If you have an outstanding policy loan, it is possible you could be subject to tax on the amount of the loan plus any accrued but unpaid interest. Death benefits generally not subject to federal income tax Policy death benefits are generally not subject to federal income tax. One notable exception is when the policy has been sold or otherwise transferred for valuable consideration by one policy owner to another, subjecting it to the transfer-for-value rule. Gift and Estate Tax Policy proceeds not considered gift to beneficiary When the proceeds of your life insurance policy are paid to a beneficiary, they are not treated as a gift for federal gift and estate tax purposes. Policy premium payments generally not subject to federal gift and estate tax When you are the owner of a policy on your own life, with another party as the beneficiary, premium payments made by you are not considered a gift to the beneficiary for federal gift and estate tax purposes. If, however, someone else pays the premiums on a policy you own, the premium payments are considered a gift to you and may be subject to the tax. Policy premiums paid by another on your behalf generally qualify for the annual gift tax exclusion. Page 14 of 16, see disclaimer on final page

15 Policy proceeds included in estate value in some cases The proceeds of a life insurance policy are included in the value of your estate if you held any incidents of ownership at any time during the three years before your death or if the proceeds are payable to you or your estate or executor. Incidents of ownership include (among other things) the right to change the beneficiary, take out policy loans, or surrender the policy for cash. Policy proceeds often exempt from state inheritance tax In many states, life insurance proceeds are exempt from state inheritance taxes. Questions & Answers Should you buy term insurance or cash value life insurance? It depends upon your personal circumstances. The first issue to resolve is not what type, but how much life insurance you should buy, and how long you need coverage. You may determine that the amount of coverage you need is so large that the only affordable way to get the coverage is by purchasing lower-premium term insurance. Or, you may consider buying cash value life insurance because you have a long-term need for coverage. With cash value life insurance, does your beneficiary get the death benefit plus the cash value amount? Maybe. Check the policy. Many cash value policies are written in such a way that the beneficiary receives only the face amount of the policy at death. The cash value is applied to partially pay off the death benefit. There are policies that will pay the beneficiary the face amount plus the cash value, but the premiums tend to be higher. Don't just assume that your policy will pay both amounts--check the policy and/or ask your agent. What is the difference between universal life insurance and traditional whole life insurance? Both are types of cash value life insurance, but there are important differences between the two. Generally, whole life is designed with fixed, level premiums and provides for a level death benefit. Some flexibility is provided, however, through dividends paid on participating policies that can be used to offset premiums or increase the death benefit, thus creating a degree of flexibility. Universal life policies, by design, offer adjustable death benefits and flexible premiums that can be changed. Another big difference is the reporting of the policy elements in a universal life policy. Unlike many other types of cash value policies, universal life policies are divided into three elements--protection, expense, and cash value. This unbundling of the policy elements allows you to see the specific charges for each component of your policy, which makes it easier to read reports on your in-force policy and could make it easier when comparing universal policies from different insurance companies. How is variable life insurance different from participating whole life? Variable life is a type of whole life policy with fixed premiums. Variable life is designed so that the policy's cash values and death benefits are related to and vary according to changes in the performance of the underlying investments you've chosen. The policy usually has a guaranteed minimum death benefit that is paid even if the underlying investments have performed poorly. As a policyowner, you are usually offered several investment options for your cash values, and you assume all of the investment risk. Unlike whole life, there is no guarantee of minimum cash values. Page 15 of 16, see disclaimer on final page

16 IMPORTANT DISCLOSURES Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, or legal advice. The information presented here is not specific to any individual's personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice. Page 16 of 16 Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2013

Like all other permanent (cash value) policies, a whole life policy contains the following features:

Like all other permanent (cash value) policies, a whole life policy contains the following features: Whole Life What is it? Permanent (cash value) life insurance Whole life insurance is called permanent protection, meaning the coverage (and possibly the premiums) lasts for your entire (whole) life, as

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