SINGLE PREMIUM LIFE TM PRODUCER GUIDE For Agent use only The Solution Before life presents the problem. SPL190 1
Based in Phoenix, Arizona, Oxford Life Insurance Company (Oxford Life) is a life and health insurer that began operations in 1965. We provide insurance coverage to meet the financial needs of our customers. Oxford Life specializes in providing senior market oriented life, fixed and fixed indexed annuities, and Medicare supplement insurance products. Oxford Life is fully committed to excellent service to our customers, as evidenced by our IMSA certification. Home Office Oxford Life Insurance Company 2721 North Central Avenue Phoenix, Arizona 85004 Phone: 602-263-6666 Toll-Free: 800-308-2318 Main Fax: 602-277-5901 Policyholder Services/Claims (New business status, customer service, commission inquiries) Toll-Free: 866-641-9999 Fax: 602-263-6645 Marketing Department (Agent support, licensing, supplies, prospecting and lead support) Toll-Free: 800-308-2318 Oxford Life has extensive agent support facilities at our agent website at www.oxfordlife.com, including applications, replacement forms, brochures and illustration software for the Advance Wealth Transfer product. 2
Table of Contents Section 3 Advance Wealth Transfer Page 7 Sales Ideas Maximizing an estate Rescue product Making the estate whole Variable annuity alternative Final expenses Section 1 Policy Features Page 4 Advance Wealth Transfer made easy Advance Wealth Transfer advantages Why sell an Advance Wealth Transfer policy Stocks and mutual funds Money market accounts and certificates of deposit Maximum issue amount Section 2 Accelerated Benefits Page 6 Terminal illness benefit Nursing home benefit Home health care benefit Section 4 Application Process Page 9 Application processing Pre-qualifying the applicant Point of sale interview The decision Addendum A Premium Rates Page 10 Addendum B Calculating Policy Cost Page 11 and Face Amount 3
Section 1 POLICY FEATURES ADVANCE WEALTH TRANSFER MADE EASY The Advance Wealth Transfer single premium life insurance product is a sophisticated way for your clients to transfer financial assets to their heirs in a cost saving and tax-deferred manner. Don t miss out on this tremendous sales and income opportunity. The Advance Wealth Transfer is a single premium life insurance policy designed specifically for the senior market. The policy is guaranteed to remain in force to the maturity date of age 100, at which time the net cash value will be paid. Advance Wealth Transfer allows you to offer a simplified way for your clients to transfer money upon their death. It is possible that they currently have sums of money set aside which they plan to gift to their children, church or charity in various types of bank accounts or investment vehicles. The single premium purchases a coverage amount that varies by risk class, gender and issue age. The single premium must accompany the application unless there is a 1035 exchange. All withdrawals and loans will be treated as ordinary income to the extent that the cash value exceeds the premium paid. In addition, a 10% federal penalty tax will be imposed, unless the owner is over age 59½ or disabled. Death benefits, cash values and loan values will be reduced upon payment of an accelerated benefit. The information provided does not constitute legal or tax advice but is intended only as Oxford Life s understanding and interpretation of current tax laws, which are subject to change. Please consult your legal or tax professional for assistance. WHY SELL AN ADVANCE WEALTH TRANSFER POLICY? There are a number of reasons to sell an Advance Wealth Transfer policy to your client. First, it allows your client to immediately increase the value of their existing asset through the purchase of life insurance. For example, a 60-year-old female non-smoker (Tier 1, see Addendum A) might use a $30,000 CD to purchase a policy that provides a $68,758 guaranteed death benefit for her beneficiaries. Advance Wealth Transfer offers these advantages: An immediate increase in the value of the estate Safety guaranteed by Oxford Life and will not be affected by market fluctuations 100% federal income tax-free payment of death benefit to heirs Tax deferred growth on cash values, cash values grow on a tax-deferred basis until the client accesses them Guaranteed cash values that increase every year Death benefit guaranteed for life Benefits are not subject to probate No medical exams, health questions only No complicated forms No delays, immediate application decision in most cases Liquidity through policy loans*, a policy loan feature that allows clients to borrow available cash values at a guaranteed rate of interest for emergencies Second, the proceeds are transferred tax-free to the beneficiaries. Compare this tax-free transfer to other products whose entire interest growth will be fully taxable to the beneficiary at the death of the owner. The tax burden of such a product can be a very unwelcome surprise to the unsuspecting beneficiary. Third, the beneficiaries will receive the life insurance benefits without the time delay and expense of probate. Advance Wealth Transfer makes it simple for you to assist your clients in reaching their estate goals with a type of product that they may never have considered before. *Current federal income tax laws consider this a modified endowment contract. All withdrawals and loans will be treated as ordinary income to the extent that the cash value exceeds the premium paid. In addition, a 10% federal penalty tax will be imposed on such amounts, unless the owner is over age 59½ or disabled. Death benefits and cash values will be reduced upon payment of an accelerated benefit. 4
STOCKS AND MUTUAL FUNDS Stocks and mutual funds all contain some element of risk. They also can create an immediate taxable event when passed to beneficiaries. With Advance Wealth Transfer your clients can rely on guarantees and the knowledge that their gift will pass tax-free to their beneficiaries. MONEY MARKET ACCOUNTS & CERTIFICATES OF DEPOSIT (CDS) The growth in money market accounts and CDs are taxed yearly as earned and are also subject to the delays and cost of probate. This not only reduces the net-amount received by the beneficiary, but the delay can mean that they do not have the money when it is needed the most. With Advance Wealth Transfer your clients can replace those types of savings, immediately increasing the value of the planned gift. This policy also provides a solution to clients that need to free up some of the money and still leave a similar gift the their beneficiaries. Keep in mind that life insurance death benefits pass immediately tax-free to the beneficiaries. MAXIMUM ISSUE AMOUNT The maximum issue amount is based on the Net Amount at Risk, (which is defined as the death benefit minus the single premium paid). The maximum net amount at risk limits are shown in the following table. Issue Age Maximum Net Amount at Risk 50-80 $100,000 81-85 $50,000 5
Section 2 ACCELERATED BENEFITS* AN ADDED FEATURE OF ADVANCE WEALTH TRANSFER Oxford Life s Advance Wealth Transfer policy offers your clients accelerated benefit provisions to help offset the cost of terminal illness, nursing home care or home health care. These accelerated benefits are qualified accelerated benefits under current federal law. Payments are made directly to your clients. If your clients are fortunate enough never to need an accelerated benefit, the Advance Wealth Transfer death benefit will pass unreduced to their beneficiaries. The total of the portion of the face amount that may be accelerated for terminal illness, nursing home care or home health care needs under this rider may not exceed the lesser of $100,000 or 75% of the face amount. The remaining 25% is reserved to pay a death benefit. Examples are set out in the table below. Face Amount Required Death Benefit Maximum Accelerated Benefit $20,000 is the minimum face amount that will be issued. Percent $40,000 $10,000 $30,000 75% $35,000 $10,000 $25,000 71% $30,000 $10,000 $20,000 67% $25,000 $10,000 $15,000 60% $20,000 $10,000 $10,000 50% TERMINAL ILLNESS BENEFIT If your client is diagnosed as being terminally ill (defined as having a life expectancy of less than 12 months), then they are entitled to receive the terminal illness benefit equal to 75% of the policy death benefit (not to exceed $100,000). NURSING HOME BENEFIT If your client is diagnosed as having a chronic illness** and has been confined to a nursing home facility for the previous 90 consecutive days, then they are entitled to receive the nursing home benefit. The amount of the benefit available is determined by the number of years the policy has been in force prior to the start of confinement. Advance Wealth Transfer The Key to Financial Peace of Mind If the policy has been in force LESS THAN 5 YEARS The monthly benefit is equal to 1% of the policy face amount (subject to a maximum of $4,000 per month). If the policy has been in force 5 YEARS OR LONGER The monthly benefit is equal to 3% of the policy face amount (subject to a maximum of $4,000 per month). HOME HEALTH CARE BENEFIT If your client has been diagnosed as having a chronic illness and has been receiving home health care for a period of 90 consecutive days or more, they are entitled to receive a monthly benefit of 1% of the policy face amount (subject to a maximum of $2,000 per month). NOTE: The Accelerated Benefits provided in the Advanced Wealth Transfer policy are not long-term care insurance. * Death benefits, cash values, and loan values will be reduced upon payment of an accelerated benefit. The accelerated benefits payable under this policy are intended to conform to Internal Revenue Code of 1986. However, accelerated benefit payments may be taxable by your client s state. Your client should consult a qualified tax advisor for specific information. Receipt of an accelerated benefit payment may adversely affect your client, your client s spouse, or their family s eligibility for medical assistance (Medicaid), Aid to Families with Dependent Children (AFDC), supplementary Social Security Income (SSI), and drug assistance or other public assistance programs. Policyholders should consult with a qualified tax advisor and with social services agencies regarding how receipt of such payment may affect eligibility for such programs. **Chronic Illness A disease or illness, certified by a physician, such that the insured: a) Is unable to perform at least two activities of daily living and has been unable to do so for the previous 90 days due to a loss of functional capacity. The activities of daily living include eating, toileting, transferring, bathing, dressing and continence; or b) Requires substantial supervision to protect the person from threats to health and safety because of severe cognitive impairment. Severity of cognitive impairment is measured by impairment in short or long term memory, orientation to people, places, or time, and deductive or abstract reasoning. 6
NOTE: Insurance products and annuities are not deposits of, or guaranteed by, any bank and are not insured by the Federal Deposit Insurance Corporation (FDIC) or any other agency of the United States. All guarantees are subject to the financial strength of Oxford Life. Section 3 ADVANCE WEALTH TRANSFER SALES IDEAS Here are some examples: MAXIMIZING AN ESTATE: Situation: John, a current client, is 65 and a non-smoker (Tier 1, See step 1 of section 4). John has $50,000 that he would like to leave his only granddaughter, Sarah. John has the following available assets: $50,000 in a CD $50,000 in mutual funds and $25,000 in a money market account. Here is an option. By transferring $28,415 [($566.50 * 50) + $90] from the CD into a single premium life policy, John can purchase a single premium life policy with a guaranteed death benefit of $50,000. By simply re-allocating an asset, John increases his estate value by $21,585 ($50,000 - $28,415) and pays no income tax on the yearly gain in cash value. More importantly, Sarah will receive $50,000 income free of taxes and probate. RESCUE PRODUCT: Situation: Mary Anne, a prospective client, is age 52 and a non-smoker (Tier 2). Mary Anne owns a $150,000 universal life insurance policy, which she purchased 15 years ago. She is paying an annual premium of $2,200 and has a cash value of $55,000. An option would be to consider purchasing a Advance Wealth Transfer policy. Based on age 52 rates and a single premium contribution of $55,000, Mary Anne could purchase a single premium life policy with a guaranteed death benefit of $147,766 [{($55,000 - $90)/ 371.60} x 1000] and no longer have to pay $2,200 in yearly premiums. The client has a similar death benefit and eliminates her annual $2,200 premium payment. 7
MAKING THE ESTATE WHOLE: Situation: Janice, a prospective client, is age 65 and a non-smoker (Tier 1). Janice purchased some mutual funds five years ago. The initial value of the funds was $100,000. The value has since declined and is now worth $80,000. Here is an option for her to consider that would help make the estate whole again. Take $20,600 of the remaining mutual fund and purchase a Advance Wealth Transfer policy. The $20,600 of single premium would purchase a guaranteed death benefit of $40,613 [{($20,600 - $90)/505.00} x 1000]. The guaranteed income tax free death benefit of $40,613, added to the remaining $59,400, would once again make the estate value whole at $100,013. VARIABLE ANNUITY ALTERNATIVE: Situation: Ruth, a prospective client, is 70 years old and a non-smoker. Ruth qualifies for (Tier 1). She has a variable annuity that is currently worth $75,000, of which $25,000 is accumulated interest (gain). Ruth does not need the money for any specific purpose, however she does not like the ups and downs of the market. She is planning to give it to her grandson James at her death. Here is an option. Ruth can surrender the annuity and pay the tax on the $25,000 in gain (28% tax bracket is $7,000 taxes paid). She can then put the $68,000 after-tax amount into a Advance Wealth Transfer policy. The $68,000 would purchase a guaranteed death benefit of $118,104 [{($68,000 - $90) / 575.00} x 1000]. The immediate increase in estate transfer value is $50,104 ($118,104 - $68,000). Not only has she increased the amount to be given to James, she has eliminated the tax burden her grandson would have faced upon receiving the annuity proceeds. FINAL EXPENSES: Situation: Mary is a 66-year-old prospective client who has $11,500 in a money market account. Mary is a non-smoker but had some medical problems a few years ago (Tier 2). The money will be used to pay for Mary s final expense costs. Here is an option. Why not immediately enhance the amount of money that is available for final expense services and related additional costs? Mary needs $20,000 of guaranteed death benefit to pay her final expenses. The premium would be $11,226 [(20 x 556.80) + 90]. 8
Point-of-Sale Decision Section 4 APPLICATION PROCESS Oxford Life makes it easy to apply for Advance Wealth Transfer with a simple, quick application process that can determine if your client qualifies at the point-of-sale. All you have to do is ask your client a few simple health questions and then contact a specially trained professional for your client to speak with right on the spot. In most cases, a decision on the insurability of your client will be determined within minutes. Once approved, Oxford Life will confirm your client s coverage upon receipt of the premium. STEP 1: PRE-QUALIFYING THE APPLICANT Complete the application with the applicant. By going through each application question with the applicant, you have the opportunity to determine whether to proceed with a phone interview. The applicant must be able to clearly answer each question without assistance. If any of the section A questions are answered Yes, the application is denied. If all Part A questions are answered No, the applicant must complete Part B of the application. A Yes answer on Part B and height and weight are within Tier 1 parameters, the applicant is eligible for the Tier 2 rates and a phone interview can be initiated. If all answers to Part A and B questions are No and the height and weight are within Tier 1 parameters, your prospect can be set up with a phone interview for Tier 1 rates. Applicants that do not fit within the height and weight guidelines will be declined coverage. Their application should be sent to the Home Office without premium. Confirm that the applicant is able to participate in a phone interview in English. STEP 2: POINT OF SALE INTERVIEW Things to consider prior to initiating the phone interview: 1. Have all of the health questions been asked? 2. Does the client fully understand all of the questions? 3. Are there any obvious impairments or weight issues that may disqualify your client from coverage? 4. An applicant with height and weight outside of the Tier 1 guidelines will be declined. 5. Is your client ambulatory and alert? Call 1-888-801-5123 to speak to an interviewer. Their hours are: Monday through Thursday: 8:00 A.M. to 9:30 P.M. CST Friday: 8:00 A.M. to 5:00 P.M. CST The interviews are not conducted on weekends. Let your client know that the interviewer will need to speak to them to verify information and ask any needed follow-up questions. When the interviewer answers the phone, give them your name, agent number and product name you are calling on. For non-english speaking applicants, follow the same procedures and you will be connected with the appropriate interpreter. STEP 3: THE DECISION Accepted If the interviewer confirms the application information, and no additional information is required, the application will be accepted over the phone at either Tier 1 or Tier 2 rates. You should accept the premium payment and forward the application and check to the Home Office: Oxford Life Insurance Company POLICYHOLDER SERVICES 2721 North Central Avenue Phoenix, AZ 85004 Declined If the applicant s answers in the phone interview conflict from those on the application taken by you, the application will be declined and should be forwarded to the Home Office. You should notify the applicant. Do not accept the premium payment. Pended On rare occasions, a decision cannot be made due to conflicting information. When this occurs, the application should be forwarded to the Home Office for further review. All applications must be forwarded to the Home Office to document the application process, even if declined or abandoned. 9
Addendum A PREMIUM RATES Issue Age Male NS TIER 1 RATES Male SM Female NS Female SM 50 $360.00 $437.00 $333.00 $393.00 51 $373.00 $451.90 $343.20 $405.80 52 $386.00 $466.80 $353.40 $418.60 53 $399.00 $481.70 $363.60 $431.40 54 $412.00 $496.60 $373.80 $444.20 55 $425.00 $511.50 $384.00 $457.00 56 $438.00 $526.40 $394.20 $469.80 57 $451.00 $541.30 $404.40 $482.60 58 $464.00 $556.20 $414.60 $495.40 59 $477.00 $571.10 $424.80 $508.20 60 $490.00 $586.00 $435.00 $521.00 61 $505.30 $599.60 $449.00 $533.90 62 $520.60 $613.20 $463.00 $546.80 63 $535.90 $626.80 $477.00 $559.70 64 $551.20 $640.40 $491.00 $572.60 65 $566.50 $654.00 $505.00 $585.50 66 $581.80 $667.60 $519.00 $598.40 67 $597.10 $681.20 $533.00 $611.30 68 $612.40 $694.80 $547.00 $624.20 69 $627.70 $708.40 $561.00 $637.10 70 $643.00 $722.00 $575.00 $650.00 71 $661.00 $738.40 $593.90 $665.20 72 $679.00 $754.80 $612.80 $680.40 73 $697.00 $771.20 $631.70 $695.60 74 $715.00 $787.60 $650.60 $710.80 75 $733.00 $804.00 $669.50 $726.00 76 $751.00 $820.40 $688.40 $741.20 77 $769.00 $836.80 $707.30 $756.40 78 $787.00 $853.20 $726.20 $771.60 79 $805.00 $869.60 $745.10 $786.80 80 $823.00 $886.00 $764.00 $802.00 81 $841.00 $902.40 $782.90 $817.20 82 $859.00 $918.80 $801.80 $832.40 83 $877.00 $935.20 $820.70 $847.60 84 $895.00 $951.60 $839.60 $862.80 85 $913.00 $968.00 $858.50 $878.00 Issue Age Male NS TIER 2 RATES Male SM Female NS Female SM 50 $377.00 $468.00 $349.00 $421.00 51 $391.50 $485.00 $360.30 $435.40 52 $406.00 $502.00 $371.60 $449.80 53 $420.50 $519.00 $382.90 $464.20 54 $435.00 $536.00 $394.20 $478.60 55 $449.50 $553.00 $405.50 $493.00 56 $464.00 $570.00 $416.80 $507.40 57 $478.50 $587.00 $428.10 $521.80 58 $493.00 $604.00 $439.40 $536.20 59 $507.50 $621.00 $450.70 $550.60 60 $522.00 $638.00 $462.00 $565.00 61 $539.50 $653.70 $477.80 $579.50 62 $557.00 $669.40 $493.60 $594.00 63 $574.50 $685.10 $509.40 $608.50 64 $592.00 $700.80 $525.20 $623.00 65 $609.50 $716.50 $541.00 $637.50 66 $627.00 $732.20 $556.80 $652.00 67 $644.50 $747.90 $572.60 $666.50 68 $662.00 $763.60 $588.40 $681.00 69 $679.50 $779.30 $604.20 $695.50 70 $697.00 $795.00 $620.00 $710.00 71 $717.20 $812.50 $641.70 $727.50 72 $737.40 $830.00 $663.40 $745.00 73 $757.60 $847.50 $685.10 $762.50 74 $777.80 $865.00 $706.80 $780.00 75 $798.00 $882.50 $728.50 $797.50 76 $818.20 $900.00 $750.20 $815.00 77 $838.40 $917.50 $771.90 $832.50 78 $858.60 $935.00 $793.60 $850.00 79 $878.80 $952.50 $815.30 $867.50 80 $899.00 $970.00 $837.00 $885.00 81 $919.20 $987.50 $858.70 $902.50 82 $939.40 $1,005.00 $880.40 $920.00 83 $959.60 $1,022.50 $902.10 $937.50 84 $979.80 $1,040.00 $923.80 $955.00 85 $1,000.00 $1,057.50 $945.50 $972.50 10
Addendum B CALCULATING FACE AMOUNT, THE SINGLE PREMIUM AND NET AMOUNT AT RISK CALCULATING FACE AMOUNT Gender: Female Age: 53 Tobacco: None Risk Class: Tier 1 Cash from available funds: $50,000 Premium per $1,000: $363.60 Formula for calculating face amount Premium Policy Fee --------------------------------------------------------- x 1,000 = Face Amount Rate Per Thousand In our example, if the applicant has $50,000 in available funds that she intends to leave to her beneficiary, the calculation is as follows: $50,000 - $90 ----------------------------------------- x 1,000 = $137,266 $363.60 CALCULATING THE SINGLE PREMIUM Gender: Male Age: 62 Tobacco: None Risk Class: Tier 1 Face Amount: $40,000 Premium per $1,000: $520.60 Formula for calculating the single premium (Rate Per Thousand x Face Amount ) + Policy Fee = Premium 1,000 In our example, if the applicant wants $40,000 in death benefit, the premium calculation would be as follows: ($520.60 x 40) + $90 = $20,914 CALCULATING NET AMOUNT AT RISK Net amount at risk is the difference between the face amount of a life insurance policy and the single premium paid for the policy. The net amount at risk for the above two hypothetical cases are: $137,266 Policy Face Amount $40,000 - $50,000 Single Premium Paid for Policy - $20,914 $87,266 Net Amount at Risk $19,086 A $90 policy fee is included in all policy calculations. 11
UNDERWRITTEN & ISSUED BY 2721 North Central Avenue Phoenix, Arizona 85004 Toll-Free 1-800-308-2318 www.oxfordlife.com Financial Strength Rating A M BEST B++ A Proud Member Of Exclusions and limitations may vary by state. Refer to Policy #SPE100.