Life Insurance Review Producer Guide Ensuring life insurance coverage meets today s goals Life. your way SM
Life. your way MetLife understands your business. We respect your entrepreneurial spirit as you guide clients toward financial freedom. We want to be your partner of choice as you grow your business the only way that matters, your way.
what is a Review? Life Insurance A life insurance review is part of an ongoing assessment of your client s ever-changing needs. A life insurance review consists of two main elements; first a review of the client s current life insurance needs followed by an analysis of the client s existing life insurance coverage to determine if the death benefit coverage and the type of policy is still appropriate. Why Conduct a LIFE INSURANCE REVIEW? Life insurance plays an important role in the completion of your client s financial plans. Whether it s to protect their family, fund an estate tax bill, complete a benefit plan, or for some other purpose; life insurance is often central to helping your clients meet their financial objectives. But is your client s life insurance correct for their current situation? Just as you would periodically review your client s investment portfolio, a client s life insurance needs to be reviewed regularly. Over the years, many life events might trigger a need to re-examine a client s insurance needs. Just as the client s goals and assets may have changed since the current policy was purchased, the client s life insurance needs may have changed in that timeframe. Their coverage may extend to newer and different needs or the coverage may be insufficient. Your obligation as a financial professional is to diligently monitor the client s life insurance needs and existing coverage over time; making sure their beneficiary designations, amount of coverage and premiums are appropriate for their situation. If you work with trustees, they have a fiduciary obligation to guard the trust assets, to make sure the grantor s intent is met and that the beneficiaries are cared for. Examples of life changing events that lead to life insurance review Family changes marriage, divorce, birth of a child Improving health and lifestyle changes New job or benefits Buying a new home and mortgage protection Buying a business, or changes in a business value Beginning a nonqualified benefit program Increased net worth Protecting a child s education funding Providing a legacy for grandchildren Caring for elderly parents 1
Who is the Ideal Client? All clients should review their life insurance coverage every employment status. During middle age, many clients also one to two years. In addition, many of your clients may fall come to appreciate the cash values associated with into categories that warrant additional review. permanent life insurance products to supplement Younger clients who purchased term insurance some time retirement income or help with estate planning ago rather than a permanent policy, but have a long-term life insurance need Business owners who are utilizing life insurance to fund their business continuation plans, benefit plans or key Middle-aged clients who purchased insurance for family person coverage protection, but may be paying more than necessary. Those Trustees who can place themselves at legal risk and who are holding term or group term coverage that might their clients goals and beneficiaries needs at risk, by not be portable if the client leaves their current job. They not diligently monitoring their life insurance may want to consider a policy that is not dependent on their case study #1 Younger Clients Jim & Laurie Our lifestyle has changed so quickly in the last few years that we didn t consider our life insurance needs. the concern the solution Jim and Laurie bought a term contract to pay off their Due to changed circumstances, their financial professional mortgage in the event Jim died unexpectedly. Since then, recommends a life insurance review and points out several the couple had two children and Laurie stopped working. things to them. The term policy they purchased and Jim s group term contract through his employer is not enough to pay off the mortgage, help Laurie raise the children and pay college tuition. Moreover, their term coverage, even though level, is scheduled to have a jump in premium when the initial coverage term expires. 2
the benefit Through a life insurance review, their financial professional shows them how they can meet all of their needs by purchasing coverage at appropriate levels. Jim and Laurie now understand the importance of reviewing their insurance coverage periodically and have committed to meet with their financial professional with greater frequency. This example is hypothetical, actual results may vary. 3
case study #2 Business Owners George & Spencer Building this business has been our focus. Now that we have a financial professional to focus on our business planning needs, we can get back to what we do best. the concern the solution George and Spencer are co-owners in a business. Some years Because George and Spencer have each decided to sell their ago they established a cross-purchase business continuation share of the business to the surviving partner, even after plan where each planned to buy-out the other in the event retirement, a term policy designed to expire at retirement of a death. They funded the insurance with a combination is no longer suitable for their needs. Fortunately, their of permanent and term coverage. The permanent coverage current term policy has a conversion privilege that can be was variable universal life, intended to provide a source of used to fund part of a new universal life insurance policy supplemental income if the policies were not needed by with a higher death benefit to fund their plans for the retirement. The term was intended to cover any gaps in continuation of the business. the cost of the business. Now, the business has increased At this time, they also review the investment options in tremendously in value. Their financial professional discovers the variable policies and make some changes to the that their current coverage is not sufficient to accomplish subaccounts they have chosen. their goals. He also points out that the variable universal life insurance is underperforming and recommends reviewing current investment options. 4
the benefit By converting their existing term insurance to universal life insurance policies that will last for their lifetimes, the survivor will be able to purchase the other half of the business no matter when the first partner dies. They are also hopeful that the changes they have made to the variable policies subaccounts will provide the potential for higher returns. This example is hypothetical, actual results may vary. 5
case study #3 Clients Utilizing a Trust Paul & Margaret We thought our trust was on auto-pilot, but our financial professional opened our eyes to the need for a regular review. the concern the solution Paul and Margaret set up their estate plan ten years ago. At the urging of their financial professional and CPA, As part of the plan, they set up an irrevocable trust and the Paul and Margaret contacted the trustee and asked to trustee purchased two second-to-die policies on their lives have the policies reviewed. After a thorough analysis, it from two different companies. One was a participating was determined that both policies were not performing whole life contract; the other was a universal life contract. as expected. Both were sold using assumptions that, The couple has diligently made gifts for premium payments while normal for life insurance policies ten years ago, each year and the trust is in good shape. However, no are unrealistically high in today s environment. The one including the trustee has reviewed the life participating whole life policy had experienced dividend insurance policies since the trust was set up. cuts over the last ten years. Because the universal life policy was being credited over 500 basis points (.5%) lower than the illustration upon which the policy was sold, the policy would now require premiums be paid an additional 12 years over the original period. 6
the benefit By evaluating the newer policies on the market, it is determined that they can obtain slightly more coverage than the original policies while preserving the original premium schedule illustrated ten years ago. Paul also quit smoking about seven years ago. As a result, Paul s moderately high blood pressure and cholesterol levels are now within normal ranges for his age. They were then pleased to discover that Paul is now eligible for the preferred non-smoker class where the existing contracts had rated him Table B and as a smoker. He had never thought of informing his existing carriers of these positive changes in his health. With the new policy and improved ratings from under writing, Paul and Margaret s trust now owns life insurance with an approximately 20% higher death benefit and a reduced period of premium payments. This example is hypothetical, actual results may vary. 7
What is a Life Insurance Review? Emphasize that a life insurance review focuses on your client s current situation. In many cases their life insurance needs have evolved. The review provides an opportunity to focus on their current needs as opposed to the needs they had when they purchased their policies years ago. It also allows them to examine how their policies have performed and how they are projected to perform going forward. Finally, a life insurance review will help identify if changes in their current life insurance, or carriers, may put their planning at risk.? Life Insurance Review what will my clients ask me? Why Would I Need a Life Insurance Review? Although simple in concept, a life insurance policy can be a complex financial instrument. Like other assets, a life insurance policy needs to be monitored to be certain that it is still appropriate for a client s goals and is performing reasonably well to expectations. Any number of items can affect a life insurance policy, including: Policies that were illustrated at rates that are unreasonable in today s economic environment. Many may be underperforming from several years of low market performance or interest rate reductions. Policies that were under funded, or funded with a combination of term and permanent coverage, to keep costs down with the result of longer than expected or higher than expected premiums. Policies where premiums were said to have vanished that are now seeing premiums reappearing due to the economy or unmonitored policy loans. Companies that receive lower ratings. Term coverage or graded premium policies that may increase substantially in cost. Coverage that is either inadequate or excessive for a client s current needs. Changing needs for insurance. Updating beneficiaries due to birth or divorce. Changes in tax law. 8
SM Sales support MetLife has designed a variety of tools to help you present this strategy to your clients. Client Brochure This brochure provides client s an overview of the strategy and how it can support their financial goals. FPO Life Insurance Low-Res Review Image Ensuring life insurance coverage meets today s goals Life Insurance Review Fact Finder FPO Note to Financial Professional: Please work with your clients to complete this fact finder. Then work with your life insurance design specialists or MetLife Sales Support Desk who will develop a life insurance illustration and an epresentation on this concept that is customized to your clients situation. Client Information Name(s): Address: City, State, Zip Code: Phone: Advisor Name: Advisor Company: Advisor Office Address: Low-Res Image Cell Phone: Life. your way Advisor E-mail: Fact Finder This tool allows you to gather all the necessary information from your client so you are able to build a customized illustration and epresentation to show them. Life. your way (Name product, or state type, e.g., universal life, variable life) (Cannot be higher than 12%) Advisor Phone: Advisor Fax: Life Insurance Information Client s Birthdate: Health Status: Smoker? (N/Y) Spouse s Birthdate: Health Status: Smoker? (N/Y) What type of coverage is required? survivorship coverage both lives insuring single life coverage insuring client s life single life coverage insuring spouse s life Type/Name of product? If VUL, what hypothetical gross rate % How much Death Benefit is required? $ level increasing *For more information about this strategy contact your MetLife Wholesaler today. What if I don t have all of the information? To perform a thorough life insurance review, it is important to have as much information as possible. However, you can always get started and fill in the gaps at a later date. The MetLife life insurance review epresentation will run even if you do not enter all your client s information however where there are gaps, the presentation will note that certain information is missing. If my clients decide to make a change, will a life insurance agent from my old company call them? Possibly. Any change in a life insurance policy, including using life insurance policy values to fund a new life insurance contract, may require additional paperwork. Some states call this replacement paperwork. That paperwork is usually provided to the original company. The company who may or may not choose to call on the client. Your client should be prepared to expect a call inquiring about the change to encourage your client to keep their current coverage. Typically such a call will include a discussion as to why the existing life insurance should be maintained. Be prepared for this type of call, or other contact, from the current life insurance companies. The life insurance review that you prepare will only be appropriate where you have taken into consideration items such as surrender charges and realistically presented future premiums, anticipated cash values and death benefits based on employer benefit packages or in-force ledgers. 9
Pursuant to IRS Circular 230, MetLife is providing you with the following notification: The information contained in this document is not intended to (and cannot) be used by anyone to avoid IRS penalties. This document supports the promotion and marketing of insurance products. Your clients should seek advice based on their particular circumstances from an independent tax advisor. MetLife, its agents, and representatives may not give legal or tax advice. Any discussion of taxes herein or related to this document is for general information purposes only and does not purport to be complete or cover every situation. Tax law is subject to interpretation and legislative change. Tax results and the appropriateness of any product for any specific taxpayer may vary depending on the facts and circumstances. Your clients should consult with and rely on their own independent legal and tax advisers regarding their particular set of facts and circumstances. Prospectuses for Equity Advantage Variable Universal Life, and for the investment portfolios offered thereunder, are available from MetLife. The policy prospectus contains information about the policies features, risks, charges and expenses. The investment objectives, risks and policies of the investment options, as well as other information about the investment options, are described in their respective prospectuses. Clients should read the prospectuses and consider this information carefully before investing. Product availability and features may vary by state. MetLife variable life insurance policies have limitations, exclusions, charges, termination provisions and terms for keeping them in force. There is no guarantee that any of the variable investment options in this product will meet its stated goals or objectives. The cash value is subject to market fluctuations so that, when withdrawn, it may be worth more or less than its original value. Guarantees are based on the claims paying ability and financial strength of the issuing insurance company. Please contact your financial professional for complete details. Life insurance is medically underwritten. Clients should not cancel their current coverage until their new coverage is in force. Surrender charges may be due on an exchange of one contract for another. A change in policy may require an examination. Surrenders may be taxable. Clients should consult their own tax advisors regarding tax liability on surrenders. Life insurance products are issued by MetLife Investors USA Insurance Company, Metropolitan Life Insurance Company and in New York only, by First MetLife Investors Insurance Company. All guarantees are based on the claims-paying ability and financial strength of the issuing insurance company. Variable products are distributed by MetLife Investors Distribution Company (MetLife Investors), Irvine, CA. May 2009 Insurance Products: Not A Deposit Not FDIC Insured Not Insured By Any Federal Government Agency Not Guaranteed By Any Bank Or Credit Union May Go Down In Value MetLife Investors Distribution Company 5 Park Plaza, Suite 1900 Irvine, CA 92614 metlifeinvestors.com 0904-1352 BDVL20607 L0509037099[0611] 2009 METLIFE, INC. PEANUTS United Feature Syndicate, Inc.