Foundational Life a guide for Representatives 1
CONTENTS What is Foundational Life?............................. 4 Why is it Unique?................................... 4 How Does Foundational Life Work?...................... 4 The Market....................................... 4 Issue Ages........................................ 5 Face Amounts..................................... 5 Coverage Types.................................... 5 Death Benefit..................................... 5 Cost of Insurance (COI) Options........................ 6 Guaranteed Cash Surrender Value....................... 6 Cash Surrender Value................................ 6 Reduced Paid-Up Values.............................. 6 Administration Fee.................................. 7 Special Family Offer................................. 7 Policy Loans...................................... 7 Withdrawals...................................... 7 Premium Payment Methods........................... 7 Surrender Charges.................................. 8 Investment Options................................. 8 Riders and Benefits................................. 9 Waiver of Premium Benefits........................... 10 3
What Is Foundational Life? Foundational Life is a totally new concept in life insurance. It combines the security of permanent life insurance with the flexibility of a universal life plan. It offers several important features your clients will welcome, including: Guaranteed death benefit Opportunities for tax-advantaged investment growth Various premium payment options A variety of riders and benefits Why is it Unique? Foundational Life brings together the best attributes of both permanent and universal life insurance. The result is a unique range of features, benefits, riders, and guarantees. Your clients will find Foundational Life to be an affordable, practical solution for many of their financial and business needs. Issue Ages 20 Year Renewable Term Paid-Up at Age 85 : 0-60 Level COI Options: To Age 100: 0-80 10 Pay: 0 75 15 Pay: 0 70 20 Pay: 0-65 Face Amounts Minimum: $10,000 Maximum: $10,000,000 Coverage Types Foundational Life can provide coverage for one or more people. Coverage types include: How Does Foundational Life Work? Your client can pay the minimum premium and will have a guaranteed death benefit. If they choose to pay more than the minimum, their additional contribution will be allocated to an investment of their choice. By contributing more, they can increase their fund value as well as their cash surrender value. The Market Foundational Life was created with the middle market in mind, and is geared towards those seeking permanent life insurance along with flexibility and investment advantages. Typically, these tend to be people with families or retirees with estates they d like to preserve. However, Foundational Life will also appeal to a broader market, since it provides both security and flexibility. Single Life Joint First-to-Die (up to 5 lives) Joint Last-to-Die (2 lives only) Death Benefit The policy pays an amount equal to the face amount plus the value of the investment account. 4 5
Cost of Insurance (COI) Options Guaranteed Level COI: Pay to Age 100 10 Pay 15 Pay 20 Pay Each provides coverage for life, with the cost of insurance guaranteed to remain the same for the term of the policy. Charges for Foundational Life stop when the pay period is over. If there are any rider premiums, these will continue to be payable. 20 Year Renewable Term Paid-Up at Age 85 This provides coverage up to age 100, with premiums renewing every 20 years, up to age 85. Charges stop after age 85. Switch in Cost of Insurance Option Allows clients with 20 year Renewable Term Paid-Up at Age 85 to switch to any Level Cost of Insurance Option. This option is not available during the first two years of the policy. Guaranteed Cash Surrender Value Available to clients with Level Cost of Insurance policies who wish to surrender their policy benefits. Begins in the 5 th policy year for 10 Pay, 15 Pay and 20 Pay. Begins in the 12 th policy year for Pay to Age 100. Cash Surrender Value A client may surrender their policy benefits at any time, for an amount equal to the Guaranteed Cash Surrender Value, plus the Total Investment Value, minus any outstanding loans or withdrawals. Market Value Adjustments and taxation may apply to surrenders. Administration Fee The administration fee for a Single policy or Joint policies is $84 per year, or $7 per month, per policy. Special Family Offer When two policies are purchased at the same time, by any two people living under the same roof, they will each receive a 50% discount on their administration fee. Also, if additional policies are purchased at the same time for children, those policies will have their administration fees waived. Reduced fees will be in effect for the life of the policies. These offers are available only at the time of issue. Example 1: A husband and wife purchase separate policies at the same time (not a joint policy). The monthly administration fee for each will be reduced by 50%. Instead of $7 per month, each pays $3.50 per month. If they purchase policies for their children at the same time, there will be no administration fees on those policies. Example 2: Two policies are purchased at the same time: one for a parent and one a child. The monthly administration fee for each will be reduced by 50%. Instead of $7 per month, each policy s fee will be $3.50. If the parent decides to purchase additional policies for other children at the same time, there will be no administration fees on those policies. Policy Loans Your client can borrow a minimum of $500, and a maximum of 90% of the Total Investment Value plus the Guaranteed Cash Value (minus any outstanding loans). Loans may be subject to tax. Reduced Paid-Up Values Beginning in the 11 th year, a client may opt to stop paying premiums in exchange for reduced policy benefits. In this case, they will receive the Total Investment Value (value of the Investment Account), which will be treated as a withdrawal. All riders will terminate and no further deposits will be allowed. The Reduced Paid-Up Value is guaranteed. 6 Withdrawals Clients may withdraw a portion of the Total Investment Value at any time. The minimum amount available for withdrawal is $500. Withdrawals may be subject to a market value adjustment and/or taxation. Premium Payment Methods Clients can choose to make premium payments monthly (PAC) or annually. The monthly PAC premium is equal to the annual premium divided by 12. 7
Surrender Charges There are no surrender charges on Foundational Life. Investment Options FIXED INTEREST ACCOUNTS Foundational Life Daily Interest Account Objective: Guaranteed interest rates having up to a one-year term. Risk: Risk-free guaranteed minimum return linked to Government of Canada Treasury Bills. This account reflects short-term interest rates (up to one year) and is competitive with rates earned on the current market on daily interest savings accounts at Canadian banks. This account is attractive during periods when interest rates are rising because you are not locked into lower prevailing rates for long periods. The interest rate is equal to 90% of the yield on 30-day Government of Canada Treasury Bills, minus 2%. The guaranteed minimum return is 0%. Foundational Life Long Term Interest Account Objective: Guaranteed interest rates linked to 10-year Government of Canada bonds over a ten year term. Risk: Risk-free guaranteed minimum return of 2.5%. This account delivers returns that compete with longer-term investments, but is free of the usual restrictions that lock in your funds for prolonged periods. The interest rate is equal to 90% of the 10-year rolling average rate linked to 10-year Government of Canada Bonds, minus 2%. INTEREST INDEX-LINKED ACCOUNT S&P/TSX 60 Stock Index Account Objective: Long-term growth based on the growth in value of the companies that make up the Index. Risk: Volatility (up and down swings in value) tends to fall in the medium range. The S&P/TSX 60 Stock Index Account seeks to achieve investment results that correspond to the change in value of the S&P/TSX 60 Stock Index. The S&P/TSX 60 Index is a large capitalization index for Canadian equity markets. The 60 stock index is market-capitalization weighted, with weight adjusted for available share float, and is balanced across 10 economic sectors (or industries). S&P/TSX 60 constituents are selected for inclusion using Standard & Poor s guidelines for evaluating company capitalization, liquidity and fundamentals. 8 The S&P/TSX 60 was launched on December 31, 1998. The S&P/TSX 60 serves as the base for relative derivative products such as exchange traded funds, and index options and futures. Our annual management fee is 3.25%. Riders and Benefits Term 10 Rider Provides the option to increase coverage by adding renewable and convertible term insurance for a ten-year period. At the end of the term, your client can renew for another 10 years, without evidence of insurability. For ages 71 to 79, the plan is renewable only to age 80. Level Term 20 Rider Provides the option to increase coverage by adding guaranteed, convertible term insurance for a twenty-year period. Your client can convert this policy to permanent insurance any time during the first 15 years, as long as they are less than 65 years old. This rider is not renewable. Critical Illness Benefit Upon diagnosis and survival of a covered critical illness, your client will have access to an amount up to the policy s Total Investment Value. Also, all insurance charges will be waived, including those for riders. Covered conditions include: heart attack, stroke, coronary artery bypass surgery, life threatening cancer, Alzheimer s disease, kidney failure, paralysis, major organ transplant (as recipient), blindness and deafness. Accidental Death Benefit Provides a lump-sum benefit, in addition to the sum insured, in the event that the Insured s death is proven to be accidental. Children s Term Insurance Rider Provides term insurance protection for each child of a life insured, including those not born at the time coverage is issued. The premium for the rider is guaranteed, regardless of the number of insured children it covers. In the future, each insured child may purchase a new permanent policy, without providing medical evidence of insurability, by means of conversion, for an amount up to 10 times the term rider coverage, up to a maximum of $150,000. (continued) 9
Children s Term Insurance Rider (continued) The conversion may be applied for, in writing, any time after each child s 20 th birthday, but no later than 31 days past the policy anniversary nearest each insured child s 25 th birthday. The premium paying period expires at 20 years, or the end of the premium paying period of the base plan, whichever comes first. Expiry is 31 days past the policy anniversary nearest the insured child s 25 th birthday. The annual premium for the new policy will be reduced during the first five years, by an amount up to 20% of the annual premium. Waiver of Premium Benefits Disability Waiver of Premium Benefit The minimum premium will be waived in the event of total and continuous disability of the Insured. The qualifying period is six consecutive months of total disability before the waiver can commence. Payor Total Disability Waiver of Premium Benefit If the payor is different from the Insured, all premiums including riders and policy fee will be waived upon total and continuous disability after the qualifying period of six consecutive months of full disability of the payor, and prior to the expiration of the rider. Payor Death Waiver of Premium Benefit If the payor is different from the Insured, all premiums including riders and policy fee will be waived on the policy until the expiry of the premium paying period of the policy, if the payor dies and written notice to the company is received along with evidence of such death. Premium Rate Calculation We recommend that you use the Max Illustration Software on your computer to calculate the premium. Max will determine age nearest birthday, allow you to obtain a complete and accurate illustration based on the needs analysis, and give you a personalized illustration to present to your clients. 10
RBC Insurance is part of RBC Financial Group, one of the oldest and largest financial groups of companies in North America. We provide a comprehensive portfolio of insurance products to protect your clients families and finances. We specialize in solutions for personal and professional needs, with insurance for life, health, home, auto, and travel. We re recognized for strength, stability, and our commitment to the 5 million customers we serve. We value the trust people place in us. Please visit our Sales Resource Centre at www.rbcinsurance.com/businesspartners/life For use by RBC Insurance Representatives. Not intended for client distribution. Underwritten by RBC Life Insurance Company TM Trademarks of Royal Bank of Canada. Registered trademark of Royal Bank of Canada. Used under license. 12 89356 (01/2004)