Introduction to Whole Life Insurance John Perre Regional Life Sales Manager
Agenda Introduction to Equitable Life Stock company VS a mutual company Benefits of dealing with a Mutual Company Introduction to Participating Whole Life Where does it fit? Dividends Features Sales Concepts Summary
Introduction to Equitable Life Equitable Life is the largest federally regulated mutual life insurance company in Canada. Our participating whole life policyholders have received dividends every year since we launched participating whole life in 1936.
Benefits of dealing with a Mutual Company Eligible to share in the distributable earnings of the PAR Account in the form of Dividends. Voting rights. Focused on long-term interests, not driven by shareholder pressures for quarterly results. We remain focused, stable and strong while stock companies consolidate. Customers know who they are dealing with now, and in the future.
Introduction to Participating Whole Life
Introduction to Participating Whole Life The evolution of whole life insurance Term Whole Life Universal Life First whole life introduced in 1762 Longest standing form of permanent insurance Precursor of UL Whole life s popularity can fluctuate based on market volatility
Canadian Life Insurance Sales Annualized Premium as at December 31, 2010 31% 36% 33% Univeral Life Whole Life Term Source: 4 th Quarter 2010 LIMRA Canadian Individual Life Insurance Sales
Canadian Life Insurance Sales - Premiums Sales by Total Annualized Premium 2012 35% 29% 36% Term Whole Life Universal Life Source: 4 th Quarter 2011 LIMRA Canadian Individual Life Insurance Sales
Canadian Life Insurance Sales Number of Policies as at December 31, 2010 55% 26% 19% Univeral Life Whole Life Term Source: 4 th Quarter 2010 LIMRA Canadian Individual Life Insurance Sales
Canadian Life Insurance Sales - Policies Sales by Policy Count 2012 25% 21% 54% Term Whole Life Universal Life Source: 4 th Quarter 2011 LIMRA Canadian Individual Life Insurance Sales
Term Life vs Whole Life Term Insurance Par Whole Life Insurance Premium Premium Death Benefit Death Benefit Cash Value
The Key Differences Term Insurance Temporary need Lower initial cost No cash value Not eligible to receive dividends Participating Whole Life Permanent need Higher cost but opportunity to use dividends to potentially reduce the premium Accumulates a cash value Eligible to receive dividends Convertible to permanent insurance
Whole Life vs. Universal Life Par Whole Life Insurance Universal Life Insurance Premium Monthly (unbundled) Charges Death Benefit Cash Value Death Benefit Cash Value
The Key Similarities Low-cost permanent life insurance protection Flexibility Premium Holiday Riders and Benefits Death Benefit Configurations Tax-deferred Cash Accumulation Access to Cash Withdrawals Policy Loans Collateral Loans Guaranteed limited pay periods
The Key Differences Participating Whole Life The company manages the cash accumulation Hands-off investment Dividend Scales can increase or decrease, but can never be negative Premium is bundled Little premium flexibility Guarantees Cash Values Death Benefits Premiums Universal Life The client/advisor manages the cash accumulation More investment choices/decisions Account values can earn negative and positive interest Premium is unbundled A lot of premium flexibility Limited Guarantees COI Charges Administration Charges Minimum Interest rates on some GDAs
Whole Life or UL? Case Study The Situation Male, age 43, non-smoker Low risk tolerance The Need $750,000 Permanent Insurance Premiums payable for a maximum 20 years Cash available to supplement retirement income between age 65 and 69 Currently maxing out RRSP Has $20,000/year available to spend
Whole Life or UL? Case Study The Choices Equimax Equimax Estate Builder 20 Pay Dividend Option Enhanced Protection with Lifetime guarantee $650,000 of basic with $100,000 of Enhancement Excelerator Deposit Option added to increase premium to $20,000 Equation Generation IV Premiums payable for 20 years Level Protector as Death Benefit Option YRT as COI type Portfolio Interest Option elected earning 4.0% interest (plus investment Bonus) 8% increases to tax shelter the deposit and growth
Equimax Estate Builder* Equation Generation IV Premium $20,000 $20,000 Death Benefit $750,000 $750,000 Guar. CV Age 65 $409,500 N/A Age 85 $557,700 N/A Total CSV Age 65 $764,865 $745,987 Age 70 $1,025,446 $961,211 Age 85 $ 2,125,683 $2,038,313 Total DB Age 65 $1,369,362 $1,160,907 Age 70 $1,653,583 $1,348,160 Age 85 $2,619,828 $2,038,313 *Equimax values are based on the current dividend scale
Whole Life The Right Choice if The Need Par Whole Life The Solution Guarantees Death Benefit, Cash Values and Premiums Stable investments Long-term investment focus of the Participating Account Tax-sheltered growth Dividends accumulation on a tax-sheltered basis. (depending on dividend option selected.) Stable, hands-off investments managed by the company. Flexibility to choose from higher long-term value or higher early cash values within the first 20 years Access to a cash reserve Access to the cash value for any reason. Eligible for a Collateral Loan of up to 90% of the CSV (subject to approval by the lending institution)
Reaping the rewards of ownership Equimax is a Participating Whole Life Insurance Policy Dividends are one of the UNIQUE features Par policyholders are eligible to share in the distributable earnings of the PAR Account in the form of dividends.
Basic Permanent Protection Death benefit structure for all Dividend Options except Enhanced Protection
Dividend Options Paid in Cash Appealing to clients who like to get a little something back each year Premium Reduction Appealing to clients who are looking for a potentially cost-effective way to pay for their permanent insurance
Dividend Options On Deposit Operates like a savings account Dividends earned are automatically deposited with Equitable Life and earn a competitive interest rate
Dividend Options Paid-Up Additions (PUAs) Dividends are used to purchase PUAs which are added to the basic permanent insurance The Cash Value of PUAs accumulate on a tax-deferred basis
Dividend Options Enhanced Protection Consists of a mix of permanent life insurance and one-year term insurance Two guarantee options:10 Year and Life
Dividend Options Enhanced Protection Dividends are used to purchase One Year Term Insurance and PUAs PUAs replace the One Year Term Insurance Cash value of PUAs accumulate on a taxdeferred basis
Dividend Options Enhanced Protection Two Enhancement Guarantees 10-Year Guarantee Lifetime Guarantee Other difference is the ratio of basic permanent insurance to one-year term enhancement 10-Year Guarantee = smaller basic permanent insurance = lower premium
How are dividends calculated?
The Participating Account Mortality and lapse experience Cancelled policies (lapse assumptions) Paid Death Benefits Taxes and expenses Difference between expected and actual Can result in either a positive or negative impact to dividends
The Participating Account Investment performance As of September 30, 2011
Strong performance of the PAR Account *data as of December 31, 2010
NEW! Understanding PAR whole life 1038
Impacts of Dividends How dividends affect par whole life insurance Actual results will vary.
Premium Offset Premium offset can potentially occur Dividends may be sufficient to pay the required premiums at some point in the future Policy can pay for itself Dividends are NOT GUARANTEED. Watch for dividend scale changes
Taxation of Dividends Dividends may result in tax reporting: At the time they are paid or credited Annually as income is generated on accumulated dividends on account Upon disposition (of either the dividend or the policy)
Equimax What s New?
Equimax Plan types Choice of two plan types Equimax Estate Builder Equimax Wealth Accumulator Higher long-term value. Ideal for covering estate taxes and fees. Higher early cash values within the first 20 years. Ideal for building wealth to access to fund education, cover business expenses or as an emergency fund.
Which plan type is right for your client?
Equimax Payment options Choice of two premium payment options Life Level premiums guaranteed for life and payable for the life of the policy 20 Pay Level premiums guaranteed and payable for 20 years Excludes premiums for additional Riders and benefits that may extend beyond 20 years.
Excelerator Deposit Option (EDO) Paid-Up Additions Total death benefits and cash values increase as soon as the extra deposits are made Enhanced Protection Policy may reach the Dividend Conversion point earlier
Coverage Options Single Life Joint First-to-Die (2 lives, adults only) Joint Last-to-Die (2 lives, adults only)
Guarantees & Flexibility Guarantees Death Benefit Premiums Cash Values Reduced Paid-Up Insurance Flexibility Premium Holidays Cash Accessibility Withdrawals Policy Loans Collateral Loans
Optional Riders and Benefits Riders or Benefits Disability Waiver of Premium Applicant s Death and Disability Waiver of Premium Additional Accidental Death Benefit Available on: Adult plans only; option to add for children at age 21 Children s plans only Adult plans only Guaranteed Insurability Option Adult plans only (18+) Flexible Guaranteed Insurability Option Children s Protection Rider Children s plans only Adult plans only 10/20 YRCT Life Insurance Rider Adult plans only
Sales Concepts Estate Creator Tax Protector The Lasting Gift
Estate Creator Use a tax-sheltered vehicle to create an instant estate Preserve an estate by covering tax bills
Estate Creator Case Study The Situation Male age 52, Non-Smoker Maximizing his RRSP (in GIC s) Conservative investor Looking to leave an estate for his 3 children to share The Choices Equimax Estate Builder $250,000 Death Benefit, PUA dividend option Premiums $9,492.50/year for 20 years GICs Conservative Investment Invests $9,492.50/year 20 years, 6% before tax interest rate
Equimax Estate Builder 20-Pay Alternative Investment @ 6% (pre-tax) Estate Advantage Age Total Death Benefit* Total Estate Value 53 $250,256 $9,777 $240,479 60 $264,428 $86,943 $177,485 65 $310,350 $152,699 $157,651 70 $391,619 $228,929 $162,690 75 $487,993 $287,080 $200,913 85 $694,062 $385,812 $308,250 100 $1,036,947 $601,082 $435,865 * Equimax values are based on the current dividend scale
Tax Protector Proceeds used to cover: Final expenses Capital gains taxes Income taxes Probate fees
Tax Protector Case Study The Situation A couple: Male, non-smoker, age 51 Female, non-smoker, age 53 $300,000 tax liability on the last death Already own life insurance to cover funeral expenses Assets $325,000 Non-Registered Assets $400,000 RRSP/RRIF Assets Cottage Paid $75,000 Worth $275,000
Tax Protector Case Study The Solution $300,000 Equimax Estate Builder, Joint Last-to- Die with Life Pay Premium Enhanced Protection with Lifetime Guarantee Premium of $4,277 annually (This is less than 2% of their Non-Registered Assets) Clients protect their estate by transferring taxable non-registered assets to a tax-exempt life insurance plan
Tax Protector Case Study Why it works? Tax liability occurs on the death of the surviving spouse Using Enhanced Protection makes the coverage more affordable. The premium is based on the amount of basic insurance coverage not the total amount, offering more total coverage for a lower premium. Using the Lifetime Guarantee means that as long as the premiums are paid, the total death benefit will be at least equal to the $300,000 needed
The Lasting Gift Target Market Policy Owner = Grandparents or Parents Insured = Child or Grandchild Provide a paid-up insurance policy with values their child or grandchild can use in any they wish Funding Education Inheritance
Lasting Gift Case Study The Situation Proud grandmother of 2 year old Natalie $100 a month budget The Need Locking in insurability at child rates Guarantee their right to purchase additional insurance without evidence Other considerations Allow access to the cash value if needed
Lasting Gift Case Study The Solution Equimax Estate Builder 20 Pay plan with PUAs Flexible Guaranteed Insurability Options ($125,000 at age 21; $125,000 at age 25, $250,000 at age 30) Guaranteed Cash Value Total Cash Value Total Death Benefit At issue 0 0 89,676 Age 20 10,582 18,968 184,977 Age 30 19,818 48,536 314,036 Age 65 56,765 368,164 791,025
Why a mutual insurance company? We put policyholders first! No shareholders demanding short-term gains at expense of long-term focus All Par policyholders are eligible to share in the success of the company Par Account is not diluted by shareholder transfers
Why Equitable Life? The largest federally regulated mutual life insurance company in Canada. Our Par policyholders are eligible to share in the success of the company Paid dividends every year since first launched Par whole life in 1936 Strong history of positive yield in Par Account
Marketing material Client facing
Marketing/sales tools Advisor Guide ADVISOR USE ONLY 1128 (available in English, pdf only)
Equitable Life Advantage How Equitable Life can help Equitable Sales Illustrations system Easy to use Includes an on-screen summary Multiple Scenarios/reports Dedicated Underwriters Support is in your own backyard via your local Regional Office!
Whole Life, Equitable Life & You Whole Life a great enhancement to your business
Disclaimer This presentation is for educational purposes only. It should not be construed as legal, tax or accounting advice. Equitable Life has made every effort to ensure the accuracy of this presentation, however accuracy is not guaranteed. If the information presented here differs from that contained in any Equitable Life policy contract, the policy contract prevails in all cases. If this presentation contains competitive information, we've made every effort to ensure its accuracy as of the date of the original oral presentation. We cannot, however, guarantee the accuracy and, if you have any questions regarding this information, you should contact the competitor directly. denotes a trademark of The Equitable Life Insurance Company of Canada. Reproduction or redistribution of this presentation, in whole or in part, without permission from Equitable Life is forbidden. 2012 The Equitable Life Insurance Company of Canada. All Rights Reserved.
Questions?