History of the IUL Market and the leading product carriers
Target client characteristics
Features and benefits of IULs
Equity Indexed Universal Life Product Comparisons
Reasons to use IUL for your clients
Effective Sales Solutions for EIUL
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The IUL Market The first indexed universal life insurance policies were issued in 1997, closely following in the footsteps of equity-indexed annuities. IUL started slowly, with early insurance carriers of the product attracting less than $65 million in premium in its first full year. Sales remained at similar levels until 2004 when IUL started growing consistently. In 2009, Indexed Universal Life accounted for $488.5 million in premiums paid despite a difficult time for the industry. Our Top IUL Carriers by Marketshare Aviva $113MM 23.2% Pacific Life $ 82MM 16.9% Minnesota Life $ 38MM 7.8% Allianz $ 19MM 4.0% For Producer Use Only
After 2008 and 2009, Why is IUL An Attractive Product?
No principal risk on part or majority of retirement income oriented assets but the upside of the market’s potential.
The ability to manage and accumulate wealth for retirement in a tax-efficient manner.
Provide a predictable base retirement income
Provide an alternative to traditional market based plans which suffer the complete volatility of the stock market
Provide additional asset and tax based diversification
Provide an option for obtaining tax advantaged income during retirement income phase.
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Capture the Indexed Universal Life Opportunity. The shifting winds of fluctuating markets are keeping many would-be clients grounded. Before they commit to buying a permanent life insurance product, they want reassurance that it can help them reach their financial and insurance goals, while still providing a comfortable level of stability. Variable Universal Life (VUL) – high potential accumulated values, limited downside protection, possibly considered too high risk Universal Life (UL) – safer, lower crediting rate potential, given today’s low interest rate environment possibly considered too low risk Indexed Universal Life (IUL) – market-paced growth potential with guaranteed minimum interest rates For Producer Use Only
The Typical IUL Target Client Needs flexible life insurance protection. Is concerned about losing money in the market. Wants higher crediting potential than may be available through UL. Is not confident that their investing expertise will outperform the market. Wants the opportunity for high upside and limited downside potential. Could benefit from potentially tax free policy distributions through policy loans and withdrawals. Risk vs. Reward Trade Off (By Types of Permanent Life Insurance Product) High Variable Universal Life Growth Potential (Cash Accumulation) Indexed Universal Life Universal Life Low High Volatility (Risk) For Producer Use Only
Unique IUL Features. Indexed Accounts Feature the following components: Indexed Segments Offer rolling returns for wider market exposure.
Index – The component that provides the basis for Indexed Accounts’ interest crediting. Examples of indexes that may be available are the S&P 500, Russell 2000, and NASDAQ 100.
Growth Cap (Cap) – Provides an upper limit to the interest earned.
Floor (Guaranteed Minimum Interest Rate) – Provides a lower limit to the interest earned.
Participation Rate – Determines what percentage of Index performance will be used in the interest crediting calculation, before Growth Caps of Floors are applied.
Segment Term – Period of time a Segment must wait before it is credited interest or becomes liquid.
How Segments Work:
Transfers from Fixed Account to Indexed Account(s) create separate Indexed Segments (Segments) within each Indexed Account.
Each Segment tracks a separate time frame of the Index’s performance and will mature at the end of the Segment Term.
Once a Segment is created, the money is locked up for the Segment Term.
At the end of the Segment Term, it is credited interest, if due.
At Segment maturity, the Segment’s value can then be reallocated to any choice of accounts or remain in its current Indexed Account.
Any new transfers or maturing Segments can go through the same process, as outlined above.
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Protect Through the Power of the Floor. Perhaps the most important and distinctive element of an IUL is its Floor, which limits downside exposure and prevents market-based losses. Though the term ‘Floor’ is used interchangeably with ‘Guaranteed Minimum Interest Rate’, there are some differences. Both ensure a minimum return and prevent against market-based losses. Guaranteed Minimum Interest Rate: Available with Fixed and Indexed Accounts. Contractually is the lowest rate that will be credited to the Account. Most common rate ranges from 0-3%. Interest is calculated and credited on an ongoing basis, according to a schedule the carrier sets. Floor: Available with Indexed Accounts only. Contractually limits a negative Growth Rate to stated Floor rate. Most common rate is 0%. Interest is calculated and credited at the end of the Segment Term. For Producer Use Only
Indexed Accounts Credit Interest Based on More Than Just Market Fluctuations. To provide strong growth opportunity with protection, Indexed Accounts credit interest based only in part of an index without directly participating in any stock or equity markets. The actual interest credited will never be less than the Floor or greater than any Caps imposed by the carrier. See below of typical interest crediting model. Typical Interest Crediting Process: The performance of the index, as a percentage, is measured over the Segment’s Term. The Index Performance Rate is then multiplied by the Segment’s Participation Rate. The Participation Rate is the percentage of the Index Performance Rate that will be used in the calculation. The product of the Index Performance Rate times the Participation Rate is called the Growth Rate. The Growth Rate is applied to the Segment’s Growth Cap, which limits it on the upside, and its Floor (Guaranteed Minimum Interest Rate), which limits it on the downside. } Growth Cap Index Performance Rate (measured change in index as a %) Participation Rate (% of Index Interest Rate used in calculation) Growth Rate Subject to… Index Performance Rate (measured change in index as a %) Floor For Producer Use Only
A Premier Benchmark – S&P 500® Index The S&P 500 is considered a premier benchmark of U.S. stock market performance because it represents the stock of 500 of the country’s leading companies of various sizes and industries. Companies tracked by the S&P 500 Index are carefully selected by committee and the amount of each stock used in proportion to its market value. Because of the width and breadth of its coverage, the S&P 500 is viewed as the preeminent hallmark of American economic progress. The S&P 500 can offer significant upside, returning an average of 16.06% from 1989 to 1998. However, it can also offer prolonged periods of economic downturn. From 1999 to 2008, it averaged a -0.68% return. To prevent market-based losses, many IULs provide protection by eliminating market loss with a 0% floor. So even if the index return is consistently negative, no account will lose value (excluding policy deductions). When the market eventually rebounds, the Indexed Accounts will be there with competitive Growth Caps to capture its upside potential. The chart below is for illustrative purposes only and does not include any insurance charges. For Producer Use Only
Equity Index Universal Life Product Comparisons For Producer Use Only
8 Reasons To Use EIUL The safety of no negative returns The carrier absorbs the investment risks The possibility of high positive returns The ability to create a tax free income stream The death benefit provides a self-fulfilling funding in case of death An ability to take advantage of the design of insurance products IRC Sec. 101(a) (1) Potentially* Tax-Free Death Benefit IRC Sec. 72(e) (1) Potentially* Tax-Free Accumulation IRC Sec. 72(e) (5) Potentially* Tax-Free Income * Current tax law provides for the allowable tax benefits mentioned. Guaranteed return of premium Insurance for a lifetime without paying for a lifetime For Producer Use Only
Effective Applications for EIUL
401(k) Mirror Voluntary Deferral Plans
Executive Bonus and Life Insurance
Key Person Life Insurance
Roth IRA Alternative
Accounts Receivable Financing
Life Insurance Premium Financing
Maximizing IRA Assets to Heirs
Wealth Transfer Strategies
Life Insurance Policy Review
How Business Owners Can Get the Most Out of Their Business
Life Insurance Needs
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Are You Utilizing The Most Innovative and Dynamic Product in the Industry Today? Here Are 3 Ways To Get Started… 1. Download a quote request form from www.abacusinsadvisors.com 2. Email us at firstname.lastname@example.org 3. Call us at 877.672.1401 For Producer Use Only
EXCEED BEYOND YOUR EXPECTATIONS. Join Abacus Insurance Advisors. Established relationships with carriers, expert guidance and exceptional service are just a few of our concierge level offerings. At AIA, we take care of your back office needs so you can focus on building your business. We invite you to leverage our comprehensive resources and become another AIA success story. Our promise is that your experience with AIA will surpass your expectations. ABACUS INSURANCE ADVISORS, LLC You Can Count On Us. Phone 864.672.1400 Toll Free 877.672.1401 Fax 864.281.9662 Website www.abacusinsadvisors.com 109 Block House Road Greenville, SC 29615 Abacus Insurance Advisors, LLC is an insurance marketing subsidiary of Asset Management, Inc. Neither Abacus Insurance Advisors, nor its employees or agents are authorized to give legal, accounting or tax advice. You should consult your own legal or tax professional regarding the purchase of any life insurance policy. For Producer Use Only