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DI Retirement Security
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Help Clients Achieve Their Retirement Dreams
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DI Retirement Security
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Agenda
• The effect of disability on retirement savings
• How the solution works
• Program guidelines
• Getting started selling DI Retirement Security
“DI Retirement Security is an easy sell and it covers the
important need of continuing retirement contributions even
when
one can’t work. DI Retirement Security is a great fit and
economical solution in many situations.” – Bob G., Colorado
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DI Retirement Security
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Protecting Retirement Dreams
Workers rank their ability to earn a living and their
retirement savings as their number 1 and 2 most valuable
financial resources1
More than 35% of workers with 401(k) or IRA plans
have not thought about or don’t know what would happen to
their contributions if they were unable to earn an income2
Almost 3 in 10 workers entering the workforce today will
become disabled before retirement3
1
Council for Disability Awareness 2010 Consumer Disability Awareness Survey
2
Council for Disability Awareness 2007 Disability Survey
3
Social Security Administration, Fact Sheet, Jan. 31, 2007
3
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DI Retirement Security
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A disability impacts more than just a paycheck
DI Retirement Security helps clients continue saving for
retirement if they become too sick or hurt to work.
If your clients could no longer work and
earn an income due to a disability, they
might not be able to:
• Contribute to their qualified retirement
plans
• Receive an employer match on those
contributions (if available)
• Contribute to Social Security
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DI Retirement Security
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Assumptions: $2,000/month contributions beginning at age 30, 5% rate of return and age 65
retirement. Consequences of disability at age 40, without DI Retirement Security.
The impact on retirement savings
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DI Retirement Security
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How it works
INSURED PRINCIPAL LIFE
IRREVOCABLE TRUST
Before a disability, DI insurance
premiums are paid to Principal Life.
The trust invest the benefits
(after a risk assessment is conducted)
At the end of the
benefit period, trust
assets are distributed
Disability occurs,
benefits are paid to
an Irrevocable Trust
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DI Retirement Security
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About the investment options
• Six asset allocation models (based on risk tolerance) are available:
– Income Allocation, Income and Growth Allocation, Balanced
Allocation, Growth and Income Allocation, Aggressive Growth
Allocation
– Models managed by Forward Funds; made up of Class C funds
• Additional investment options are available through Banker’s Trust:
– Annuity
– Mutual Funds
View models: https://bankerstrust.com/btportfolios/new_home_html
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DI Retirement Security
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Program guidelines
• Available on the HH 750 individual disability income policy
• Minimum annual income to qualify: $76,000
• Maximum benefit amount:1
– $4,225/month individual pay2
– $5,425/month employer-pay2
• Minimum benefit amount: $1,000/month
• Investment management fees are assessed on the mutual funds
in which the trust invests
• Available for single-life or multi-life cases
1– Maximum amount subject to change based on annual IRS defined contribution guidelines
– as of 2012.
2 – Includes a $50 monthly trust administration fee.
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DI Retirement Security
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Program guidelines
• Issue ages: 18-60 (all occupation classes)
• Elimination Periods: 180 or 365 days
• Benefit Periods: To Age 65 and To Age 67
• Your Occupation Periods: 2 year, 5 year, To Age 65, To Age 67
• Available Riders: Future Benefit Increase, Cost of Living Adjustment,
and Mental/Nervous Substance Abuse Disorder Limitation (MNSA)1
• Available Discounts:2
Select Occupation – 10%, Multi-Life – 20% to
30%, Association – 10%, MNSA – 10%1
1– Required on all single-life Individual Disability Income insurance policies in FL, LA
and NV; required on all cases in California; optional in all other states for multi-life
cases. Not available in Vermont. Discount applies; 10% in all states except TX – 5%.
2 – Not all discounts can be stacked together.
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DI Retirement Security
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Underwriting guidelines
Stand-alone DI Retirement Security sale
Underwriting decision based on the TeleApp and
application; no other medical underwriting
requirements requested
Combination Disability Income and DI
Retirement Security sale
Underwriting decision based on full medical and
financial underwriting guidelines
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DI Retirement Security
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Underwriting guidelines
• DI Retirement Security is not available for:
– Government employees
– Individuals who are over-insured based on Principal Life’s
current Issue and Participation guidelines.
• If there is existing individual disability insurance
coverage with lifetime benefits, certain occupations
are subject to a combined benefit maximum
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DI Retirement Security
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Three ways to access to trust assets
1. At the end of the benefit period (To Age 65 or To
Age 67)
2. In the event of certain financial hardships1
, such as:
• Extraordinary medical or health care expenses not
covered by insurance
• Payment of post-secondary education and related
fees
• Inability to make payments on principal residence
1. If the client has not been eligible to receive benefits
for 12 consecutive months
1
Upon Banker’s Trust approval
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DI Retirement Security
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Trust tax information
• On an annual basis, clients receive a 1099 form from
Banker’s Trust Company.
• The client also receives quarterly statements of principal
and income transactions within the trust.
• At age 65 or 67, the trust begins distributing accumulated
assets to the client per the trust agreement. Clients do not
need to pay additional taxes on distributed funds that have
already been taxed.
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DI Retirement Security
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Forms needed at application time
• State-specific individual disability insurance application
• DI Retirement Security supplemental form
• Signed Trust Agreement
• Financial and underwriting requirements, as requested by
Underwriting
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DI Retirement Security
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Getting started — target market
• Earn at least $76,000 annually
• Already have (or planning to purchase) group long-term
disability or individual disability income (DI) insurance
• Currently saving for retirement (no documentation
required)
• Majority of policies sold to 3A and above occupations
• Often sold to corporate executives, accountants/CPAs,
attorneys, business owners, engineers and medical
professionals
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DI Retirement Security
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Prospecting tips
1
Sell DI insurance and DI Retirement Security together
Present the solutions together to showcase the need and
affordability—the client only undergoes underwriting once.
Recently sold a fully underwritten Principal
Life DI policy without a rating?
If there’s been no change in insurability, simply
submit a DI Retirement Security Supplemental
Application form and signed Trust Agreement
to apply for DI Retirement Security.
*Must be within 90 days of TeleApp interview being taken and DI application signed.
Must include completed blood testing and urinalysis; if the case was written with
exclusions, those exclusions will also be included in a DI Retirement Security policy.
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DI Retirement Security
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Prospecting tips
Receives DI
Retirement Security
Benefits
DI Retirement Security
Benefits Paid to Trust
Disability
occurs
To age 65 or 67
Benefit Period
Trust assets
diminish
Receives Individual
Disability Income
Benefits
Sell DI insurance and DI Retirement Security together
A solution for
ongoing benefits
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DI Retirement Security
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Prospecting tips
2
Enhance employee benefit packages
Along with a 401(k) plan, employers can offer DI
Retirement Security to provide a comprehensive
retirement solution. It’s affordable too, especially when
the 20% Multi-Life discount based on unisex rates is
applied (available when three or more employees are covered).
3
Approach clients who are maxing out their 401(k)s
These clients most likely highly value their ability to save
for retirement and make excellent prospects.
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DI Retirement Security
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Prospecting tips
4
Talk to clients who have met Individual DI issue limits
These clients may be looking for options to obtain
additional coverage-and understand the need/importance
of coverage.
5
Follow up during investment reviews
As you help clients review their retirement goals, discuss
the importance of disability protection.
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DI Retirement Security
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Case Study
Overview
• Client had just established a $12 million
employer-sponsored 401(k) plan
Sales approach
• Emphasized the importance of being able to
save for retirement even in the event of a
disability
• Recommended DI Retirement Security
Solution
• Voluntary DI Retirement Security program
Compensation1
• $7,510 annual
premiums
• $3,755 FYCs
• $1,502 renewals
1
Series 700 compensation – 50% FYCs, no annual coverage increases, 100% persistency,
renewals based on 5 year projection.
• Offered on a guaranteed standard issue basis—up to 30% in discounts
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Sample monthly rates
Age Male Female
Multi-Life
Discount1
30 $42.12 $65.75 $37.09
35 $47.57 $71.07 $41.83
40 $61.86 $86.52 $53.44
45 $75.13 $99.63 $64.02
Assumptions: Colorado resident, $2,000/month benefit, 180-day elimination period, benefits to age 65,
4A occupation class.
1 –Multi-Life discount based on unisex rates; available when three or more individuals with a common
employer purchase Principal Life Individual Disability Insurance coverage
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DI Retirement Security
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Key Marketing Materials
FOR YOU
• Producer Kit (KIT1992)
• Case studies flier (JJ1175)
• FAQ (DI2111)
FOR CLIENTS
• Keep Your Retirement on Course
Mailer (JJ1171)
• Pre-approach letter (DI2115)
• Protect Your Income and Retirement
Dreams flier (JJ1210)
• Video and emails
Find these tools and more at principal.com/financialprofessional
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DI Retirement Security
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Questions?
FOR MORE INFORMATION
Contact your regional Disability Wholesaling team or
the National Sales Desk at 800-654-4278
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DI Retirement Security
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While this communication may be used to promote or market a transaction or an idea that is
discussed in the publication, it is intended to provide general information about the subject matter
covered and is provided with the understanding that none of the member companies of The
Principal Financial Group®
are not rendering legal, accounting, or tax advice. It is not a marketed
opinion and may not be used to avoid penalties under the Internal Revenue Code. You should
consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, or
accounting obligations and requirements.
DI Retirement Security is issued as a non-cancelable, guaranteed renewable, individual disability
income insurance policy. It is not a pension or retirement program or a substitute for such a
program. DI Retirement Security is not available for government employees, individuals with Group
LTD coverage that includes a “retirement supplement,” or anyone who is over insured based on
Principal Life’s current Issue and Participation guidelines. It may not be available or the benefit
amount may be reduced for certain occupations if there is existing DI coverage with lifetime
benefits. Additional underwriting guidelines may apply.
Disability income insurance has certain limitations and exclusions. For costs and complete details of
coverage, contact your Principal Life financial representative.
This is a general summary only; additional guidelines and state variations apply. Principal Life
Insurance Company is a member of the Principal Financial Group®
, Des Moines, IA, 50392.
t110901046s | DI 2167-1
Editor's Notes
Hello and welcome. Today, I’m going to give you an overview of our DI Retirement Security and provide tips on how you can incorporate this program into your block of business to help your clients achieve their retirement dreams.
I’ll cover the importance of why retirement savings protection is needs, how DI Retirement Security works, program guidelines and prospecting strategies to help you start selling.
So why sell DI Retirement Security? Well, if we look at the numbers, we see a real need. Workers rank their ability to earn an living and their retirement assets as their number 1 and 2 most valuable financial resources.
Of those with 401(k) or IRA plans in place, 35% have not thought about or don’t know what would happen to their contributions if they were unable to earn an income.
Add to that the fact nearly 3 in 10 workers becoming disabled before retirement, and it becomes even more clear that your clients need a solution to help them protect their ability to save for retirement.
Many individuals have not really thought about the full effect disability could have on their finances. It impacts more then just their paychecks. A disability could affect their retirement savings as well.
It’s hard enough to prepare for retirement without incurring a disability. If your client is too sick or hurt to work, what would happen to their retirement plans and dreams if they could no longer:
Contribute to a 401(k) plan?
Receive an employer match on those contributions (if available)? OR
Contribute to Social Security?
Not having these options available could dramatically impact the funds a client would have at retirement. Plus, without an income, some may even need to dip into their retirement savings to cover everyday expenses.
DI Retirement Security can help you build your business with clients or prospects who are serious about retirement and understand the importance of protecting their income and assets.
This program allows your clients to continue saving for retirement in the event of a qualifying disability and helps make it possible for them to still have the future retirement lifestyle they’ve been working toward.
This graph demonstrates how dramatic of a loss to retirement savings a client could have if they became permanently disabled at age 40 and could no longer contribute to retirement . Over 20 years (until a retirement age of 65), there is a 1.2 million dollar loss of savings.
Not many can sustain a loss this dramatic and still enjoy the retirement they were hoping for.
This slide shows how this program works. Before a disability, premiums are paid to Principal Life. Upon a disability, Principal Life pays DI Retirement Security benefits directly to an irrevocable trust. The trust then invests the benefits on the insured’s behalf into 1 of 6 different asset allocation models. The client chooses which model the trust invests in by taking a risk tolerance questionnaire. At the end of the benefit period, the trust distributes the assets.
Six asset allocation models (based on risk tolerance) are available:
Income Allocation, Income and Growth Allocation, Balanced Allocation, Growth and Income Allocation, Aggressive Growth Allocation
Models managed by Forward Funds and are made up of Class C funds
Additional investment options are also available through Banker’s Trust, such as:
Annuity
Mutual Funds
To view models, visit Banker’s Trust website.
DI Retirement Security benefits are over and above Principal Life’s current Issue and Participation Limits for disability income insurance. DI Retirement Security can be offered as either an employer-paid or employee-paid program.
Maximum benefit amount1:
$4,125/month employee-pay2 (No more than 15% of earned income can be contributed under this program, not to exceed the maximum of $3,875/month.)
$5,325/month employer-pay2 (No more than 19% of earned income can be contributed under this program, not to exceed the maximum of $5,000/month.)
The benefit amounts are not tied to the client’s retirement contributions. Work with your clients to select the benefit level that is right for them.
The minimum annual income to qualify is just $76,000.
Here are additional features of DI Retirement Security.
Issue ages: 18-60 (all occupation classes)
Elimination Periods: 180 or 365 days
Benefit Periods: To Age 65 and To Age 67
Your Occupation Periods: 2 year, 5 year, To Age 65, To Age 67
Available Riders: Future Benefit Increase, Cost of Living Adjustment, and Mental/Nervous Substance Abuse Disorder Limitation (MNSA)1
Available Discounts:2 Select Occupation – 10%, Multi-Life – 20% to 30%, Association – 10%, MNSA – 10%
If DI Retirement Security is underwritten as a stand-alone policy, with no other disability coverage inforce or applied for with Principal Life at the time of application, the underwriting decision is based on the TeleApp interview and application. No other medical underwriting requirements are requested.
If a traditional IDI policy is applied for at the time of the DI Retirement Security application, full medical and financial underwriting guidelines apply.
DI Retirement Security is not available for:
Government employees or Individuals who are over-insured based on Principal Life’s current Issue and Participation guidelines.
If there is existing individual disability insurance coverage with lifetime benefits, certain occupations are subject to a combined benefit maximum
3A-M and 4A-M occupation classes who have existing DI policies with lifetime benefits or a lifetime benefit rider are only eligible for a combined benefit of $10,000/month between the DIRS benefit and their existing lifetime benefits.
At the end of the benefit period (age 65 or 67), the client can begin receiving trust assets as retirement income.
Upon Banker’s Trust approval, a client may access trust assets in the event of certain financial hardships. These hardships could include:
Extraordinary medical or health care expenses (not covered by insurance)
Payment of post-secondary education and related education fees
Inability to make payments for a principal residence
If clients recover from the disability and stop receiving benefits, they can access accumulated trust assets after being off claim for 12 consecutive months.
Remaining assets in a client’s trust go to his or her estate if the client dies while receiving benefits.
If a client’s disability is approved:
On an annual basis, the client receives a 1099 form from Banker’s Trust Company. The 1099 form includes interest, dividends and capital gain distribution information. Your client will also receive quarterly statements of principal and income transactions within the trust.
At age 65 or 67, the trust begins distributing accumulated assets to your client per the trust agreement. Clients will not need to pay additional taxes on distributed funds that have already been taxed.
The forms listed here are needed at the time of application.
State-specific individual disability insurance application
DI Retirement Security supplemental form
Signed Trust Agreement
Financial and underwriting requirements, as requested by Underwriting
Application is based on the state in which the client will be signing the application in.
The ideal clients for DI Retirement Security sales are individuals who earn at least 76,000 a year and are committed to saving for retirement. They may already have disability insurance or may be planning to purchase an individual DI policy.
The majority of DI Retirement Security policies are sold to 3A and above occupation classes.
Here are five tips to get started prospecting.
First, Sell DI insurance and DI Retirement Security togetherUse the Alternate DI Retirement Security report from the Principal Life illustration system to showcase the need for and affordability of both products. Point out that the client only needs to undergo underwriting once, with limited additional paperwork, to obtain both coverages.
As we get close to fourth quarter and wrapping up the year, this can be an ideal time to sell DI Retirement Security. Talk to clients who recently purchased Individual DI coverage from you in the past 90 days. They can apply for DI Retirement Security without going through underwriting again.
Using DI Retirement Security with traditional disability insurance provides your clients with ongoing benefits!
It’s a combination sale. Not only are you able to help protect your client’s most important asset – their ability to earn an income – you’re helping protect their retirement dreams as well!
As shown in this chart, if clients become disabled at 45, they would:
Begin receiving benefits from the traditional DI policy
AT THE SAME TIME , the DI Retirement Security benefits would start being paid into a Trust to help them continue saving for retirement.
At the end of the benefit period (either age 65 or age 67), when traditional benefits stop paying, DI Retirement Security benefits would start – providing ongoing benefits! As indicated earlier, the benefits would continue until the funds diminish or the insured’s death. At death, any remaining funds are paid to the insured’s estate.
Using DI Retirement Security with traditional disability insurance provides your clients with ongoing benefits!
It’s a combination sale. Not only are you able to help protect your client’s most important asset – their ability to earn an income – you’re helping protect their retirement dreams as well!
As shown in this chart, if clients become disabled at 45, they would:
Begin receiving benefits from the traditional DI policy
AT THE SAME TIME , the DI Retirement Security benefits would start being paid into a Trust to help them continue saving for retirement.
At the end of the benefit period (either age 65 or age 67), when traditional benefits stop paying, DI Retirement Security benefits would start – providing ongoing benefits! As indicated earlier, the benefits would continue until the funds diminish or the insured’s death. At death, any remaining funds are paid to the insured’s estate.
Two. Talk with employer clients about providing an additional employee benefit to enhance benefit packages
If you’ve sold a company a 401(k) or other retirement plan, suggest they offer another valued benefit – DI Retirement Security – to help employees prepare for the future. By offering a retirement plan, plus DI Retirement Security, employers can provide employees with a truly comprehensive retirement solution. Plus, when three or more individuals purchase coverage, they receive Principal Life’s 20 percent Multi-Life Discount (based on unisex rates).
Three. Approach clients who are contributing the maximum to their 401(k)Contributing the maximum amount to a 401(k) is a strong signal that clients find saving for retirement very important. These clients often already believe in financial security and preparedness for the future. They are usually quick to understand the value of protecting their ability to save for retirement from a disability and make excellent prospects for DI Retirement Security.
Take advantage of Principal Life materials to provide them with a visual aid that illustrates just how much could be at risk if their retirement contributions were disrupted by a disability.
Approach clients who are at their maximum issue limits for individual DIYou may have clients that are maxed out on the amount of Individual DI insurance they are eligible for. These clients may obtain additional coverage by purchasing DI Retirement Security.
Whenever you pair Individual DI insurance and DI Retirement Security, you provide your clients with the opportunity to receive ongoing benefits throughout their working years and in retirement. I’ll go into a little more detail about this on the next slide.
During investment reviews, discuss the importance of DI Retirement Security
Given the recent market volatility, many are clients are likely paying closer attention to their investments. As you help them review their current retirement goals and plans, discuss the importance of disability protection. After the meeting, follow-up with additional sales literature on DI Retirement Security. Principal Life has e-mails, videos and brochures available to help showcase the importance of retirement savings protection.
Four. Approach clients who are at their maximum issue limits for individual DIYou may have clients that are maxed out on the amount of Individual DI insurance they are eligible for. These clients may obtain additional coverage by purchasing DI Retirement Security.
Whenever you pair Individual DI insurance and DI Retirement Security, you provide your clients with the opportunity to receive ongoing benefits throughout their working years and in retirement. I’ll go into a little more detail about this on the next slide.
Five. During investment reviews, discuss the importance of DI Retirement Security
Given the recent market volatility, many are clients are likely paying closer attention to their investments. As you help them review their current retirement goals and plans, discuss the importance of disability protection. After the meeting, follow-up with additional sales literature on DI Retirement Security. Principal Life has e-mails, videos and brochures available to help showcase the importance of retirement savings protection.
After closing a $12 million employer-sponsored 401(k) plan, the producer asked the company CEO what would happen to his 401(k) contributions if an injury or illness made it impossible for him to work. The answer was simple: his contributions would stop. After explaining DI Retirement Security could help address this gap, the CEO wanted to purchase a policy for himself and also make it available to his employees on a voluntary basis.
After the producer had the CEO’s buy-in, the producer spoke with employees about purchasing voluntary DI Retirement Security to help protect their retirement contributions in the event of a qualifying disability. With 12 employees enrolling in the DI Retirement Security solution, they were able to participate in the Guaranteed Standard Issue (GSI) sales program and received a 20% Multi-Life Discount and 10% Mental/Nervous and Substance Abuse Disorder Discount.
The producer
The case generated $7,510 in first year premium, equating to approximately $3,455 in first year commission. There is potential to earn an additional $1,502 in renewal commissions over the next five years.
You might be surprised to learn how affordable DI Retirement Security can be. These rates assumes a monthly benefit of $2,000. The Multi-Life discount makes the coverage even more affordable.
We have a variety of materials to help you learn more about DI Retirement Security and tools to help you approach clients. Take advantage of our producer kit as a starting point for selling DI Retirement Security. It includes information for you and materials for clients.
We also have a series of consumer-approach emails and educational video on Retirement Savings Protection. You can find these tools and many more on Principal eFP.
Principal Life’s sales programs, like DI Retirement Security, along with our service, support and competitive products, give you a strong foundation for building IDI sales success!
