Understanding Interest Crediting

Transcription

1 Understanding Interest Crediting ON INDEXED UNIVERSAL LIFE INSURANCE (IUL) Products issued by National Life Insurance Company Life Insurance Company of the Southwest This material must be accompanied by an Indexed Universal Life Insurance Buyer s Guide, 64055, 63922, 64331, 64332, or 63573, which contains important information on how interest is credited to the contract and other benefits. National Life Group is a trade name of National Life Insurance Company, Montpelier, VT, Life Insurance Company of the Southwest (LSW), Addison, TX and their affiliates. Each company of National Life Group is solely responsible for its own financial condition and contractual obligations. LSW is not an authorized insurer in New York and does not conduct insurance business in New York. Centralized Mailing Address: One National Life Drive, Montpelier, VT TC99855(0318)1 Cat No 64367(0318) TC99855(0318)1 1

2 IUL Offers Death Benefit and Potential Cash Value Accumulation Life insurance products create an immediate reservoir of funds that, at death, can be used to help protect the financial security of your family or help maintain your business. In addition to the death benefit, indexed universal life (IUL) insurance also offers the potential to build cash value on a tax-deferred basis, which may be accessed income taxfree during your lifetime through withdrawals and loans. 1 Cash value accumulation is dependent on the interest crediting rate paid by the insurance company on the premiums in excess of the insurance cost. Our IUL products offer a Fixed interest crediting strategy, and Indexed strategies based on the changes in a major market index through the, or Point-to- strategy. Depending on the strategy you elect, you can earn interest crediting up to a specific Cap (if applicable) or Participation Rate. We will never credit less than 0%, so your policy will not lose value due to a decline in the index. How Interest Crediting Works Upside Potential Downside Protection Regardless of the strategy, each index segment is measured using a 1-year term, during which changes to the major market index are tracked. The performance of the market is reflected differently by each strategy depending on how it is measured. Returns can be as high as the Cap (for strategies with a Cap) and Participation Rate will allow, and as low as the 0% interest crediting floor. Strategies Our strategies are measured using two methods: compares the index value at the beginning of the term to the index value at the end of the term. If the index value is higher, interest will be credited to your policy to help accumulate cash value. If the value is lower, no interest will be credited. compares the index value at the beginning of the term to the average of all the daily index values during the term. If the average is higher than the beginning value, interest will be credited. If the average is lower, no interest will be credited. Rates Explained Participation Rate; is the maximum percentage of the annual increase in the index that will be credited. For Example: The one year increase in the Index is 10%. If the Participation Rate is 90%, then 9% would be used to calculate the interest credit [10% x 90% = 9%]. Cap; is the maximum that strategy can be credited. For Example: The Participation Rate is 100% and there is a cap of 12%. If the one year increase in the Index is 14%, the earnings will be capped at 12%. Participation Rate and Caps are subject to change annually for a given indexed segment. 1 Policy loans and withdrawals reduce the policy s cash value and death benefit and may result in a taxable event. Except in the case of a Modified Endowment Contract (MEC), withdrawals up to the basis paid into the contract and loans thereafter will not create an immediate taxable event, but substantial tax ramifications could result upon contract lapse or surrender. For MECs, policy loans and withdrawals are considered withdrawals and treated as taxable income to the extent there is gain in the policy and may also be subject to a 10% penalty for early withdrawals. Surrender charges may reduce the policy s cash value in early years. TC99855(0318)1 2

3 Annual Interest Crediting Rates % 0.000% 0.000% 0.000% % 0.000% % 3.519% 3.042% 3.447% % 1.914% % % % % % % % 8.538% 8.414% 6.654% 7.233% 6.959% % 7.189% 7.189% 6.297% 3.471% 6.276% % % % % 8.273% 9.569% % % % % 9.351% % % 6.764% 7.139% 4.501% 4.151% 5.248% % 3.858% 4.193% 2.700% 0.008% 1.611% % % % % 8.314% 9.705% Annual Interest % 7.893% 7.503% 6.803% 3.079% 6.482% Upside Potential Based on the positive growth of the major market index. Downside Protection Guaranteed 0% interest crediting floor in the event of a decline in the index. Cap and Participation Rates can vary by product or strategy. Past performance is not indicative of future index performance and historical interest rates should not be construed as interest rates to be paid in the future on any product offered by the insurance companies of National Life Group. There are administrative, cost of insurance and other charges associated with these IUL insurance policies. The rates shown in this exhibit do not reflect these charges. Historical interest rates are based on LSW SecurePlus Paragon indexed universal life insurance, form series 8387/8387ID(0606), 8733/8733ID(0709), underwritten by Life Insurance Company of the Southwest. LSW Secure Plus Paragon is no longer available for sale. New sales are only available with policies shown on the following pages. TC99855(0318)1 3

4 Numbers shown represent the past performance of our strategies, which are based on the change in the S&P 500 index, excluding dividends, without direct market participation and with guaranteed protection against negative returns. One Year Snapshot Sweep Date Start Credit Date End 1/21/13 1/21/ % % % % % % 2/21/13 2/21/ % % % % % % 3/21/13 3/21/ % % % % % % 4/21/13 4/21/ % % % % % % 5/21/13 5/21/ % % % 8.261% 5.466% 6.286% 6/21/13 6/21/ % % % % % % 7/21/13 7/21/ % % % % 7.049% 8.812% 8/21/13 8/21/ % % % % % % 9/21/13 9/21/ % % % % 8.948% % 10/21/13 10/21/ % % % 7.325% 7.945% 9.931% 11/21/13 11/21/ % % % 9.687% 6.114% 7.642% 12/21/13 12/21/ % % % 9.020% 5.868% 7.335% 2 Policy values may decline if premiums paid out-of-pocket are insufficient to cover insurance costs and other charges. Guarantees are dependent upon the claims-paying ability of the issuing company. TC99855(0318)1 4

5 Sweep Date Start Credit Date End 5/21/07 5/21/ % 0.000% 0.000% 0.000% % 0.000% 6/21/07 6/21/ % 0.000% 0.000% 0.000% % 0.000% 7/21/07 7/21/ % 0.000% 0.000% 0.000% % 0.000% 8/21/07 8/21/ % 0.000% 0.000% 0.000% % 0.000% 9/21/07 9/21/ % 0.000% 0.000% 0.000% % 0.000% 10/21/07 10/21/ % 0.000% 0.000% 0.000% % 0.000% 11/21/07 11/21/ % 0.000% 0.000% 0.000% % 0.000% 12/21/07 12/21/ % 0.000% 0.000% 0.000% % 0.000% 1/21/08 1/21/ % 0.000% 0.000% 0.000% % 0.000% 2/21/08 2/21/ % 0.000% 0.000% 0.000% % 0.000% 3/21/08 3/21/ % 0.000% 0.000% 0.000% % 0.000% 4/21/08 4/21/ % 0.000% 0.000% 0.000% % 0.000% 5/21/08 5/21/ % 0.000% 0.000% 0.000% % 0.000% 6/21/08 6/21/ % 0.000% 0.000% 0.000% % 0.000% 7/21/08 7/21/ % 0.000% 0.000% 0.000% % 0.000% 8/21/08 8/21/ % 0.000% 0.000% 0.000% % 0.000% 9/21/08 9/21/ % 0.000% 0.000% 0.000% % 0.000% 10/21/08 10/21/ % % % 8.599% % 0.000% 11/21/08 11/21/ % % % % % % 12/21/08 12/21/ % % % % 6.008% 6.008% 1/21/09 1/21/ % % % % % % 2/21/09 2/21/ % % % % % % 3/21/09 3/21/ % % % % % % 4/21/09 4/21/ % % % % % % 5/21/09 5/21/ % % % % % % 6/21/09 6/21/ % % % % % % 7/21/09 7/21/ % % % 6.024% % % 8/21/09 8/21/ % 4.440% 6.216% 2.220% 7.549% 6.417% 9/21/09 9/21/ % 7.056% 9.878% 3.528% 4.093% 3.479% 10/21/09 10/21/ % 9.142% % 4.571% 3.228% 2.744% 11/21/09 11/21/ % 9.928% % 4.964% 3.220% 2.737% 12/21/09 12/21/ % % % 6.308% 1.989% 1.691% 1/21/10 1/21/ % % % 7.473% 2.798% 2.658% 2/21/10 2/21/ % % % % 5.097% 4.842% 3/21/10 3/21/ % % % 7.163% 1.667% 1.584% 4/21/10 4/21/ % % % 6.540% % 0.000% 5/21/10 5/21/ % % % % % % 6/21/10 6/21/ % % % 9.827% 9.852% 9.360% 7/21/10 7/21/ % % % % % % 8/21/10 8/21/ % 4.837% 6.772% 2.902% % % 9/21/10 9/21/ % 2.367% 3.314% 1.420% % % 10/21/10 10/21/ % 4.913% 6.879% 2.948% 7.009% 6.659% 11/21/10 11/21/ % 0.000% 0.000% 0.000% 5.608% 5.327% 12/21/10 12/21/ % 0.000% 0.000% 0.000% 1.007% 0.957% Cap and Participation Rates can vary by product or strategy. Past performance is not indicative of future index performance and historical interest rates should not be construed as interest rates to be paid in the future on any product offered by the insurance companies of National Life Group. There are administrative, cost of insurance and other charges associated with these IUL insurance policies. The rates shown in this exhibit do not reflect these charges. Historical interest rates are based on LSW SecurePlus Paragon indexed universal life insurance, form series 8387/8387ID(0606), 8733/8733ID(0709), underwritten by Life Insurance Company of the Southwest. LSW Secure Plus Paragon is no longer available for sale. New sales are only available with policies shown on the following pages. TC99855(0318)1 5

6 Numbers shown represent the past performance of our strategies, which are based on the change in the S&P 500 index, excluding dividends, without direct market participation and with guaranteed protection against negative returns. Sweep Date Start Credit Date End 1/21/11 1/21/ % 2.496% 3.494% 1.497% % 0.000% 2/21/11 2/21/ % 1.430% 2.001% 0.886% % 0.000% 3/21/11 3/21/ % 8.049% % 4.991% % 0.000% 4/21/11 4/21/ % 3.077% 4.308% 1.908% % 0.000% 5/21/11 5/21/ % 0.000% 0.000% 0.000% % 0.000% 6/21/11 6/21/ % 2.315% 3.241% 1.505% % 0.000% 7/21/11 7/21/ % 1.403% 1.965% 0.912% % 0.000% 8/21/11 8/21/ % % % % % % 9/21/11 9/21/ % % % % % % 10/21/11 10/21/ % % % % 8.771% % 11/21/11 11/21/ % % % % % % 12/21/11 12/21/ % % % 9.743% % % 1/21/12 1/21/ % % % 8.430% 5.586% 6.703% 2/21/12 2/21/ % % % 6.690% 3.026% 3.631% 3/21/12 3/21/ % % % 6.621% 0.959% 1.150% 4/21/12 4/21/ % % % 8.333% 3.752% 4.502% 5/21/12 5/21/ % % % % % % 6/21/12 6/21/ % % % % % % 7/21/12 7/21/ % % % % % % 8/21/12 8/21/ % % % % 8.238% 9.474% 9/21/12 9/21/ % % % % 6.173% 7.100% 10/21/12 10/21/ % % % % 9.618% % 11/21/12 11/21/ % % % % % % 12/21/12 12/21/ % % % % % % 1/21/13 1/21/ % % % % % % 2/21/13 2/21/ % % % % % % 3/21/13 3/21/ % % % % % % 4/21/13 4/21/ % % % % % % 5/21/13 5/21/ % % % 8.261% 5.466% 6.286% 6/21/13 6/21/ % % % % % % 7/21/13 7/21/ % % % % 7.049% 8.812% 8/21/13 8/21/ % % % % % % 9/21/13 9/21/ % % % % 8.948% % 10/21/13 10/21/ % % % 7.325% 7.945% 9.931% 11/21/13 11/21/ % % % 9.687% 6.114% 7.642% 12/21/13 12/21/ % % % 9.020% 5.868% 7.335% 1/21/14 1/21/ % % % 6.639% 5.280% 6.600% 2/21/14 2/21/ % % % 9.701% 6.908% 8.635% 3/21/14 3/21/ % % % 8.413% 6.146% 7.683% 4/21/14 4/21/ % % % 7.827% 6.819% 8.523% 5/21/14 5/21/ % % % 8.359% 6.968% 8.710% 6/21/14 6/21/ % 7.495% % 4.872% 3.602% 4.503% 7/21/14 7/21/ % 7.376% % 4.795% 3.553% 4.442% 8/21/14 8/21/ % 0.000% 0.000% 0.000% 3.172% 3.964% 9/21/14 9/21/ % 0.000% 0.000% 0.000% 2.065% 2.581% 10/21/14 10/21/ % 4.000% 5.601% 2.600% 5.864% 7.330% 11/21/14 11/21/ % 1.244% 1.742% 0.809% % 0.000% 12/21/14 12/21/ % 0.000% 0.000% 0.000% % 0.000% TC99855(0318)1 6

7 Sweep Date Start Credit Date End 1/21/15 1/21/ % 0.000% 0.000% 0.000% 1.172% 1.465% 2/21/15 2/21/ % 0.000% 0.000% 0.000% % 0.000% 3/21/15 3/21/ % 0.000% 0.000% 0.000% % 0.000% 4/21/15 4/21/ % 0.000% 0.000% 0.000% % 0.000% 5/21/15 5/21/ % 0.000% 0.000% 0.000% % 0.000% 6/21/15 6/21/ % 0.000% 0.000% 0.000% % 0.000% 7/21/15 7/21/ % 2.169% 3.036% 1.518% 4.211% 0.000% 8/21/15 8/21/ % % % 7.564% 3.359% 4.367% 9/21/15 9/21/ % 9.972% % 6.981% 4.461% 5.800% 10/21/15 10/21/ % 6.054% 8.475% 4.238% 2.530% 3.289% 11/21/15 11/21/ % 5.218% 7.305% 3.653% % 0.000% 12/21/15 12/21/ % % % 8.452% 3.398% 4.417% 1/21/16 1/21/ % % % % % % 2/21/16 2/21/ % % % % % % 3/21/16 3/21/ % % % 9.265% 6.100% 7.321% 4/21/16 4/21/ % % % 7.994% 5.276% 6.331% 5/21/16 5/21/ % % % 9.630% 8.563% 9.848% 6/21/16 6/21/ % % % 9.959% 8.040% 9.246% 7/21/16 7/21/ % % % 8.518% 5.491% 6.315% 8/21/16 8/21/ % % % 6.717% 5.686% 6.539% 9/21/16 9/21/ % % % 9.361% 7.954% 9.147% 10/21/16 10/21/ % % 9.750% % % % 11/21/16 11/21/ % % 9.750% % 9.422% % 12/21/16 12/21/ % % 9.750% % 7.711% 8.482% s 7.507% 8.165% 7.761% 7.037% 3.540% 6.705% TC99855(0318)1 7

8 Standard and Poor s, S&P, Standard and Poor s 500, and 500 are trademarks of Standard & Poor s and have been licensed for use by National Life Insurance Company and Life Insurance Company of the Southwest. The product is not sponsored, endorsed, sold or promoted by S&P and S&P makes no representation regarding the advisability of investing in this Product. The S&P Composite Index of 500 stocks (S&P 500 ) is a group of unmanaged securities widely regarded by investors to be representative of large-company stocks in general. An investment cannot be made directly into an index. Certain features of this contract may be indexed to an MSCI Index. This contract is not sponsored, endorsed, sold or promoted by MSCI, Inc. and MSCI bears no liability with respect to any such contracts. A more detailed description of the limited relationship MSCI has with National Life Insurance Company and Life Insurance Company of the Southwest accompanies the contract. The MSCI Emerging Markets Index is a free floatadjusted market capitalization index that is designed to measure equity market performance of emerging markets. The MSCI Emerging Markets Index consists of the following 21 emerging market country indices: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, and Turkey. An investment cannot be made directly into an index. PeakLife NL Indexed Universal Life Insurance, form series 20413/ICC (0616), NL FlexLife II Indexed Universal Life Insurance, form series 20413/ICC (0616), NL LifeCycle Solution Survivorship Indexed Universal Life, form series 8918/ICC (0511), 8919/ICC (0511) and Ultra Select 8385/8385ID(0606), 8386/8386ID(0606) are underwritten by National Life Insurance Company, Montpelier Vermont. PeakLife Indexed Universal Life Insurance, form series 20417/ICC (0616), LSW FlexLife II Indexed Universal Life Insurance, form series 20417/ ICC (0616), LSW LifeCycle Solution Survivorship Indexed Universal Life, form series 8935/ICC (0511), 8936/ICC (0511), LSW SecurePlus Advantage 79, form series 8593/8593ID(0708), 8594/8594ID(0708) and LSW Provider, form series 8212/8212ID(0305), 8734/8734ID(0709) are underwritten by Life Insurance Company of the Southwest, Addison, TX. LSW products and riders are not available in New York. The Participation Rate is the maximum percentage of the annual increase in the Index that will be credited. The Cap is the maximum earnings percent that will be credited. Participation Rates and Caps are subject to change annually for a given indexed segment. The minimum Guaranteed Participation and Cap Rates for all products except LSW SecurePlus Provider are: Strategies 1 and 5: PR = 100%, Cap = 3.1%; Strategy 2: PR = 110%, Cap = 3.0%; Strategy 3: PR = 25%, ; Strategy 4: PR = 30%,. The minimum Guaranteed Participation and Cap Rates for LSW SecurePlus Provider are: Strategy 1: PR = 100%, Cap = 3.0%; Strategy 2: PR = 30%, ; Strategy 3: PR = 110%, Cap = 3.0%; Strategy 4: PR = 100%, Cap = 3.1%. In the event the market declines, the policy has a built-in 0% interest crediting floor. The Floor is the minimum earnings percent that will be credited. The minimum annual rate of interest credited to funds in the fixed-interest strategy is 2.5% (2.0% for LSW SecurePlus Provider) and the minimum interest credited in the indexed strategies is 2.5% (2.0% for LSW SecurePlus Provider) upon death or full surrender. Monthly deductions from the account value include a monthly policy fee, monthly expense charge, cost of insurance charge, and applicable rider charges. In addition there is a surrender charge if the policy is lapsed or surrendered in the first 10 years (5 years for SecurePlus Advantage 79) from issue or following an increase. Surrender charges vary based on gender, rate classification, issue age, and policy year. Excess Interest Formula: Index earnings for each indexed segment are calculated at the end of the crediting period as follows: index growth is multiplied by the segment s participation rate, adjusted so that this rate is no greater than the segment s index earnings cap, and no less than 0%; multiplied by the value in the indexed segment value. Failure to maintain the policy to maturity will result in no participation in the equity index. Index earnings are not direct participation in any stock or equity investment. There are two death benefit options from which to choose: Option A: Level Death Benefit = Face Amount; Option B: Increasing Death Benefit = Face Amount + Account Value. Upon death of the insured, a death benefit equivalent to the death benefit at the time of the insured s death less any policy debt and less other amounts owed to the insurance company will be paid to the beneficiary. The policy will then be terminated and all rights including access to the cash surrender value shall cease. National Life Group is a trade name of National Life Insurance Company, Montpelier, VT, Life Insurance Company of the Southwest (LSW), Addison, TX and their affiliates. Each company of National Life Group is solely responsible for its own financial condition and contractual obligations. LSW is not an authorized insurer in New York and does not conduct insurance business in New York. Centralized Mailing Address: One National Life Drive, Montpelier, VT No bank or credit union guarantee Not a deposit Not FDIC/NCUA insured May lose value Not insured by any federal or state government agency Guarantees are dependent upon the claims-paying ability of the issuing company. TC99855(0318)1 8