Product Reference Guide

Transcription

1 FOR LIFE Product Reference Guide Lincoln WealthPreserve SM Survivorship Indexed UL This information was compiled by Product & Distribution Support. For questions contact Annie Raasch You re In Charge SM. Lincoln Financial Group is the marketing name for Lincoln National Corporation and its affiliates. Not For Use With The Public. LCN: Last Update 07/14

2 Lincoln WealthPreserve SM Survivorship Indexed UL Product Reference Guide Table of Contents Product Objective p.3 Key Terms Indexed Account o Index, Segment, Floor, Cap, Participation Rate, Indexed Interest Crediting p. 3 Fixed Account p. 4 Dollar Cost Averaging (DCA) Account p. 4 Holding Account p. 4 Indexed Accounts p. 4-6 o 1-Year Point-to-Point (Capped), 1-Year Point-to-Point (Uncapped), 1-Year Point-to-Point (High Participation) Indexed Account Value p. 6 Key Features Death Benefit Options p. 7 Index Bonus p. 7 Two Loan Options p. 7 Participating Loans p. 8 Fixed Loans p. 9 o Converting from One Loan Option to the Other p. 9 o Changing from a Participating Loan to a Fixed Loan p. 9 o Changing from a Fixed Loan to a Participating Loan p Year No Lapse Guarantee p. 10 Available Riders/Endorsements Accelerated Benefits Rider (with first death benefit) p. 10 Accelerated Benefits Rider (with no first death benefit) p. 11 Estate Protection Rider p. 12 Extended No-Lapse Minimum Premium Rider p. 12 Overloan Protection Endorsement p. 13 Product Summary p Premiums Target Premiums p. 19 Planned Periodic Premium p Year No Lapse Guarantee Minimum Premium p. 19 Premium Deposit Fund p of 26

3 Table of Contents (continued) Charges, Fees and Deductions Premium Load p. 20 Monthly Deduction Method p. 20 Charges and Fees p Transfers Initial Allocation Date and Transfers p. 21 Agent Compensation p General Information 7702 / 7702A Life Insurance Tax Qualification Tests p. 22 Recapture Ceiling p. 23 Modified Endowment Contracts (MEC) 7702A p. 24 General Glossary of Terms p of 26

4 Product Objective Lincoln WealthPreserve SM Survivorship Indexed UL (SIUL) is a flexible premium adjustable survivorship universal life product with Index Options. It provides insurance on two lives and pays a death benefit upon the second death. It was designed for clients looking for cost-efficient life insurance protection with cash value flexibility to meet changing needs. There are three indexed accounts available in addition to the Fixed Account. The Fixed Account corresponds to the account value on a regular universal life policy. Lincoln WealthPreserve SM Survivorship Indexed UL offers the opportunity to have the policy accumulation value allocated between Indexed Accounts and a Fixed Account. The Indexed Accounts are eligible for Indexed Interest. Indexed Interest is non-guaranteed interest based on fluctuation of an outside index that will be credited to the Indexed Accounts at the end of each segment year. The interest rate is guaranteed to never go below 1.00%. Key Terms: Indexed Account: Derives a crediting rate based on the index, timeframe and interest rate rules: Index: This product uses the Standard and Poor s 500 Composite Stock Price Index* (S&P 500 Index) to determine the indexed interest crediting rate for the Indexed Accounts. Any day the S&P 500 Index value is not published (e.g. a weekend or holiday), the next published closing index value will be used instead. The Index does not reflect dividends paid by the stocks underlying the Index. *The S&P 500 Index is a product of S&P Dow Jones Indices LLC ( SPDJI ), and has been licensed for use by The Lincoln National Life Insurance Company. Standard & Poor s, S&P and S&P 500 are registered trademarks of Standard & Poor s Financial Services LLC ( S&P ); Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC ( Dow Jones ); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by The Lincoln National Life Insurance Company. The Lincoln National Life Insurance Company s Product is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product nor do they have any liability for any errors, omissions, or interruptions of the S&P Index. Segment: Tracks a separate performance timeframe which matures at the end of a 12- month term. Segments always begin and end on the 15 th of the month. Each time a transfer is made from the Holding Account to an Indexed Account, a new Segment is created. Floor: The guaranteed minimum interest rate. The interest rate is guaranteed to never go below 1.00% for all indexed accounts. Cap: is a limit on the index growth used in calculating the indexed interest rate credited for the 1-Year Point-to-Point - Capped account and the 1-Year Point-to-Point - High Participation account. Participation Rate: Determines the percentage of the Index performance used in the interest rate calculation. The raw growth rate is multiplied by the participation rate before the caps are applied. 3 of 26

5 Indexed Interest Crediting: Interest is only credited on value held in the Indexed Account Segments for a full 12 month period. If money from segments is removed because of monthly deductions or withdrawals, that money will receive no interest crediting. Fixed Account: Fixed Account value earns interest on a daily basis, at a rate guaranteed to be no less than 1.00% annually. The current rate is not guaranteed. Dollar Cost Averaging (DCA) Account: Premiums may be directed to an optional DCA Account from which a portion is then systematically transferred on a monthly basis. On each Monthly Allocation Date, an amount equal to one twelfth (1/12) of the premiums allocated to the DCA Account within the last 12-month period plus any interest credited since the last Monthly Allocation Date is transferred to the Holding Account for monthly allocation processing. The DCA Account is only available with annual and semi-annual payment modes and requires a minimum premium amount of $1000. The DCA Account earns interest on a daily basis, at a rate guaranteed to be no less than 1.00% annually.. Holding Account: The Holding Account temporarily holds funds intended for account allocations until the next Monthly Allocation Date. Holding Account Value includes premiums (including any portions from the DCA Account being systematically transferred) and funds available for transfer such as maturing index account segments. The Holding Account earns interest on a daily basis. Indexed Accounts: The policyholder determines the allocation of the Holding Account funds being transferred to the Indexed Account. The Lincoln WealthPreserve SM Survivorship Indexed UL product offers the following three Indexed Accounts: 1-Year Point-to-Point (Capped): This account provides interest linked to the full Point-to- Point percentage change in the S&P 500 Index value for the segment year. At the end of the one-year segment term, the beginning S&P 500 Index value is compared to the ending value to determine the percentage change. If the percentage change is positive, the segment will earn the percentage change up to the cap. If the percentage change is negative or less than 1.00%, the segment is credited the 1.00% floor. The minimum guaranteed cap is 3.00%. The current cap is 11.00%. The current and minimum guaranteed participation rate is 100%. Example 1: Exceeds cap Assumptions: Current Cap = 11% Beginning Index Value = 1000 Ending Index Value = 1300 Segment Value = $ Calculate percentage change = = 30% 2. Apply cap 30% reduced to 11% 3. Calculate interest credited $900 x 11% = $99 Example 2: Less than cap Assumptions: Current Cap = 11% Beginning Index Value = 1000 Ending Index Value = 1100 Segment Value = $ Calculate percentage change = = 10% 2. Cap does not apply 3. Calculate interest credited $900 x 10% = $90 4 of 26

6 1-Year Point to Point (Uncapped): This account provides interest linked to a portion of the Point-to-Point percentage increase in the S&P 500 Index value based on a participation percentage declared at the beginning of the segment year. At the end of the one-year segment term, the beginning S&P 500 Index value is compared to the ending value to determine the percentage change. If the percentage change is positive, the segment will earn the percentage change multiplied by the participation rate. If the percentage change is negative or less than 1.00%, the segment is credited the 1.00% floor, multiplied by the participation rate. The current participation rate is 60.00% and the minimum guaranteed participation rate is 15.00%. There is no cap on the percentage increase. Example: Assumptions: Beginning Index Value = 1000 Ending Index Value = 1300 Segment Value = $900 Current participation rate = 60.00% 1. Calculate percentage change = = 30% 2. Apply participation rate 30% x 60.00% = 18% 4. Calculate interest credited $900 x 18% = $162 5 of 26

7 1-Year Point to Point (High Participation): This account provides interest linked to the Point-to-Point percentage increase in the S&P 500 Index value increased by a participation percentage up to an indexed growth cap declared at the beginning of the segment year. At the end of the one-year segment term, the beginning S&P 500 Index value is compared to the ending value to determine the percentage change. If the percentage change is positive, the segment will earn the percentage change multiplied by a participation percentage, up to the growth cap. If the percentage change is negative or less than 1.00%, the segment is credited the 1.00% floor. The current cap is 9.5%. The current participation rate is % and the minimum guaranteed participation rate is %. The minimum guaranteed cap is 2.50%. Example 1: Less than cap Assumptions: Current Cap = 9.5% Beginning Index Value = 1000 Ending Index Value = 1050 Segment Value = $900 Current Participation rate = 140% 1. Calculate percentage change = = 5% 2. Multiply the % change by the participation rate 5% x 140% = 7% 3. Cap does not apply 4. Calculate interest credited $900 x 7% = $63 Example 2: Exceeds cap Assumptions: Current Cap = 9.5% Beginning Index Value = 1000 Ending Index Value = 1300 Segment Value = $900 Current Participation rate = 140% 1. Calculate percentage change = = 30% 2. Multiply the % change by the participation rate 30% x 140% = 42% 1. Apply cap 42% reduced to 9.5% 4. Calculate interest credited $900 x 9.5% = $85.50 Indexed Account Value: The sum of all Indexed Account Segments. 6 of 26

8 Key Features Death Benefit Options Lincoln WealthPreserve SM Survivorship Indexed UL offers two death benefit options level and increasing by cash value. Option I: Level - The death benefit will be the greater of: Specified Amount or Account Value x IRS Corridor Benefit Option II: Increasing by cash value - The death benefit will be the greater of: Specified Amount plus the Account Value (in NY + Prorated interest on open Indexed Segments) Specified Amount x 115% Account Value x IRS Corridor Benefit The death benefit option may be changed from Option II to Option I after the first policy year. The Specified Amount will be increased or decreased appropriately to maintain the same death benefit before and after the change. Increases due to a change in death benefit option will not incur a new per policy expense charge or surrender charge and commissions will not be paid on the increase. There will not be any surrender charge on a decrease in Specified Amount due to an option change. Index Bonus One of the considerations for allocating premiums into the Fixed Account is to provide sufficient value to cover Monthly Deductions. This would avoid taking deductions from an Indexed Segment which may result in the loss of Indexed Interest that might otherwise have been payable. However, excess Fixed Account value can reduce the potential for Indexed Account growth. The guaranteed Index Bonus is designed to eliminate the need to allocate premiums to the Fixed Account for the purpose of covering Monthly Deductions. Each month an Index Bonus will be credited if the Monthly Deduction reduces the value of any Indexed Segment and the Policy Value is greater than zero. The amount credited will equal the total reduced value of all Indexed Segments multiplied by a factor that approximates the interest that would have been credited if that value had been in the Fixed Account. The Index Bonus will be credited to the most recently opened Index Segment with a value greater than zero. Two Loan Options Participating Loans remain a key to the optimal sales design story (max funded, minimum non- MEC death benefit, DBO 2-1) as participating loans allow maximum distributions. The addition of a Fixed Loan option provides an option if a client wants to lock-in predictability. 7 of 26

9 Participating Loans Policy loans on the Lincoln WealthPreserve SM Survivorship Indexed UL work the same as on Lincoln LifeReserve Indexed UL Accumulator (2014). When a loan is taken, the money backing the loan does not move anywhere; it remains in the Fixed Account or Indexed Account where it currently resides. Instead, a loan balance is set up against the policy. The loan balance will accumulate at a guaranteed loan charge rate of 6% in years 1-10, 5.5% in years 11 to the younger insured s Attained Age 121 and 3% thereafter. The loan amounts with accrued interest make up policy debt, which reduces the available cash surrender value and any proceeds paid upon death. Because the money backing the loan does not move to a Loan Account, there is no defined loan crediting rate, no loan spread and no wash loans. Instead, the interest credited on loaned money is the same as the interest credited to the Account Value. This means that the interest credited on loaned money could be higher or lower than the loan charged rate, depending on the client s allocations to the Fixed and Indexed Accounts and the interest credited in those accounts, and guaranteed not to be less than 1% credit (4.5% spread in years 11+). Example: Let s assume the starting Account Value is $10,000. For this example we are going to assume there are no monthly policy deductions, so we can focus on the effect of loans. Assume that a $2,000 loan is taken with a charged rate of 5.50% and that the Account Value over the next year is credited 7.00% interest, representing a blending of Fixed Account and Indexed Account interest. The chart below shows the impact of the loan and interest credits over the year. For this example, the relative loan balance decreased over the year because the Account Value was credited more than the loan charged rate. Account Value Loan Balance Percent of Account Value Impaired by Loan Beginning of Year $10,000 $2, % Interest Credit/Charged $700 $110 End of Year $10,700 $2, % In a second example, assume the same starting account value and loan balance, but instead assume that the interest credited over the year is 1.5%, again representing a blending of Fixed Account and Indexed Account interest. The chart below shows the impact of the loan and interest credits over the year. For this example, the relative loan balance increased over the year because the Account Value was credited less than the loan charged rate. Account Value Loan Balance Percent of Account Value Impaired by Loan Beginning of Year $10,000 $2, % Interest Credit/Charged $150 $110 End of Year $10,150 $2, % These basic examples demonstrate that the loan method introduces the same type of volatility into loan balances as exists in the policy interest crediting methods through the Indexed Accounts. The amount of volatility the client is exposed to depends on their chosen allocation percentages to the Fixed or Indexed Accounts and how the Indexed Accounts perform over time. The Overloan Protection Endorsement is available to help mitigate against policy lapse, see the Rider/Endorsement Section for details. 8 of 26

10 Fixed Loans Lincoln WealthPreserve SM Survivorship Indexed UL also offers a traditional fixed loan option. Here s how it works: For a more predicable approach, the fixed loan offers a guaranteed interest charge and guaranteed credit so the policy owner knows exactly where they stand. Debt is transferred from the Fixed Account and, if necessary, in successive order from the Holding Account, DCA Account, and from the most recently opened Indexed Account(s) to the Collateral Account. The Fixed Loan interest charged is guaranteed at 3.00% through policy year 10 and 2% thereafter. The interest rate credited to the Collateral Account is guaranteed at 2% in all years, creating a zero net cost in years 11+. When determining which loan option is most appropriate, consider the long-term return that is desired. The example below highlights three scenarios that compare the net cost and income potential. This assumes that all loans take place after year 10. Participating Loan Return exceeds charged rate Return equals charged rate Return at guaranteed floor Guaranteed loan interest charged (A) Policy value return (B) Net cost of loan (A-B) Long term income potential 5.5% 8% -2.5% Better than fixed loan 5.5% 5.5% 0% Same as fixed loan 5.5% 1% 4.5% Worse than fixed loan Converting from One Loan Option to the Other A conversion from one loan option to the other may be done only once in a twelve month period and the entire loan must be converted. Both loan options may not exist on a single policy simultaneously. Since the policy owner is able to switch between loan options, they may choose to consider a combination approach where they take advantage of the growth potential of a participating loan during the distribution phase of the policy and then convert to a fixed loan to provide a more stable loan balance in the later years. Changing from a Participating Loan to a Fixed Loan On the day a loan is converted from a Participating Loan to a Fixed Loan, an amount equal to the loan principal will be transferred from the Fixed Account, and if necessary, in successive order from the Holding Account, DCA Account, and from the most recently opened Segment of the Indexed Account(s), to the Collateral Account. If multiple Segments were opened on the same Allocation Date, a prorated portion will be taken from each Segment. No Index Bonus is credited on funds transferred from the Indexed Account(s). 9 of 26

11 Changing from a Fixed Loan to a Participating Loan When a Fixed Loan is converted to a Participating Loan, the Collateral Account Value, including any Collateral Account Interest accrued until the day of the conversion, will be transferred to the Holding Account, and will be included in the next scheduled allocation. 10 Year No Lapse Guarantee There is a 10-year minimum premium period during which the policy will remain in force even if the cash surrender value is insufficient to cover the monthly deduction, as long as the cumulative premium requirement is met. If, during the first ten years, the surrender value is not sufficient to cover the monthly deduction, the policy will continue in force as long as the cumulative minimum premium requirement has been met, otherwise the policy will enter the Grace Period. The cumulative monthly minimum premium (MMP) requirement means that the cumulative premiums paid must be at least as great as the cumulative MMP due. The cumulative premium paid is the sum of all premiums paid since issue less any debt and withdrawals. The cumulative MMP due is equal to the MMP multiplied by the number of completed policy months. Available Riders/Endorsements Accelerated Benefits Rider (With No First Death Benefit): This rider pays a benefit upon the occurrence to the survivor of any one or more of two qualifying events: 1. Being permanently confined to a nursing home; or 2. Being diagnosed as terminally ill (life expectancy of 6 months or less). Issue Ages: Maximum Cumulative Benefit Amount: Same as for base policy. 50% for terminal illness 40% for nursing home confinement Maximum cumulative accelerated benefit is $250,000 Please note that there is no ABR benefit payable prior to or at the first death. Once the first death occurs, the surviving insured is then eligible for the rider benefits. This rider is available after issue. It is available on a rated basis without restrictions. There is no charge for this rider but there is a $300 charge at the time of claim which is deducted from the benefit payable. On a pro-rata basis, any accelerated benefit paid will repay a portion of outstanding policy loans and will proportionately restrict access to additional policy loans. The benefit creates an interest-bearing lien on the policy, accumulating interest at the policy loan rate for amounts up to the loan value restricted, and the variable policy loan rate for excess amounts. For any benefit the policy must have sufficient unloaned value to avoid termination within the 5 years following qualification for acceleration. The two versions of the Accelerated Benefits Rider cannot be elected on the same policy. 10 of 26

12 Accelerated Benefits Rider (With First Death Benefit): The rider pays a benefit at the first death of up to 5% of the base policy death benefit, with a maximum of $25,000. After the first death, the survivor is then eligible for the other rider benefits if any one or more of three qualifying events including: 1. The occurrence of a specified critical illness or condition; 2. Being permanently confined to a nursing home; or 3. Being diagnosed as terminally ill (life expectancy of 6 months or less). This benefit will be treated as a lien against the policy and as such, will accrue interest. In order to exercise the benefit, there must be sufficient surrender value to cover costs for five years. Issue Ages: Maximum Cumulatiave Benefit Amount: Same as for base policy 5% for critical illness or $25,000, whichever is less 40% for nursing home confinement 50% for terminal illness The maximum cumulative accelerated benefit is $250,000. This rider must be elected at issue and may not be added later. The rider is not commissionable. This rider is available if on policies where neither insure is rated higher than Table D and there is less than 20 years difference in the insureds ages. There is no charge for this rider but there is a $300 charge at the time of claim, which is deducted from the benefit payable. (State variations may apply). On a pro-rata basis, any accelerated benefit paid will repay a portion of outstanding policy loans and will proportionately restrict access to additional policy loans. The benefit creates an interest-bearing lien on the policy, accumulating interest at the policy loan rate for amounts up to the loan value restricted, and the variable policy loan rate for excess amounts. For any benefit the policy must have sufficient unloaned value to avoid termination within the 5 years following qualification for acceleration. The two versions of the Accelerated Benefits Rider cannot be elected on the same policy. 11 of 26

13 Estate Protection Rider: This rider, available at an additional cost, protects the policy proceeds if an irrevocable trust is not established prior to policy issue and both insureds die in the first four policy years. The rider covers this risk by providing additional term insurance death benefit. This benefit will offset the effect of applicable estate taxes on the total policy proceeds, keeping the intended policy benefit intact. Issue Ages/Classes: Minimum Issue Amount: $250,000 Maximum Issue Amount: Rider Target: Monthly Charge: Same as base policy. Not allowed if younger insured is age 76 or older. 123% of the base policy initial specified amount 12 x first month cost of insurance Same as the base policy COI x the Estate Protection Rider specified amount This rider must be elected at issue and the amount cannot be increased after issue. Increases and decreases to the rider post-issue are not allowed. It is not convertible to permanent insurance. The rider is commissionable. Extended No-Lapse Minimum Premium Rider: Available at an additional cost, this rider extends the 10-Year No-Lapse Minimum Premium that is included with the policy up to the younger insured s age 85 or 30 years, depending on issue age. The addition of the rider can ensure that the policy will continue if the Cash Surrender Value is insufficient to cover the cost of a monthly deduction. If the premium requirement is not met during the rider coverage period, you may pay additional premium to catch-up the premium required to bring the rider back into effect. Younger Insured Issue Age Duration Years Age years Age 85 This rider cannot be added after policy issue and is only available through issue age 74. Only allowed with Death Benefit Option 1. If this rider is keeping the policy in force, no Index Bonus will be credited to the policy. 12 of 26

14 Overloan Protection Endorsement: If a policy is heavily funded and heavily loaned, the Overloan Protection Endorsement may help prevent lapse in the event of a market downturn, avoiding adverse tax consequences. If the following conditions are all met and the Endorsement charge has been paid, any riders or benefits attached to the policy will terminate and any Indexed Account Value will be transferred to the Fixed Account. 1. The policy has been in force for at least 15 Policy Years; 2. The Younger Insured s Attained Age is 75 or older; 3. The policyowner sends us a request in writing to exercise the Overloan Protection Benefit; 4. The Cash Surrender Value is insufficient to cover the cost of 3 monthly deductions plus the Endorsement charge; 5. Debt is larger than the Specified Amount; 6. The policy must not be a Modified Endowment Contract; and 7. Death Benefit Option I must be in effect. The Death Benefit provision of the policy will be modified so that the Death Benefit will be the larger of the following: 1. The Policy Value on the date of death multiplied by the corridor factor as shown in the Table of Corridor Factors in the policy specifications page; or 2. The Debt on the Insured s date of death plus $10,000. When the Overloan Protection feature takes effect, the following will not be allowed: Premium payments to be made; Partial surrenders; Policy loans; Increases or decreases in the Specified Amount; Death Benefit option changes. When the Overloan Protection Feature is in effect, no further monthly deductions will taken and the policy will not enter the Grace Period. There is no charge for adding the endorsement to a policy, but if the benefit is elected, there will be a one-time charge not to exceed the Maximum Election Charge shown in the policy specifications page deducted from the policy value. If sufficient funds are not available to cover the charge, a notice will be sent. The charge will be equal to 3% of Policy Value. 13 of 26

15 Lincoln WealthPreserve SM Survivorship Indexed UL Product Summary Policy Form Number: Data Pages: Issue Ages/Underwriting Classes: Minimum Specified Amount: Maximum Specified Amount: Death Benefit Options: Life Insurance Tax Qualification Test: Account Options: Nationwide: SUL6035 Nationwide: F6037-A Preferred Non-tobacco: Standard Non-tobacco: Standard Tobacco: Age Nearest Birthday. No Table D ratings above issue age 80. If both lives are between issue ages 76-80, one life must be Table D or better. One life must be Table F or better. Table Reduction Program is available. Substandard Flat Extra up to a maximum of $50/$1000 per life of specified amount allowed. $100,000 Subject to Underwriting Guidelines Option I greater of: Specified Amount Account Value x Corridor Option II greater of : Specified Amount + Account Value Account Value x Corridor Guideline Premium Test (GPT) or Cash Value Accumulation Test (CVAT). The policy owner decides which test is used and cannot change after issue. If no selection is made, the default will be GPT. Indexed Accounts: Eligible for non-guaranteed indexed interest which is linked to the percentage change in the S&P 500 Index value for the segment year. Each Indexed Account determines the crediting rate through a different method using an index growth cap and/or participation rate which are declared for each segment at the beginning of the segment year. Subsequent index growth caps and/or participation rates may differ, but will never be less than the guaranteed minimum rate. The crediting rate applied to a matured segment is guaranteed to be no less than 1.00% annually for all Indexed Accounts. Performs best with moderate S&P 500 performance. 1 Year Point to Point Capped: Earns the full PTP percentage increase of the S&P 500 Index up to an index growth cap declared at the beginning of the segment year. Current cap: 11% Minimum guaranteed cap: 3.00% (Continued) Minimum guaranteed participation rate: 100% 14 of 26

16 Lincoln WealthPreserve SM Survivorship Indexed UL Product Summary Account Options (continued): 1 Year Point to Point Uncapped: Earns a portion of the PTP percentage increase of the S&P 500 Index based on a participation percentage declared at the beginning of the segment year. Performs best when S&P 500 performance is highest. Current participation rate: 60.00% Minimum guaranteed participation rate: 15.00% 1 Year Point to Point High Participation: Earns the PTP percentage increase of the S&P 500 Index increased by a participation percentage up to an indexed growth cap declared at the beginning of the segment year. Performs best when S&P 500 pserformance is lower. Current participation rate: 140% Minimum guaranteed participation rate: 140% Current cap: 9.5% Minimum guaranteed cap: 2.5% Fixed Account: The Fixed Account earns interest on a daily basis. Current: 3.00% annually Guaranteed: 1.00% annually to younger insured s age 121; 3.00% thereafter Dollar Cost Averaging (DCA Account): Premiums may be directed to an optional DCA Account from which a portion is then systematically transferred on a monthly basis. On each Monthly Allocation Date, an amount equal to one twelfth (1/12) of the premiums allocated to the DCA Account within the last 12-month period plus any interest credited since the last Monthly Allocation Date is transferred to the Holding Account for monthly allocation processing. The DCA Account is only available with annual and semi-annual payment modes and requires a minimum premium amount of $1000. The DCA Account earns interest on a daily basis. Current: 4.00% Guaranteed: 1.00% annually Holding Account: The Holding Account temporarily holds funds intended for account allocations until the next Monthly Allocation Date. Holding Account Value includes premiums (including any portion from the DCA Account being systematically transferred) and funds available for transfer such as maturing indexed account segments. The Holding Account earns interest on a daily basis. Current: 3.00% annually Guaranteed: 1.00% annually 15 of 26

17 Lincoln WealthPreserve SM Survivorship Indexed UL Product Summary Allocations: Premium Allocation Instructions: Premium allocations determine how premiums are allocated between the Holding Account and the DCA Account. Account Allocation Instructions: Account Allocations determine how the Holding Account value will be allocated between the Indexed Account(s) and the Fixed Account. Allocation Dates: Dates on which transfers from the Holding Account occur. The Initial Allocation Date is the 15 th day of the calendar month following the date we process the initial premium. Once allocations begin, the Monthly Allocation Date is the 15 th of each calendar month thereafter. Extended Maturity: As long as the policy is in-force at the younger insured s Attained Age 121, the Death Benefit Option is changed to level, and thereafter the Death Benefit Option and the Specified Amount may not be changed. All monthly deductions cease. Account value continues to earn interest. Any money in the Indexed Accounts would finish its 12-month period but at the segment anniversary, all funds will be transferred to the Fixed Account at that time. No additional transfers will be allowed at younger insured s Attained Age 121. Interest on any loan would continue to accrue and the policy will continue in-force for the life of the insureds. No-Lapse Guarantee: Extended No-Lapse Minimum Premium Rider: Policy Premium Load: Monthly Administrative Charges: Guaranteed Cost of Insurance Charges: Monthly Deductions: There is a 10-year minimum premium period during which the policy will remain in force even if the cash surrender value is insufficient to cover the monthly deductions, as long as the cumulative premium requirement is met. Available through the younger insured s issue age 74 for an additional cost, the rider will extend the base 10-year minimum premium period as follows: Younger Insured Issue Age Rule Actual Duration Shorter of age 80 or 30 years 30 years Shorter of age 80 or 30 years Age Shorter of age 85 or 25 years 25 years Shorter of age 85 or 25 years Age 85 Not available with DBO2. All Years: 6% of all premiums, current and guaranteed Policy Charge: $15/mo. ($180/annual) at issue and for each increase; Current to younger insured s age 105; Guaranteed all years Unit Load: Per unit charge at issue and for each increase; Current for 10 years; Guaranteed all years Based on 2001 CSO Tables. Current COIs stope at younger insured s Attained Age 105; Guaranteed - all years. All deductions, including monthly deductions and withdrawals, are taken from the Fixed Account until it is exhausted, then in successive order from the Holding Account, DCA Account and the most recently opened Indexed Segment(s). Any deductions that deplete an Indexed Segment will result in the loss of any Indexed Interest that might otherwise have been credited. 16 of 26

18 Lincoln WealthPreserve SM Survivorship Indexed UL Product Summary Index Bonus: Loan Options: Interest Credited on Unborrowed and Participating Loan Borrowed Funds: Interest Credited on Fixed Loan Borrowed Funds: The guaranteed Index Bonus is designed to eliminate the need to allocate premiums to the Fixed Account for the purpose of covering Monthly Deductions. Each month an Index Bonus will be credited if the Monthly Deduction reduces the value of any Indexed Segment and the Policy Value is greater than zero. The amount credited will equal the total reduced value of all Indexed Segments multiplied by a factor that approximates the interest that would have been credited if that value had been in the Fixed Account. The Index Bonus will be credited to the most recently opened Index Segment with a value greater than zero. Participating Loans: Debt remains in the Fixed Account and/or Indexed Account(s) and all funds continue to earn the same credited interest. Since the Fixed Account and/or Indexed Account(s) continue to earn interest, it is possible for the credited rates to be more or less than the guaranteed loan charged rate. Fixed Loans: Debt is transferred from the Fixed Account and, if necessary, in successive order from the Holding Account, DCA Account and the most recently opened Indexed Account(s) to the Collateral Account. For either loan type: Only one option can be chosen for all loans at any one time. May switch between loan options no more than once per policy year by transferring the entire loan balance to the new loan option. For both loan options, interest charged accrues on a daily basis from the date of the loan and is compounded annually. Unpaid interest at policy anniversary is added to and becomes part of the loan principal. Loans reduce both surrender value and death benefit. If a Participating Loan is switched to a Fixed Loan, Debt is transferred from the Fixed Account and, if necessary, in successive order from the Holding Account and DCA Account and the most recently opened Indexed Account(s) to the Collateral Account. If a Fixed Loan is switched to a Participating Loan, the Collateral Account value will be transferred to the Holding Account, and will be included in the next scheduled allocation. Minimum guaranteed interest on borrowed or unborrowed funds: 1.00% Current and Guaranteed: 2.00% in all years 17 of 26

19 Lincoln WealthPreserve SM Survivorship Indexed UL Product Summary Policy Loan Charged Rate: Surrender Charge Period: Surrender Charges for Face Amount Decreases: Participating Loans: Years 1-10: 6% guaranteed; Years 11 to the younger insured s Attained Age 121: 5.5% guaranteed 3% thereafter Fixed Loans: Years 1-10: 3% guaranteed Years 11+: 2% guaranteed (zero net cost) 15 Years Withdrawals: Minimum: $500 Premium Deposit Fund: Available Riders/Endorsements: Internal Replacements: Per $1000 charge times the number of 1000 s in the decrease during the surrender period. Maximum: Cash Surrender Value minus $500 Transaction Fee: 0% current (guaranteed to be no higher than $25) Allows the policyholder to provide in advance for payment of future premiums. Minimum Deposit: $250 Maximum Deposit: 10 times annual premium Guaranteed interest credited on deposit: 1% - Accelerated Benefits Rider (with first death benefit) 2,3 - Accelerated Benefits Rider (with no first death benefit) 2,3 - Estate Protection Rider 1 - Extended No-Lapse Minimum Premium Rider 1 - Overloan Protection Endorsement 3 1 There is an additional premium for this rider. 2 There is no charge for this rider until exercised. 3 The one-time charge for this endorsement is effective only at the time it is elected to take effect. 3% premium load will be charged, except for FL, NV and TX which are the full 6% Compensation: Rolling Target for 5 years. Compensation Chargeback on Decrease due to Full Surrender//Withdrawal/Lapse: Policy months 1-6: 100% of impacted commissions Policy months 7-12: 50% of impacted commissions Compensation Chargeback on Requested Specified Amount Decreases: Policy months 1-6: 100% of impacted commissions Policy months 7-12: 75% of impacted commissions Policy months 13-24: 50% of impacted commissions 18 of 26

20 Premiums Target Premiums Lincoln WealthPreserve SM Survivorship Indexed UL has flexible premiums as well as an adjustable death benefit that gives the client control over the design of their policy. Premium payments are flexible but there are some requirements and limitations. Lincoln WealthPreserve SM Survivorship Indexed UL has a target premium that is the maximum premium that will receive the full commission rate. There is a rolling target for commissions which means that the initial commission rate is paid on all premiums received in the first 5 policy years until premiums received reach the target premium. External 1035 exchange loans do count toward the Target Premium and are commissionable. Planned Periodic Premium The Planned Periodic Premium is the amount of premium that the policyowner intends to pay and the Premium Frequency is how often the Planned Periodic Premium will be paid. Both of these items are selected by the policyowner. Increases, decreases or changes in the frequency of premium payments may be made providing the payment meets guidelines set by the Internal Revenue Service. Additional premiums are any premiums made in addition to the planned premiums and are subject to the maximums imposed by the Internal Revenue Code. The modes of premium payment allowed are as follows: Mode: Minimum modal premium: Annual direct bill or EFT $200 Semi-Annual direct bill or EFT $100 Quarterly direct bill or EFT $50 Monthly Electronic Funds Transfer (EFT) $15 ($10 if more than one policy is on the same bank draft) There is no additional charge for modal billing, but be sure the illustration solve that is utilized assumes the appropriate, desired mode since the timing of the premium payments will impact the level of funding required due to the compounding of payments and interest over time. 10 Year No Lapse Guarantee Minimum Premium The policy provides for a 10 Year Minimum Premium provision, which can ensure that coverage will continue during the first 10 policy years even if the Cash Surrender Value is insufficient to cover the cost of a monthly deduction. Under the 10 Year Minimum Premium provision, the policy will not enter the Grace Period during the first 10 policy years if the 10 Year Minimum Monthly Premium Test is met as described on the policy specifications page. Conditions that can impact whether the 10 Year Minimum Premium provision will remain in force include: Partial Surrenders taken; Policy Debt; Continued payment of premiums required to satisfy the 10 Year Minimum Monthly Premium Test. 19 of 26

21 Premium Deposit Fund The Premium Deposit Fund (PDF) allows the policyowner to provide in advance for payment of future premiums. This will help to avoid the policy from becoming a Modified Endowment Contract due to the 7702A premium limitations. Minimum Deposit: $250 Maximum Deposit: 10 times annual premium Interest is credited to the fund at a declared rate, (1% guaranteed) and is taxable annually. Annual premiums are paid automatically from the Premium Deposit Fund into the policy. Deposits into the PDF are not commissionable but commissions will be paid when the money is transferred into the policy as premium. Loans are not permitted. Charges, Fees and Deductions Premium Load: There is a premium load that is deducted from all premiums. The premium load for Lincoln WealthPreserve SM Survivorship Indexed UL is 6% in all years, current and guaranteed. Rollover money on internal replacements will be charged a 3% load, except in FL, NV and TX which are the full 6%. Monthly Deduction Method: Lincoln deducts all charges first from the Fixed Account, then from the Indexed Accounts. If it becomes necessary to deduct from the Indexed Accounts, then we remove value from the most recently opened segment, then the next mostly recently opened segment, and so forth. If there are multiple segments opened on the same day, we will pro-rate the charge between those segments. This treatment protects the interest crediting as much as possible within the Indexed Accounts as only money that has stayed in the Account for 12 months will be receive any Indexed Interest. Premiums may be directed to an optional Dollar Cost Averaging (DCA) Account from which a portion is then systematically transferred on a monthly basis. On each Monthly Allocation Date, an amount equal to one twelfth of the premiums allocated to the DCA Account within the last 12- month period plus any interest credited since the last Monthly Allocation Date is transferred to the Holding Account for monthly allocation processing. The Holding Account temporarily holds funds intended for account allocations until the next Monthly Allocation Date. Holding Account Value includes premiums (including any portion from the DCA Account being systematically transferred) and funds available for transfer such as maturing indexed account segments. Charges and Fees: In addition to the premium load, the policy includes several ongoing charges and fees. They are: Monthly Cost of Insurance: A charge per 1,000 of net amount at risk, and any rider costs, which vary by gender and underwriting class will be deducted from the cash value. Current COIs stop at younger insured s Attained Age 105, guaranteed all years. The rates are based on the Ultimate 2001 CSO Tables. Monthly Administrative Charges: o Policy Charge: $15/month ($180 annual) in all years; Current to younger insured s age 105; Guaranteed all years o Unit Load: Per unit charge at issue and for each increase: Current for 10 years; Guaranteed all years (continued) 20 of 26

22 Surrender Charges: The cash surrender value equals the account value minus the applicable surrender charges and any outstanding loan balance. The surrender charges decrease as the policy year increases up to and including the 15 th year, and are zero thereafter. Specified Amount Decrease Charge: There will be a partial surrender charge if there is a decrease in the Specified Amount during the surrender charge period. The partial surrender charge is prorated by face amount. These charges also apply to withdrawals that reduce the specified amount. Withdrawal Charge: Currently, there is no transaction fee in addition to the amount of the withdrawal (contract guarantees fee to be no more than $25). Partial withdrawals may be made at any time and may not exceed the cash value less $500. The minimum for a partial withdrawal is $500. The Specified Amount remaining in force after a partial withdrawal may not be less than $100,000 (unless insured is in a Standard underwriting class). Any request for a partial surrender that would reduce the Specified Amount below this minimum will not be allowed. The allowable withdrawal will be limited to the amount that would result in the minimum face amount. Transfers Initial Allocation Date (IAD) and Transfers Clients are given an opportunity to transfer money into the Indexed Accounts 12 times per policy year. This gives them monthly access to the Indexed Accounts for money that comes in postissue, such as 1035 exchanges, as well as future monies received as part of paying premiums on a non-annual basis. The dates on which they can transfer money are called allocation dates and the first time they can transfer (and the date from which all future allocation dates are measured) is called the Initial Allocation Date (IAD). The IAD is set as the 15 th of the month following placing the policy inforce with premium. Transfer dates will ALWAYS be on the 15 th. So, if the policy is placed in force on 6/7/2014, the IAD would be 6/15/2014. If it s placed in force on 6/21/2014, the IAD will be 7/15/2014. Once allocations begin, the Monthly Allocation Date is the 15 th day of each calendar month thereafter. Agent Compensation There is a rolling target for the first 5 policy years. External 1035 rollover loans are credited toward the target premium and are commissionable. Please refer to your commission schedule for complete compensation details. Commission Recalls: Commissions will be recalled within the first two policy years for a face amount decrease and within the first year for a lapse/surrender/withdrawal based on the following percentages. When a policy is decreased, the recall pertains to the decreased portion of the policy rather than to the policy as a whole. 21 of 26

23 Face Decrease Lapse/Surrender/Withdrawal Months % of First Year Commissions Recalled Months % of First Year Commissions Recalled % % % % % Compensation of internal replacements may or may not be available, depending on the circumstances of the individual case. See replacement schedules for complete details. General Information 7702/7702A Life Insurance Tax Qualification Tests 7702 Defra Type: Guideline Premium Test (GPT) In order to meet the IRS definition of life insurance, the contract must pass either the Guideline Premium/Corridor Test or the Cash Value Accumulation Test (see below).the flexible premium on universal life insurance allows the client to experiment with different funding levels. At times, you may encounter guideline premium limits which are set by the IRS to ensure that policies meet the definition of life insurance. The maximum total premium allowed in a policy is the greater of the guideline single premium or the sum of the guideline level premiums already paid. If the rule is violated, the policy is not acceptable to the IRS as life insurance and the earnings become taxable to the policyowner as income. Lincoln will not accept any premium that violates the guidelines and if the policy becomes out of compliance (due to policy changes) the excess premium will be refunded to the policyowner. The policyowner must choose at issue which test will be used to determine tax qualification and may not change after issue. Cash Value Accumulation Test (CVAT) A contract meets the cash value accumulation test if the cash surrender value does not exceed the net single premium which would have to be paid at such time to fund future benefits under the contract. The policyowner must choose at issue which test will be used to determine tax qualification and may not change after issue. If no selection is made, the default will be GPT. 22 of 26

24 Recapture Ceiling The tax code includes rules that prevent the tax deferred treatment of life insurance from being abused. Two of the main tests include the Guideline Premium Test, which compares premium to death benefit, and the Cash Value Accumulation Test (CVAT), which compares cash value to death benefit. See descriptions below. Historically, when partial withdrawals were taken from a contract, any amount up to the premiums paid to date, also known as basis, was non-taxable. This is known as the FIFO treatment (basis is withdrawn first, then any income/gain). New rules which came into effect on January 1, 1985 changed the way partial withdrawals were to be taxed. Under the new rules, taxable income may be forced out of the policy when a partial withdrawal meets all of the following conditions: The change reduces the future benefits under the contract. The change occurs within 15 years of the policy issue date. Cash is distributed from the contract as a result of the change. The Recapture Ceiling calculation is positive. There is a gain in the contract. When the withdrawal meets these conditions it will receive the LIFO treatment (any income/gain is withdrawn first, then basis), and any gain up to the Recapture Ceiling would be taxable. In an effort to make clients aware of how different funding patterns might impact the tax advantage status of their policy s death benefit and how premiums could change the tax treatment of distributions, Lincoln now uses the Guideline Premium Test, Cash Value Accumulation Test and the Recapture Ceiling Test. This should not be used in place of professional tax advice, but rather to draw attention to possible pitfalls. The Recapture Ceiling (RC) Test is only applied during the first 15 years following policy issue and only when a withdrawal creates a gain in the policy. There is a two-year look back period (from point of withdrawal request) during which previous withdrawals must be included in the calculation. There are two separate calculations that could apply depending upon whether the policy is in Years 1-5 or Years If the withdrawal fails this test, the entire withdrawal is treated as a loan to avoid a taxable event. 23 of 26