The Power of Permanent Insurance

Transcription

1 A Comparative Analysis of Permanent Insurance vs. Term Insurance Plus an Investment Place Image Here Prepared For: Brian McCoy Presented By: * * * * License: 0 Insurance products are issued by: John Insurance Hancock products Life are Insurance issued by: Company John Hancock (U.S.A.), Life Boston, Insurance MA andcompany securities of offered New York, through Valhalla JohnNY. Hancock Securities Distributors Products LLC distributed through byother John Insurance broker/dealers Hancock Distributors products that are have LLC issued a selling through by: John agreement other Hancock broker/dealers with Life John Insurance Hancock appointed Company Distributors by John of (U.S.A), Hancock New LLC, York, Boston, 197 Distributors Valhalla Clarendon MA NY. LLC, Street, Boston, Clarendon MA Street, Boston, MA 02117

2 A Comparative Analysis of Permanent vs. Term Insurance The Power of of Permanent Insurance is a isplanning a planning tool designed tool designed to assist to you assist by showing you by showing the benefits theof benefits permanent of permanent insurance. However, insurance. this However, this presentation is not intended to be your retirement/estate plan nor is isit ita specific recommendation for foryour retirement/estate plan. This presentation is isfor for illustrative purposes only. This analysis does doesnot not constitute a recommendation a of a of particular a particular option option or options or options over over any other any other planning planning alternatives. alternatives. Other alternatives may be bemore appropriate or or suitable suitable for for your your particular particular situation situation and you and should you should discuss discuss these these options options with your withlegal, yourtax, legal, and tax, and accounting advisors prior to making any investment or purchase decisions. John Hancock does New York not guarantee does not guarantee the accuracy theof accuracy the Term ofvs. thepermanent Term vs. Permanent Insurance Analysis Insurancesystem Analysis or the system output. or the John output. Hancock Johnwill Hancock not be liable New York for any will not damages be liable arising for any from damages the use or arising misuse fromof this use software or misuse or from of any this software errors or omissions or from anyin errors the same. or omissions John Hancock in the assumes same. John no Hancock duty to update New York this software assumesor noto duty provide to update notice this of any software errors or in tothe provide software notice or applicable of any errors changes in the in software the law. or applicable changes in the law. Figures used in this program illustrate various benefit/retirement planning concepts, which are based upon both assumptions and anddata provided by byou, you, the client. Your furnishing of ofaccurate data will will help helpenhance the thevalue of of this this analysis. However, all all assumed growth growth rates rates for assets for assets are are based based upon upon information provided and assumed by you and are not a guarantee of the future performance of ofthe life insurance policy. Please review the assumptions page for accuracy of information. Guaranteed product features are dependent upon minimum premium requirements and the claims-paying ability of the issuer. This supplemental illustration assumes that the currently illustrated non-guaranteed elements will will continue for for all all years years shown. However, it is itnot is not likely likely that the non-guaranteed elements will will perform perform exactly exactly as shown as shown in the inillustration. the illustration. In addition, In addition, the actual theconsequences actual consequences of a particular of a planning particular planning alternative will depend on many variables, some of of which may maynot not be befully fully accounted for for or described in this in this presentation. Unless Unless otherwise otherwise indicated, indicated, the income tax implications of ofparticular transactions are arenot not reflected in inthe the analysis. This This program does does not not illustrate the the estate, estate, gift, gift, and and generationskipping transfer (GST) tax taximplications of of owning owning permanent life insurance. life insurance. Withdrawals Withdrawals and loans and loans from life frominsurance life insurance policies policies have the have effect theof effect of reducing the amount payable to your beneficiaries at your death. Loans and withdrawals will reduce the thedeath benefit and andthe thecash cash surrender value, value, and and may may cause cause the the policy policy to lapse. to lapse. Lapse Lapse or surrender or surrender of a of policy a policy with a loan may cause the therecognition of of taxable income. Withdrawals in excess in excess of the of the cost cost basis basis (premiums (premiums paid) paid) will be will subject be subject to tax to and taxcertain and certain withdrawals within the first 15 years may be subject to recapture tax. Additionally, policies classified as modified endowment contracts may be subject to tax when a loan or withdrawal is ismade. A federal tax taxpenalty of of10% may also alsoapply if if the theloan loanor or withdrawal is is taken taken prior prior to to age age /2. 1/2. Withdrawals are available after the first policy year. Before you make any investment, estate or ortax planning decisions (or (orchange title to toany anyassets or or change beneficiary designations), your your legal legal and and tax tax advisors should be consulted to todetermine (1) (1) the thesuitability of of a particular a planning alternative for for you, you, and and (2) (2) the the precise precise legal, legal, tax, tax, investment, investment, and and accounting consequences of that alternative. John Hancock and Newits York agents, andemployees, its agents, and employees, registered and representatives registered representatives do not give legal, do not tax, give accounting legal, tax, or investment accounting advice, or investment and this advice, presentation and this and presentation any other and oral any or written other oral communication or written communication should not be should construed not as besuch. construed As you asexplore such. As your youplanning exploreneeds your planning with your needs legal with and tax your advisors, legal and we tax hope advisors, that we you hope find this thatanalysis you finduseful. this analysis useful. This material does not constitute tax, tax, legal or or accounting advice advice and and neither neither John John Hancock Hancock nor Nwe any of York its agents, nor anyemployees of its agents, or registered employees or registered representatives are in the business of offering such advice. It Itwas not intended or orwritten for use and cannot be beused by byany taxpayer for forthe thepurpose of of avoiding any IRS penalty. It Itwas written to tosupport the themarketing of of the the transactions or topics topics it addresses. it Anyone Anyone interested in these in these transactions or or topics should seek advice based on his or her particular circumstances from independent professional advisors. Page 2 of 12 Internal Compliance Number: MLINY

3 TABLE OF CONTENTS A. Overview B. Summary Analysis of Term & Side Fund vs. Permanent Insurance C. Comparison Analysis of Term & Side Fund vs. Permanent Insurance D. Assumptions Page 3 of 12

4 OVERVIEW THE PROBLEM You may require life insurance coverage to replace family income, pay off debts, plan for the succession of a business interest or to provide your heirs with liquidity to pay estate taxes due at death. You may be interested in securing term life insurance because the cost may be relatively low currently. Although term life insurance can provide effective, temporary and low cost coverage, it will be prohibitively expensive to maintain the coverage in the future. In addition, your premiums will not be refunded and no cash value accumulation is available. And, if your health deteriorates in the future, you will not be able to secure alternative permanent lifetime coverage, which you may need. Furthermore, if you are concerned about potential long term care (LTC) expenses, the death benefit of a term policy cannot be accelerated to pay for your long term care expenses during lifetime. THE SOLUTION Permanent insurance can be designed to provide you with death benefit coverage for your lifetime and cash value accumulation potential based on your particular needs. Although the premium requirement on a permanent policy is generally more than a term policy's premium at younger ages, the cash value accumulation may help you to recover your costs. You can also access cash values on a tax-favorable basis. And unlike term insurance, permanent insurance may have policy guarantees on death benefit coverage. Moreover, it may be possible to add a long term care rider to a permanent policy to accelerate the death benefit payment during your lifetime to pay for qualifying long term care expenses. A comparison of the financial and qualitative benefits of each type of policy can help you to make an informed decision about which type of policy is best for you and your family. HOW IT WORKS A permanent policy can be designed to take into account your death benefit needs and any income or lump sum cash you may need in the future. The premiums you pay, net of life insurance and administrative charges, are invested in underlying investment options. The design of a permanent policy takes into account your risk tolerance for specific types of investments, including stock and bond funds as well as your preference for fixed accounts. Then the annual cash value accumulation and the death benefit of the permanent policy are compared to a hypothetical side fund in which the difference between the term and permanent insurance premiums are invested at an assumed rate of return. s Death Proceeds Client Possible Retirement Income via Loans & Withdrawals Permanent Life Insurance Net to Heirs At Life Expectancy Page 4 of 12

5 OVERVIEW BENEFITS OF PERMANENT LIFE INSURANCE Permanent Death Provides protection from economic loss due to death. Cash value accumulation The policy has the potential to accumulate cash value. Tax-favored income Distributions from the policy may be taken on a tax-free basis as long as cumulative withdrawals do not exceed cost basis and loans are taken thereafter. CONSIDERATIONS Cash flow The decision to purchase a permanent policy over a term policy will depend on your available cash flow. Death benefit reduction Loan and withdrawals will decrease the amount of the death benefit available to heirs and potentially cause the policy to lapse. And, if a long term care rider is included in the policy, the death benefit will be reduced by the amount of the LTC benefit payments made. Low cost term insurance The cost of term insurance at younger ages can be significantly less than the cost of permanent insurance. It is important to consider your short term and long term goals of owning the life insurance as well as your cash flow requirements in order to determine what type of policy is right for you. expenses associated with it in addition to life insurance related charges including surrender charges and investment management fees. Variable Universal life insurance is unsuitable as a short term savings vehicle. The primary purpose of Variable Universal Life Insurance is to provide lifetime protection against economic loss due to death of the insured person. Please consult with your professional advisors to find out which type of life insurance is appropriate for you. Refer to the Product Client Guide for information regarding specific product costs and risks. Purchasing variable life insurance also involves investing in underlying investment accounts that correspond to your investment objectives and level of risk tolerance. The types of risk associated with investing in these accounts include market, portfolio, inflation and international risk. For more information, please refer to your prospectus. Depending on the performance of the underlying investment accounts, the cash values available for loans and withdrawals may be worth more or less than your original investment amount. Additional premiums may be required to sustain the policy. YOUR SITUATION The following pages illustrate a comparative analysis of funding a permanent life insurance policy to funding a lower cost term insurance policy and investing the difference in a hypothetical side fund. The comparison illustrates the cumulative cost (premiums) for each type of policy based on your specific underwriting assumptions to the cumulative benefits each scenario provides (death benefit and policy cash value or death benefit and side fund value, respectively). Page 5 of 12

6 A Comparative Analysis of Permanent Insurance vs. Term Insurance Plus Side Fund Accumulation IUL 15 vs. John Hancock Term 16 with Vitality (20 Year Level ) Assuming Current Charges and an Interest Rate of 6.00% Net; Side Fund Gross Rate of Return: 6.00% Year PERMANENT INSURANCE Cumulative Net Net Death s + Surrender Deposits Value TERM INSURANCE & SIDE FUND Cumulative Death Net Side s + Plus Fund Deposits Value Side Fund 10 $103,730 $75,443 $1,000,000 $103,730 $111,710 $1,111, $207,460 $252,728 $1,000,000 $207,460 $270,816 $1,270, $207,460 $416,176 $1,000,000 $207,460 $385,720 $385, $207,460 $594,609 $1,000,000 $207,460 $530,286 $530,286 $600,000 $1,400,000 $500,000 $1,200,000 $400,000 $1,000,000 $300,000 $800,000 $600,000 $200,000 $400,000 $100,000 $200,000 $ $ Permanent Policy: Net Cash Value Term plus Side Fund: Net Side Fund Value Permanent: Total Death Term: Death + Side Fund For Male Age 45, Preferred NonSmoker Initial LTC LTC Maximum Monthly Percentage Amount of Monthly LTC Potential Months of LTC Coverage $10,373 $995,165 2% $19, This is a SUPPLEMENTAL illustration only and is not intended to predict or project actual performance. This illustration is not valid unless accompanied by the BASIC PERSONALIZED HYPOTHETICAL individual illustration. s and values may not be guaranteed; the assumptions on which they are based are subject to change by the insurer. Actual results may be more or less favorable. Refer to the basic illustration for guaranteed elements and other important information. Page 6 of 12

7 LIFE INSURANCE Product: Accumulation IUL 15 Initial : $10,373 Insured(s): Brian McCoy Initial Death : $1,000,000 Male Age 45, Preferred Nonsmoker Year Age Annual Payment Universal Life 6.00% Net Net Income From Policy Value Net Cash Surrender Value Net Death , ,000, , ,000, , ,000, , ,000, ,373 6,997 1,000, ,373 16,195 1,000, ,373 27,895 1,000, ,373 40,595 1,000, ,373 54,871 1,000, ,373 75,443 1,000, ,373 89,418 1,000, , ,386 1,000, , ,275 1,000, , ,134 1,000, , ,011 1,000, , ,964 1,000, , ,042 1,000, , ,301 1,000, , ,830 1,000, , ,728 1,000, ,232 1,000, ,466 1,000, ,406 1,000, ,022 1,000, ,264 1,000, ,076 1,000, ,422 1,000, ,250 1,000, ,513 1,000, ,176 1,000, ,045 1,000, ,243 1,000, ,748 1,000, ,541 1,000, ,578 1,000, ,850 1,000, ,146 1,000, ,419 1,000, ,609 1,000, ,665 1,000,000 Totals 207,460 This is a SUPPLEMENTAL illustration only and is not intended to predict or project actual performance. This illustration is not valid unless accompanied by the BASIC PERSONALIZED HYPOTHETICAL individual illustration. s and values may not be guaranteed; the assumptions on which they are based are subject to change by the insurer. Actual results may be more or less favorable. Refer to the basic illustration for guaranteed elements and other important information. Page 7 of 12

8 LIFE INSURANCE Product: Accumulation IUL 15 Initial : $10,373 Insured(s): Brian McCoy Initial Death : $1,000,000 Male Age 45, Preferred Nonsmoker Year Age Annual Payment Universal Life 6.00% Net Net Income From Policy Values Net Cash Surrender Value Net Death ,443 1,000, ,865 1,000, ,836 1,000, ,228 1,000, ,910 1,000, ,812 1,000, ,790 1,000, ,717 1,000, ,450 1,000, ,887 1,000, ,169 1,000, ,297 1,000, ,264 1,000, ,856 1,000, ,819 1,000,000 Totals 207,460 This is a SUPPLEMENTAL illustration only and is not intended to predict or project actual performance. This illustration is not valid unless accompanied by the BASIC PERSONALIZED HYPOTHETICAL individual illustration. s and values may not be guaranteed; the assumptions on which they are based are subject to change by the insurer. Actual results may be more or less favorable. Refer to the basic illustration for guaranteed elements and other important information. Page 8 of 12

9 PERMANENT LIFE INSURANCE VS. BUY TERM & INVEST THE DIFFERENCE Accumulation IUL 15 vs. John Hancock Term 16 with Vitality (20 Year Level ) Assuming Current Charges and a Rate of Return of 6.00% Net; Side Fund Gross Rate of Return: 6.00% PERMANENT INSURANCE TERM INSURANCE & SIDE FUND Male Age 45, Preferred NonSmoker Initial : $10,373 Initial Death : $1,000,000 Tax Bracket: 40.00% Year Age Annual (1) Net Surrender Value (2) Death (3) Term (4) Amount Invested (5) After Tax Side Fund (6) Term Death (7) Difference In Total Cash (2)-(6) Difference In Death (3)-(7)-(6) , ,000,000 1,224 9,149 9,478 1,000,000 (9,478) (9,478) , ,000,000 1,224 9,149 19,298 1,000,000 (19,298) (19,298) , ,000,000 1,224 9,149 29,471 1,000,000 (29,471) (29,471) , ,000,000 1,224 9,149 40,010 1,000,000 (40,010) (40,010) ,373 6,997 1,000,000 1,224 9,149 50,929 1,000,000 (43,932) (50,929) ,373 16,195 1,000,000 1,224 9,149 62,241 1,000,000 (46,046) (62,241) ,373 27,895 1,000,000 1,224 9,149 73,960 1,000,000 (46,065) (73,960) ,373 40,595 1,000,000 1,224 9,149 86,101 1,000,000 (45,506) (86,101) ,373 54,871 1,000,000 1,224 9,149 98,679 1,000,000 (43,808) (98,679) ,373 75,443 1,000,000 1,224 9, ,710 1,000,000 (36,267) (111,710) ,373 89,418 1,000,000 1,224 9, ,210 1,000,000 (35,792) (125,210) , ,386 1,000,000 1,224 9, ,195 1,000,000 (35,810) (139,195) , ,275 1,000,000 1,224 9, ,685 1,000,000 (35,410) (153,685) , ,134 1,000,000 1,224 9, ,696 1,000,000 (34,562) (168,696) , ,011 1,000,000 1,224 9, ,247 1,000,000 (33,236) (184,247) , ,964 1,000,000 1,224 9, ,359 1,000,000 (31,395) (200,359) , ,042 1,000,000 1,224 9, ,050 1,000,000 (29,008) (217,050) , ,301 1,000,000 1,224 9, ,342 1,000,000 (26,041) (234,342) , ,830 1,000,000 1,224 9, ,257 1,000,000 (22,427) (252,257) , ,728 1,000,000 1,224 9, ,816 1,000,000 (18,088) (270,816) ,232 1,000, ,566 0 (14,334) 719, ,466 1,000, ,666 0 (10,200) 709, ,406 1,000, ,130 0 (5,724) 698, ,022 1,000, ,971 0 (949) 688, ,264 1,000, , , ,798 Totals: 207,460 24, ,980 This is a SUPPLEMENTAL illustration only and is not intended to predict or project actual performance. This illustration is not valid unless accompanied by the BASIC PERSONALIZED HYPOTHETICAL individual illustration. s and values may not be guaranteed; the assumptions on which they are based are subject to change by the insurer. Actual results may be more or less favorable. Refer to the basic illustration for guaranteed elements and other important information. Page 9 of 12

10 PERMANENT LIFE INSURANCE VS. BUY TERM & INVEST THE DIFFERENCE Accumulation IUL 15 vs. John Hancock Term 16 with Vitality (20 Year Level ) Assuming Current Charges and a Rate of Return of 6.00% Net; Side Fund Gross Rate of Return: 6.00% PERMANENT INSURANCE TERM INSURANCE & SIDE FUND Male Age 45, Preferred NonSmoker Initial : $10,373 Initial Death : $1,000,000 Tax Bracket: 40.00% Year Age Annual (1) Net Surrender Value (2) Death (3) Term (4) Amount Invested (5) After Tax Side Fund (6) Term Death (7) Difference In Total Cash (2)-(6) Difference In Death (3)-(7)-(6) ,076 1,000, , , , ,422 1,000, , , , ,250 1,000, , , , ,513 1,000, , , , ,176 1,000, , , , ,045 1,000, , , , ,243 1,000, , , , ,748 1,000, , , , ,541 1,000, , , , ,578 1,000, , , , ,850 1,000, , , , ,146 1,000, , , , ,419 1,000, , , , ,609 1,000, , , , ,665 1,000, , , , ,443 1,000, , , , ,865 1,000, , , , ,836 1,000, , , , ,228 1,000, , , , ,910 1,000, , , , ,812 1,000, , , , ,790 1,000, , , , ,717 1,000, , , , ,450 1,000, , , , ,887 1,000, , ,531 Totals: 207,460 24, ,980 This is a SUPPLEMENTAL illustration only and is not intended to predict or project actual performance. This illustration is not valid unless accompanied by the BASIC PERSONALIZED HYPOTHETICAL individual illustration. s and values may not be guaranteed; the assumptions on which they are based are subject to change by the insurer. Actual results may be more or less favorable. Refer to the basic illustration for guaranteed elements and other important information. Page 10 of 12

11 PERMANENT LIFE INSURANCE VS. BUY TERM & INVEST THE DIFFERENCE Accumulation IUL 15 vs. John Hancock Term 16 with Vitality (20 Year Level ) Assuming Current Charges and a Rate of Return of 6.00% Net; Side Fund Gross Rate of Return: 6.00% PERMANENT INSURANCE TERM INSURANCE & SIDE FUND Male Age 45, Preferred NonSmoker Initial : $10,373 Initial Death : $1,000,000 Tax Bracket: 40.00% Year Age Annual (1) Net Surrender Value (2) Death (3) Term (4) Amount Invested (5) After Tax Side Fund (6) Term Death (7) Difference In Total Cash (2)-(6) Difference In Death (3)-(7)-(6) ,169 1,000, ,638 0 (16,470) 189, ,297 1,000, ,821 0 (35,524) 160, ,264 1,000, ,055 0 (56,790) 129, ,856 1,000, ,377 0 (80,521) 98, ,819 1,000, ,826 0 (107,008) 66,174 Totals: 207,460 24, ,980 This is a SUPPLEMENTAL illustration only and is not intended to predict or project actual performance. This illustration is not valid unless accompanied by the BASIC PERSONALIZED HYPOTHETICAL individual illustration. s and values may not be guaranteed; the assumptions on which they are based are subject to change by the insurer. Actual results may be more or less favorable. Refer to the basic illustration for guaranteed elements and other important information. Page 11 of 12

12 ASSUMPTIONS CLIENT INFORMATION Family Name Client Name Age Sex Smoking Status McCoy Brian 45 Male Preferred NonSmoker Spouse's Name Age Sex Smoking Status PLAN INFORMATION Long Term Capital Gains Bracket Client's Life Expectancy Spouse's Life Expectancy Joint Life Expectancy n/a Income tax Bracket 40.00% Income tax bracket (State & Federal) PRESENTER INFORMATION Presenter's Name * Agency/Firm Name * Address * City, State & Zip * Phone 0 Fax 0 Address n/a n/a n/a n/a 20.00% 39.0 n/a PERMANENT INSURANCE INFORMATION Type of Policy Single Policy Name Accumulation IUL 15 State Michigan Death of Policy of Policy Years for s Current Crediting Rate $1,000,000 $10, % Policy's crediting rate TERM INSURANCE & SIDE FUND INFORMATION Policy Name John Hancock Term 16 with Vitality Death of Policy $1,000,000 Annualized Level $0.00 Number of Years for Level 90 Total Investment Return 6.00% Total ROR for side fund net of investment expenses Ordinary Income 6.00% Ordinary Income portion of rate of return Tax-Exempt Income 0.00% Tax-Exempt Income portion of rate of return Realized Capital Gains 0.00% Realized Capital Gains portion of rate of return Unrealized Capital Gains 0.00% Unrealized Capital Gains portion of rate of return RESULTS INFORMATION Focus year Years to Print Summary Years The focus year refers to the year that has been chosen by you. The 39 values in the focus year are highlighted, can be changed and are for 99 10, 20, 30, and 39 Page 12 of 12