Introduction to
Whole Life Insurance
John Perre
Regional Life Sales Manager
Agenda
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Introduction to Equitable Life
Stock company VS a mutual company
Benefits of dealing with a Mutual Company
Introduction to Participating Whole Life
Where does it fit?
Dividends
Features
Sales Concepts
Summary
Introduction to Equitable Life
• Equitable Life is the largest federally
regulated mutual life insurance company in
Canada.
• Our participating whole life policyholders
have received dividends every year since we
launched participating whole life in 1936.
Benefits of dealing with a Mutual Company
• Eligible to share in the distributable earnings
of the PAR Account in the form of Dividends.
• Voting rights.
• Focused on long-term interests, not driven by
shareholder pressures for quarterly results.
• We remain focused, stable and strong while
stock companies consolidate.
• Customers know who they are dealing with
now, and in the future.
Introduction to
Participating Whole Life
Introduction to Participating Whole Life
The evolution of whole life insurance
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Term → Whole Life → Universal Life
First whole life introduced in 1762
Longest standing form of permanent insurance
Precursor of UL
Whole life’s popularity can fluctuate based on
market volatility
Canadian Life Insurance Sales
Annualized Premium
as at December 31, 2010
31%
36%
Univeral Life
Whole Life
33%
Term
Source: 4th Quarter 2010 LIMRA Canadian Individual Life Insurance Sales
Canadian Life Insurance Sales - Premiums
Sales by Total Annualized Premium
2012
29%
35%
36%
Term
Whole Life
Universal Life
Source: 4th Quarter 2011 LIMRA Canadian Individual Life Insurance Sales
Canadian Life Insurance Sales
Number of Policies
as at December 31, 2010
26%
Univeral Life
Whole Life
Term
55%
19%
Source: 4th Quarter 2010 LIMRA Canadian Individual Life Insurance Sales
Canadian Life Insurance Sales - Policies
Sales by Policy Count
2012
25%
54%
21%
Term
Whole Life
Universal Life
Source: 4th Quarter 2011 LIMRA Canadian Individual Life Insurance Sales
Term Life vs Whole Life
Term Insurance
Premium
Death Benefit
Par Whole Life
Insurance
Premium
Death Benefit
Cash Value
The Key Differences
Term Insurance
Participating Whole Life
Temporary need
Permanent need
Lower initial cost
Higher cost but opportunity to use
dividends to potentially reduce the
premium
No cash value
Accumulates a cash value
Not eligible to receive dividends
Eligible to receive dividends
Convertible to permanent insurance
Whole Life vs. Universal Life
Par Whole Life
Insurance
Premium
Death Benefit
Cash Value
Universal Life
Insurance
Monthly (unbundled) Charges
Death Benefit
Cash Value
The Key Similarities
• Low-cost permanent life insurance protection
• Flexibility
– Premium Holiday
– Riders and Benefits
– Death Benefit Configurations
• Tax-deferred Cash Accumulation
• Access to Cash
– Withdrawals
– Policy Loans
– Collateral Loans
• Guaranteed “limited pay” periods
The Key Differences
Participating Whole Life
Universal Life
The company manages the cash
accumulation
The client/advisor manages the cash
accumulation
•Hands-off investment
•More investment choices/decisions
Dividend Scales can increase or
decrease, but can never be “negative”
Account values can earn negative
and positive interest
Premium is “bundled”
Premium is “unbundled”
Little premium flexibility
A lot of premium flexibility
Guarantees
Limited Guarantees
•Cash Values
•Death Benefits
•Premiums
•COI Charges
•Administration Charges
•Minimum Interest rates on some GDAs
Whole Life or UL? – Case Study
The Situation
– Male, age 43, non-smoker
– Low risk tolerance
The Need
– $750,000 Permanent Insurance
– Premiums payable for a maximum 20 years
– Cash available to supplement retirement income
between age 65 and 69
– Currently maxing out RRSP
– Has $20,000/year available to spend
Whole Life or UL? – Case Study
The Choices
Equimax®
• Equimax Estate Builder
• 20 Pay
• Dividend Option – Enhanced
Protection with Lifetime guarantee
• $650,000 of basic with $100,000 of
Enhancement
• Excelerator Deposit Option added to
increase premium to $20,000
Equation Generation® IV
• Premiums payable for 20 years
• Level Protector as Death Benefit
Option
• YRT as COI type
• Portfolio Interest Option elected
earning 4.0% interest (plus investment
Bonus)
• 8% increases to tax shelter the deposit
and growth
Equimax Estate
Builder*
Equation Generation IV
Premium
$20,000
$20,000
Death Benefit
$750,000
$750,000
Age 65
$409,500
N/A
Age 85
$557,700
N/A
$764,865
$745,987
Age 70
$1,025,446
$961,211
Age 85
$ 2,125,683
$2,038,313
$1,369,362
$1,160,907
Age 70
$1,653,583
$1,348,160
Age 85
$2,619,828
$2,038,313
Guar. CV
Total CSV
Total DB
Age 65
Age 65
*Equimax values are based on the current dividend scale
Whole Life – The Right Choice if…
The Need
Par Whole Life – The Solution
Guarantees
•
Death Benefit, Cash Values and Premiums
Stable investments
•
Long-term investment focus of the Participating
Account
Tax-sheltered growth
•
Dividends accumulation on a tax-sheltered basis.
(depending on dividend option selected.)
•
•
Access to a cash reserve
•
•
Stable, hands-off investments managed by the
company.
Flexibility to choose from higher long-term value or
higher early cash values within the first 20 years
Access to the cash value for any reason.
Eligible for a Collateral Loan of up to 90% of the
CSV (subject to approval by the lending institution)
Reaping the rewards of ownership
• Equimax® is a Participating
Whole Life Insurance Policy
• Dividends are one of the
UNIQUE features
• Par policyholders are eligible to
share in the distributable
earnings of the PAR Account in
the form of dividends.
Basic Permanent Protection
• Death benefit structure for all Dividend
Options except Enhanced Protection
Dividend Options
• Paid in Cash
– Appealing to clients who like to get a little
something back each year
• Premium Reduction
– Appealing to clients who are looking for a
potentially cost-effective way to pay for their
permanent insurance
Dividend Options
• On Deposit
– Operates like a savings account
– Dividends earned are automatically deposited
with Equitable Life® and earn a competitive
interest rate
Dividend Options
• Paid-Up Additions (PUAs)
– Dividends are used to
purchase PUAs which
are added to the basic
permanent insurance
– The Cash Value of
PUAs accumulate on a
tax-deferred basis
Dividend Options
• Enhanced Protection
– Consists of a mix of permanent life insurance and
one-year term insurance
– Two guarantee options:10 Year and Life
Dividend Options
• Enhanced Protection
– Dividends are used to
purchase One Year Term
Insurance and PUAs
– PUAs replace the One
Year Term Insurance
– Cash value of PUAs
accumulate on a taxdeferred basis
Dividend Options
• Enhanced Protection
– Two Enhancement Guarantees
• 10-Year Guarantee
• Lifetime Guarantee
• Other difference is the ratio of basic permanent insurance to one-year term
enhancement
• 10-Year Guarantee = smaller basic permanent insurance = lower premium
How are dividends calculated?
The Participating Account
• Mortality and lapse experience
– Cancelled policies (lapse assumptions)
– Paid Death Benefits
• Taxes and expenses
– Difference between expected and actual
– Can result in either a positive or negative impact
to dividends
The Participating Account
Investment performance
As of September 30, 2011
Strong performance of the PAR Account
*data as of
December 31, 2010
NEW! Understanding PAR whole life
1038
Impacts of Dividends
How dividends affect par whole life insurance
Actual results will vary.
Premium Offset
Premium offset can “potentially” occur
– Dividends may be sufficient to pay the required
premiums at some point in the future
– Policy can “pay for itself”
– Dividends are NOT GUARANTEED. Watch for
dividend scale changes
Taxation of Dividends
• Dividends may result in tax
reporting:
– At the time they are paid or
credited
– Annually as income is
generated on accumulated
dividends on account
– Upon disposition (of either
the dividend or the policy)
Equimax – What’s New?
Equimax – Plan types
Choice of two plan types
Equimax
Estate Builder
Higher long-term value. Ideal for
covering estate taxes and fees.
Equimax
Wealth Accumulator
Higher early cash values within the
first 20 years. Ideal for building
wealth to access to fund education,
cover business expenses or as an
emergency fund.
Which plan type is right for your client?
Equimax – Payment options
Choice of two premium payment options
– Life
• Level premiums guaranteed for life and payable for the
life of the policy
– 20 Pay
• Level premiums guaranteed and payable for 20 years
• Excludes premiums for additional Riders and benefits
that may extend beyond 20 years.
Excelerator Deposit Option (EDO)
Paid-Up Additions
Enhanced Protection
• Total death benefits and
cash values increase as
soon as the extra deposits
are made
• Policy may reach
the Dividend Conversion
point earlier
Coverage Options
• Single Life
• Joint First-to-Die (2 lives, adults only)
• Joint Last-to-Die (2 lives, adults only)
Guarantees & Flexibility
Guarantees
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Death Benefit
Premiums
Cash Values
Reduced Paid-Up Insurance
Flexibility
– Premium Holidays
– Cash Accessibility
• Withdrawals
• Policy Loans
• Collateral Loans
Optional Riders and Benefits
Riders or Benefits
Available on:
Disability Waiver of Premium
Adult plans only; option to add for children
at age 21
Applicant’s Death and Disability Waiver of
Premium
Children’s plans only
Additional Accidental Death Benefit
Adult plans only
Guaranteed Insurability Option
Adult plans only (18+)
Flexible Guaranteed Insurability Option
Children’s plans only
Children’s Protection Rider
Adult plans only
10/20 YRCT Life Insurance Rider
Adult plans only
Sales Concepts
• Estate Creator
• Tax Protector
• The Lasting Gift
Estate Creator
• Use a tax-sheltered
vehicle to create an
instant estate
• Preserve an estate
by covering tax bills
Estate Creator – Case Study
The Situation
– Male age 52, Non-Smoker
– Maximizing his RRSP (in
GIC’s)
– Conservative investor
– Looking to leave an estate
for his 3 children to share
The Choices
Equimax Estate Builder
• $250,000 Death Benefit, PUA
dividend option
• Premiums $9,492.50/year for 20
years
Conservative Investment
• GICs
• Invests $9,492.50/year 20 years,
6% before tax interest rate
Equimax
Estate Builder
20-Pay
Alternative
Investment
@ 6% (pre-tax)
Age
Total Death
Benefit*
Total Estate
Value
53
$250,256
$9,777
$240,479
60
$264,428
$86,943
$177,485
65
$310,350
$152,699
$157,651
70
$391,619
$228,929
$162,690
75
$487,993
$287,080
$200,913
85
$694,062
$385,812
$308,250
100
$1,036,947
$601,082
$435,865
* Equimax values are based on the current dividend scale
Estate
Advantage
Tax Protector
Proceeds used to cover:
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Final expenses
Capital gains taxes
Income taxes
Probate fees
Tax Protector – Case Study
The Situation
– A couple:
•
•
•
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Male, non-smoker, age 51
Female, non-smoker, age 53
$300,000 tax liability on the last death
Already own life insurance to cover funeral expenses
– Assets
• $325,000 Non-Registered Assets
• $400,000 RRSP/RRIF Assets
• Cottage…Paid $75,000 Worth $275,000
Tax Protector – Case Study
The Solution
– $300,000 Equimax Estate Builder, Joint Last-toDie with Life Pay Premium
– Enhanced Protection with Lifetime Guarantee
– Premium of $4,277 annually (This is less than 2% of their
Non-Registered Assets)
– Clients protect their estate by transferring taxable
non-registered assets to a tax-exempt life
insurance plan
Tax Protector – Case Study
Why it works?
– Tax liability occurs on the death of the surviving
spouse
– Using Enhanced Protection makes the coverage
more affordable. The premium is based on the
amount of basic insurance coverage not the total
amount, offering more total coverage for a lower
premium.
– Using the Lifetime Guarantee means that as long as
the premiums are paid, the total death benefit will be
at least equal to the $300,000 needed
The Lasting Gift
Target Market
– Policy Owner = Grandparents
or Parents
– Insured = Child or Grandchild
– Provide a paid-up insurance policy with values
their child or grandchild can use in any they
wish
• Funding Education
• Inheritance
Lasting Gift – Case Study
The Situation
– Proud grandmother of 2 year
old Natalie
– $100 a month budget
The Need
– Locking in insurability at child rates
– Guarantee their right to purchase additional insurance
without evidence
Other considerations
– Allow access to the cash value if needed
Lasting Gift – Case Study
The Solution
– Equimax Estate Builder 20 Pay plan with PUAs
– Flexible Guaranteed Insurability Options
($125,000 at age 21; $125,000 at age 25, $250,000 at age 30)
Guaranteed Cash
Value
Total Cash Value
Total Death Benefit
At issue
0
0
89,676
Age 20
10,582
18,968
184,977
Age 30
19,818
48,536
314,036
Age 65
56,765
368,164
791,025
Why a mutual insurance company?
We put policyholders first!
– No shareholders demanding short-term gains at
expense of long-term focus
– All Par policyholders are eligible to share in the
success of the company
– Par Account is not diluted by shareholder transfers
Why Equitable Life?
• The largest federally regulated mutual life
insurance company in Canada.
• Our Par policyholders are eligible to share in the
success of the company
– Paid dividends every year since first launched Par
whole life in 1936
• Strong history of positive yield in Par Account
Marketing material – Client facing
Marketing/sales tools – Advisor Guide
ADVISOR USE ONLY
1128 (available in English, pdf only)
Equitable Life Advantage
How Equitable Life can help
– Equitable Sales Illustrations system
• Easy to use
• Includes an on-screen summary
• Multiple Scenarios/reports
– Dedicated Underwriters
– Support is in your own “backyard” via your
local Regional Office!
Whole Life, Equitable Life & You
Whole Life
a great enhancement to
your business
Disclaimer
This presentation is for educational purposes only. It should not be construed as
legal, tax or accounting advice.
Equitable Life has made every effort to ensure the accuracy of this presentation,
however accuracy is not guaranteed. If the information presented here differs from
that contained in any Equitable Life policy contract, the policy contract prevails in all
cases.
If this presentation contains competitive information, we've made every effort to
ensure its accuracy as of the date of the original oral presentation. We cannot,
however, guarantee the accuracy and, if you have any questions regarding this
information, you should contact the competitor directly.
® denotes a trademark of The Equitable Life Insurance Company of Canada.
Reproduction or redistribution of this presentation, in whole or in part, without
permission from Equitable Life is forbidden.
© 2012 The Equitable Life Insurance Company of Canada. All Rights Reserved.
Questions?