Answering Objections to EIUL

Answering Objections to EIULPresented by

Ronald W. Norvell CLU.,CHFCVice President, Sales Development

Request a copy of this presentation toUplife@aol.com1-888-565-6900

Equity Indexed U.L.Equity Indexed U.L.

Three Equity Indexed Universal Life ProductsThree Equity Indexed Universal Life Products

• Vista Advantage/Advantage Builder – low target

• Vista Select/Liberty Builder – mid target• Vista Elite/Vision Builder

– high target• No variable licensing

required to sell

“Before you Say”“Before you Say”“It’s too hard to explain to clients!”

Let’s Make it simple

Let’s Make it SimpleLet’s Make it Simple• It is like all the traditional universal life plan

you have ever sold. – Cost of insurance– Monthly expenses– Portfolio growth

• It’s the interest rate crediting that is different. - instead of a bond rate crediting - we credit the S&P 500 index rate of return

Keeping it simple, know these Concepts!Keeping it simple, know these Concepts!

• Index & Index Earnings

• Participation Rate• Cap Rate• Segments• The Six Guarantees• Two Loan Capabilities

What is an Index ?What is an Index ?

                       

The S&P 500The S&P 500

• Tracks 500 selected companies as an indicator of the growth in our economy

S&P 500 Industry weightings

How various industries were represented in the S&P 500

as of Jan. 22:Financials 18.2%

Information technology 18.2%

Health care 14.4%Consumer discretionary

12.9%Industrials 10.9%

Consumer staples 8.4%Energy 6.1%

Telecommunications 5.3%Utilities 3.1%

Materials 2.5%

Source: Standard & Poors

Index earningsIndex earnings

• The all time S&P 500 high was March 24, 2000 at 1552.87

• The lowest drop since that date was October 9, 2002 at 777.

• How much money would your client have lost?

• What is the S&P 500 today?

Index earningsIndex earnings

• Here is an example on how to calculate an index earnings.

On Feb 6, 2004 the S&P500 closed at 1142.76

One year later, the S&P500 closes at 1284.56

1284.56-1142.76

141.80 /

1142.76 =12.41%

Participation rate 100%Participation rate 100%

• What you see is what you get!!

• All loads were taken out at the beginning of the portfolio period, therefore you have 100% guaranteed participation.

• The participation is guaranteed!

Cap Rates Today are 12% & 30%Cap Rates Today are 12% & 30%

• 100% participation rate guaranteed• A 4% to 8% minimum annual cap guaranteed

based on strategy• Annual caps set in advance on segment

anniversary• Cap managed on a portfolio basis• Cap rates will primarily raise and fall

according to interest yield on bonds New premium and segment renewals move together.

Equity Indexed StrategyIllustrated Rate BasisEquity Indexed StrategyIllustrated Rate Basis

• 53 year look-back of historical S&P– January 1950 - December 2003

• Performance results: One Year cap 12% cap 7.90%

Two Year cap 30% cap 8.30%• Less volatility in illustrated rate 1% change in cap only effects illustration .4%

Note: The actual credited rate can be higher or lower, and will be based on actual S&P 500 index movement. Unlike the illustrated rate, the actual credited rates are likely to vary from year to year.

$$Basic

InterestStrategy at 4.75%

MaturedValue

MaturedValue

One Year

Five Years

0ne-YearFixed Term

Strategy at 4.5%

Five-YearEquity Indexed

Strategy at 7.9%

(NET OF SALES CHARGES and COI’S)

SIX-YearEquity Indexed

Strategy at 8.3%

MaturedValue

SIXYears

Segments for premium

“Before You Say”“Before You Say”“It is too risky of a product for my Client”

Let’s look at the Guarantees

The Six Value-Added GuaranteesThe Six Value-Added Guarantees• Policy values protection

• Annual lock-in of index gains• Annual Reset• Guaranteed credited rate• Life Protector Rider• No Lapse Guarantee Rider

– Even with a guaranteed conditional pay period

Key Question To AskKey Question To Ask

• To A Potential Fixed UL Buyer– Are you comfortable risking the 1-2% (a potential 3-

4% vs. 2% guaranteed) in exchange for the potential to earn up to 12% each year or 30% over two years?

• To A Potential Variable UL Buyer– Are you willing to give up the potential gains over

12% each year or 30% every two years in order to protect your principal, lock-in the gains every 12 or 24 months, and secure a 2% guarantee?

Two types of LoansTwo types of Loans

• Zero-Net cost loan (Preferred loan)

• Variable loan - This loan is from the company using your policy as collateral. Your policy earns at the index rate, while the company charges a variable loan.

“Before you say”“Before you say”“It doesn't fit the market I’m in.”

Let’s look at the markets these products are being used in

Four Major MarketsFour Major Markets• Accumulation plans 1.Provides living benefits 2. Retirement plans 3. College funding• Guaranteed Death Benefit and Premium Sales• Single Premium Sales• Rescue sales

Seven Sales IdeasSeven Sales Ideas

• Single pay, better than an annuity?• Start Cheap, Educate, Retire, leave a Legacy• Be Your Own Banker!!• Take it to the Max!• A Grandparent’s Choice• 1035 Rescue of a dying policy with a loan.• Various Financial Alternatives

Single Pay, better than an Annuity?Single Pay, better than an Annuity?

• Situation– 62 year old female, preferred non tobacco

– Wants to convert a jumbo CD of $100,000 to an annuity.

– However would consider a permanent, guaranteed death benefit until age 100 to pass on to her heirs.

– May want to withdraw funds in the future

Guaranteed Death Benefit

Automatic Death Benefit ExtensionTo 115.

Guaranteed Rate of Return

IRR stays high on a pre-IRR stays high on a pre-tax basistax basis

GuaranteedD.B.

Life ProtectorRider

95% of cash value taken out

Start Cheap, Educate and Retire, and leave a LegacyStart Cheap, Educate and Retire, and leave a Legacy

• 30 yr old man with a 3 yr old son

• Needs $400,000 of life protection

• Wants to have money 15 years from now for college

• Want to have a retirement plan.

Low cost beginning

$22,000 for 4 yearsNo tax outlay

$65,000 tax free fo 20 years.

Total input

Total outtake

Death benefitIn his nineties

Be your Own BankerBe your Own Banker

• There are several methods to achieve this goal• This example shows how a 35yr. old man can

buy two luxury cars, in his life time, pay himself back, and increases his retirement.

• You can design the same, with an understanding on how to create repayments, which most of your competition can’t.

Two car loans

$115,000 taxFree for 20 yrs.

Take it to the Max!Take it to the Max!

• Many sales scenarios look at minimum premium• Let’s look at the benefits of taking that minimum premium

and funding on a maximum basis• Let’s look at a

Female Age 35, $200,000 death benefitfirst paying minimum,then paying maximum

• Review Internal Rateof Return on thePremium Difference

Initial Outlay $1,289

Age 65 Cash Value$82,590

Initial Outlay$2,741

Age 65 Cash Value$285,445

Annual Premium Age 65 Cash Value

Maximum: $ 2,741 $ 285,445

Minimum: $1,290 $ 82,950

Differential: $ 1,452 $ 202,495

Let’s Look at the Numbers

Internal Rate of Return: 9.1%

Taking it to the Max!Receive the entire

9.1% in a lump-sum,($202,507)

tax free!

WOW!

A Grandparent’s ChoiceA Grandparent’s Choice

• Grandparents are always looking to provide their grandchildren with unique gifts

• Why not insure the mother after birth with the grandparents annual gift exclusion.

• Provides protection for the child and a wonderful college fund.

A 1035 rescue of a dying policy with a loanA 1035 rescue of a dying policy with a loan

• We have a 60 yr. old male who has a $1,000,000 policy that has $200,000 of cash value, but also has a $100,000 loan against it.

• He would like to not pay any more premium, but is worried about the policy lapsing and owing tax.

• Could we help him with our new LPR?

A 1035 A 1035 exchange for exchange for $1,000,000 $1,000,000 of original of original coveragecoverage

The cash value in the The cash value in the exchange is $200,000 exchange is $200,000

with a loan of with a loan of $100,000$100,000

The D.B. The D.B. begins to begins to

decline under decline under the weight of the weight of the loan and the loan and

mounting mounting interestinterest

The policy will lapse The policy will lapse under the current under the current

assumptions at age assumptions at age 8585

However, by However, by using the new using the new LPR, we can LPR, we can rescue this rescue this

1035 exchange 1035 exchange and guarantee and guarantee the policy will the policy will never lapse!never lapse!