buyers guide variable universal life-1021884

7/31/2019 Buyers Guide Variable Universal Life-1021884

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Guide to Variable Universal Life Insurance

Your future. Made easier.SM

LIFE


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Introduction

This guide offers helpful information about variable universal life (VUL) insurance features to help you

understand more about making financial choices that work best for you. While this booklet is primarily

about variable universal life insurance, it does give a brief description of other types of life insurance for

comparison purposes.

This brochure was created to provide accurate and reliable information on the subjects covered.

It is not intended to provide specific legal, tax or other professional advice. The services of an appropriate

professional should be sought regarding your individual situation. At the end of this guide are questions

you should specifically ask your ING financial representative. Make sure youre satisfied with the answers

before you purchase a life insurance policy.

Before investing, you should carefully consider your need for life insurance coverage and the chargesand expenses of the variable universal life insurance policy. You should also consider the investmentobjectives, risks, fees, and charges of each underlying variable investment option. This and other informationis contained in the prospectuses for the variable universal life insurance policy and the underlying variableinvestment options. You may obtain these prospectuses from your agent/registered representative, by

calling 877-253 5050, or from www.ing.com/us and should read them carefully before investing.


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What Is Variable Universal Life (VUL) Insurance?

Life insurance is basically a contract between you and a life insurance company. In the

contract (policy) you make one or more premium payments, and in return the life

insurance company is bound by the policy to pay the death benefit to the beneficiaries when

the insured person dies.

Variable universal life insurance has these major characteristics:

Its life insurance

It may provide lifelong coverage until its maturity date (unless allowed to lapse more

on that later)

It has a flexible premium payment structure

It may provide cash value

It provides the policyowner with the ability to direct premium payments to various

variable investment options

Cash values vary with the performance of the variable investment options and the owner

assumes the investment risk for amounts allocated to the variable investment options,along with potentially greater returns.

Lets look at each of these features in detail.

Its life insurance

VUL has variable investment options that may help generate cash value under the policy. The

cash value can be an important part of a retirement plan. But it is fundamentally a life

insurance policy used to protect and provide for those who may be financially dependent on

the insureds life.

It may provide lifelong insurance coverage

Unlike term insurance, where, when the term of the policy is up, you must buy a new policyor renew the term, VUL may provide lifelong insurance coverage. The only way VUL insurance

coverage stops is if the policy lapses. Unless it lapses it stays in effect until the death of the

insured and then pays a death benefit to the beneficiary or until the maturity date of the

policy, whichever comes first. It can lapse if sufficient premium payments are not made. It can

also lapse if, in later years, there isnt enough in the cash value of the policy to cover the

monthly policy charges. (Please note that a sufficient payment into the policy at that time can

prevent a lapse.)

It has a flexible premium payment and death benefit structure

Like universal life insurance, VUL insurance allows you as the policyowner to determine the

amount and frequency of premium payments and adjust the death benefit up or down, eachdepending on your needs and certain conditions, limits and underwriting requirements that

may apply.

It may provide cash value

Beyond whatever guaranteed death benefit that may exist, a VUL policy has a cash value

feature. Cash value may accumulate from premiums you pay in excess of the policy charges

(like cost of insurance or expense charges). This cash value may earn interest or grow in

value, and these earnings are allowed to grow tax-deferred.1 The cash value may also

decrease in value (see page 2), depending on the performance of the variable investment

options you choose.1

Income and growth on accumulated cash values has been held to be generally taxable only upon withdrawal. Early withdrawalsmay be subject to a surrender charge. In addition, distributions prior to age 59 12 may be subject to a 10 percent tax penalty.


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Provides the ability to direct cash value to variable investment options

Whole and universal life insurance also have a cash value feature, but they do not allow you as the

policyowner to make decisions about how this cash value is invested. With variable universal life insurance

you determine how this cash value is allocated into the variable investment options.

Cash values vary and the owner assumes investment risk along with potentially greater returns

This is what makes it variable. VUL is life insurance, with flexible payments, and a cash value feature likeother types of cash value insurance. Beyond that, the VUL policyowner has several options for investing this

money. This means that you as the policyowner agree to take on more risk in return for the opportunity to

potentially achieve higher returns. Most VUL policies offer a range of variable investment options, from

conservative to aggressive, and you can usually mix-and-match the combination that suits your risk

tolerance and financial goals.

CoverageCash Value

(Accumulation)

Flexible Premium

Payments

Control of

Allocations of

Cash Value

Guaranteed Return on

Allocations of Cash Value

Term Fixed amount oftime (term of

the policy)

No No No Cash Value No Cash Value

Whole Life (sometimes

called Ordinary Life)Lifelong* Yes No No Yes

Universal Life Lifelong* Yes Yes No Yes

Variable Universal Life Lifelong* Yes Yes Yes

Depends on whether the

policy offers a fixed accountoption in addition to

variable investment options

*Provided policy is not allowed to lapse, or mature/expire.

Its also important to note that specific features will vary depending on the product that you buy.

Benefits of Cash Value

You may use the accumulated cash value for emergencies and other needs, or it can be used as supplemental

retirement income. To access the cash value, you may partially or fully surrender the policy, or the cash may be

borrowed under a loan provision, which will reduce the death benefit and available cash values, and may create

an income-tax liability.

VUL insurance policies are often bought for death benefit protection or supplemental income needs. They have

tax deferral features that may make them a good choice for additional retirement funding. Tax deferral is apowerful benefit in two ways. First, any supplemental increases in cash value are not counted on your current

income taxes in any given year. Second, because your returns are not decreased by having to pay current income

taxes, they can stay allocated in the policy and potentially continue to grow until theyre withdrawn.


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Subaccounts, Funds or VariableInvestment Options

When you purchase a variable universal life insurance policy, the

insurer places part of your premiums net of fees and charges

within the various available investment options you can select.The investment options will vary depending on the company

and the specific product you have purchased.

Companies call the variable investment choices options,

subaccounts, variable investment options, portfolios, or

funds. Variable investment options are actually investments in the

subaccounts of the separate account that supports the VUL product.

These variable investment options most often invest in mutual fund

portfolios that have been created and are managed to be available

through variable insurance products. However, these variable

investment options are not mutual funds and are available only

within variable universal life insurance and variable annuity products.Variable investment options are grouped into categories based on

lower and higher risks and possible returns. An important benefit of

a VUL policy is that in most cases you can move money among

variable investment options as your needs and investment objectives

change. You can often do this without additional transaction charges

from the company (usually up to a limited number of times in a year).

In addition, the IRS doesnt count your move from one variable

investment option to another within your VUL policy as creating

income for you and no income tax becomes due as long as no

money is actually withdrawn from the policy. (See also What About

Tax Treatment of a VUL?)

Variable investment option returns may be, on average and over

time, higher than for other types of insurance that have a minimum

guaranteed rate of return. In return for the possibility of achieving

these better returns, you take on the risk that the value of your VUL

policys variable investment options may also go down.


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How Do I Take Advantageof the Cash Value?

Death Benefit

As life insurance, theres obviously a financial consequence. When the

insured dies a death benefit is paid out. Some policies have up tothree death benefit options:

Option A (Level) Death benefit equals the policy face amount.

Option B (Variable) Death benefit equals the policy face amount

plus the accumulation value.

Option C (Face Amount Plus Premium) Death benefit equals the

policy face amount plus premiums paid into the policy.

Accessing Cash Values

In addition to providing a death benefit, VUL insurance policies are a

popular way to accumulate money for retirement, college expenses, orother financial needs. The cash value can be taken out in several ways.

Policy Loans

Policyowners can borrow against the accumulated cash value of the

policy. Cash value is the accessible cash in the policy. The cash value

serves as the collateral for the loan, and interest rates are often lower

than from other lending sources. Another way to think of it is that

the loans are like taking an advance on the death benefit.

Loans and withdrawals may generate an income tax liability, reduce

available cash value and reduce the death benefit or cause the policy

to lapse.

Partial Withdrawals and Surrenders

You can obtain cash from a VUL policy through a surrender or partial

withdrawal. A surrender means that the entire policy is cashed out

(minus any surrender charges, fees, or payment of outstanding loans)

and the policy (and your life insurance coverage) ends. The insurance

company may impose a surrender charge to process the

transaction. Usually the surrender charges are higher during the early

years of the policy.

A partial withdrawal is really a surrender of part of the insurance

policy. The advantage of a partial withdrawal over a loan is that itdoes not have the interest and repayment obligation that a loan

does. A disadvantage of partial withdrawals is a decrease in the

death benefit, usually by an amount similar to the amount of the

partial withdrawal.

Loans and withdrawals may generate an income tax liability,

reduce available cash value and reduce the death benefit or cause

the policy to lapse.


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What Charges May Be SubtractedFrom My Variable Universal LifeInsurance Policy?

Most VUL policies have charges related to the cost of selling or

servicing them, in addition to the cost of insurance itself. Thesecharges may be subtracted directly from the cash value. In a VUL

policy, this means that the actual amount of your premium that is

added to your variable investment options will be the amount

remaining after any applicable charges have been deducted.

Ask your ING financial representative to describe the charges that

apply to your VUL policy. Also check out your VUL policy

prospectus which gives you detailed information on all charges

and expenses and how they are calculated.

Typical examples of charges include:

Surrender or Partial Withdrawal Charges

If you need access to your money, you may be able to take all or

part of the cash value out of your VUL policy at any time. If you

take out all of the cash value and surrender, or terminate, the

policy, you may pay a policy surrender charge. If you make a

partial withdrawal you may pay a proportional surrender or partial

surrender charge.

How these charges are calculated depends on the company and

the specific product.

Remember, withdrawals will reduce the policys death benefit and

available cash value.

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What About the Tax Treatment of VariableUniversal Life Insurance?

Under current federal law, VUL policies receive special tax treatment. Most

states tax laws on VUL policies follow the federal law. Below is a general

discussion about taxes and VUL policies. You should consult a professional tax

advisor to discuss your individual tax situation.

Tax-Deferred Growth

Income tax on any growth in your life insurance policy is deferred. That means

you arent taxed on the earnings while they stay in the policy. Taxes that you

might otherwise have to pay on interest income, dividends or capital gains

remain in the policy.

Tax-Free Loans

You may pay no tax when you take money out as policy loans and your policy is

not considered a Modified Endowment Contract under federal tax laws. In

this case, policy loans will be income-tax-free as long as the policy remains in

force. If the policy is allowed to lapse with an outstanding loan (or loans), you

may have an income tax liability. The amount of the tax liability is calculated

based on how much of the loan amount was a return of your payments (cost

basis) and how much was earnings from the variable investment options.

If the policy is a Modified Endowment Contract under federal tax laws, loans

are treated as taxable distributions to the extent of the gain in the policy.

Taxes on Death Benefit

Your beneficiaries generally do not pay any income tax on the death benefit if itis paid in a lump sum. If installment payments are received, your beneficiaries

only pay taxes on the interest received. However, estate taxes will be

determined by policy ownership.

What Is A Free Look Provision?

Many states have laws which give you a set number of days to look at the VUL

policy after you buy it. If you decide during that time you dont want the policy,

you can return the policy and get some or all of your money back. This is often

referred to as a free look or right to return period. The free look period should

be prominently stated in your policy. Be sure to read your policy carefully during

the free look period.

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These materials are not intended to be used to avoid tax penalties, and were prepared to support thepromotion or marketing of the matter addressed in this document. The taxpayer should seek advice from anindependent tax advisor.


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Final Points To Consider

Before you decide to buy variable universal life insurance, review the policy carefully. Ask yourself if,

depending on your needs or age, this VUL policy is right for you. Terms and conditions of each VUL policy

will vary. Compare information for similar policies from several companies. Comparing products may help

you make a better decision.

VUL insurance is for the long haul. Be sure you plan to keep a VUL policy long enough so that the

charges dont take too much of the money you put in. Be sure you understand the effect of all charges

on the net amount of money invested in your behalf.

Taking money out of a VUL policy may mean you must pay taxes.

Also, while its sometimes possible to transfer the value of an older life insurance policy into a new VUL

policy, the new policy may have a new schedule of early surrender charges or other fees that could

mean new expenses you must pay directly or indirectly. Ask your ING financial representative to do a

complete comparison of your old and new policies before deciding to replace an older policy.

Remember that the quality of service you can expect from the company and your financial

representative is a very important factor in your decision.

When you receive your VUL policy, read it carefully! Ask your ING financial representative to explain

anything you dont understand. Do this before the free-look period ends.


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Glossary

Adjustable death benefit

A life insurance option that allows the

policy owner to increase or decrease the

death benefit.

Administrative fees

Fees charged to cover costs to operate and

maintain the policy; frequently includes costs

to handle transactions, preparing and mailing

statements, and other customer service costs.

Agent

A licensed person or organization authorized

to sell insurance by or on behalf of an

insurance company.

Asset allocationDividing your money among asset classes

according to your investment strategy and

risk tolerance.

Asset class

Categories of investments based on risks

and returns.

Asset rebalancing

An investment strategy designed to help the

owner of a variable life insurance policy or

variable annuity contract maintain his or herdesired allocations among variable

investment options by periodically

reallocating cash values.

Beneficiary

The person designated by the policyowner to

receive the death benefit.

Cash surrender value

The amount an insurer will pay the

policyowner if the policy is surrendered while

it is in force. The net surrender value on the

date surrendered is equal to: the cash value,

minus any surrender charge, minus any

outstanding loan amount, plus any interest

the policy owner paid in advance on the loan

for the period between the date of surrender

and the next policy anniversary.

Cash value

The sum of the variable life insurance policys

value in its variable investment option

accounts and any fixed accounts, less any

applicable fees or charges.

Death benefitThe amount of money the insurance

company will pay to the beneficiary(ies) when

the insured dies.

Diversification

Investment strategy used to try to reduce risk

by investing in a broad range of stocks

and/or bonds, across different industries,

companies, or countries. The objective is to

have potential gains in one area offset by

potential losses in others.

Face amount

The amount specified by the insured to

define the death benefit based on the death

benefit option chosen.

Fixed account

An allocation option that provides a

guaranteed minimum return and payouts in

fixed dollar amounts.

Flexible premium policy

VUL insurance that, within set limits, allows

you to pay as much premium as you want,whenever you want.

Free-look period

A period of time (10, 20 or 30 days) after the

delivery of the policy, during which the

owner may review the VUL policy and return

it for a refund (typically the policy value, or

premium paid).

General account

An account that holds all of an insurers

assets other than those in the separateaccounts. (See also: separate account)


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Illustration

A hypothetical example used to show how

the death benefit, cash value, and net

surrender value of a variable life insurance

policy would change with different rates of

hypothetical investment performance over an

extended period of time.

Insured

The person whose life is insured by the

policy. That person may or may not be

the policyowner.

Interest income

Income derived from an instrument of debt,

such as a bond.

Investment management fees

The fees that each mutual fund portfolio in

which a variable investment option invests is

assessed to pay for the cost of providing

professional money management. The

amount of this fee varies by portfolio.

Life insurance

A contract between an insurance company

and an individual, generally guaranteeing

payment of an amount of money to the

beneficiary(ies) on the insureds death. (See

also: variable universal life insurance)

Loan amount

The total amount of all outstanding policy

loans, including both principal and interest due.

Loan value

The amount which can be borrowed at a

specified rate of interest from the issuing

company by the policyholder using the value

of the policy as collateral. If the policyholder

dies with the debt partially or fully unpaid,

then the amount borrowed plus any interest

is deducted from the death benefit payable.Owner

Person who has ownership rights and

privileges of the policy. (see Policyowner)

Partial withdrawal (see also Surrender)

Taking part of the money in the VUL; may resultin withdrawal or surrender charges. Partialwithdrawals may reduce the VULs cash valueand death benefit amounts, and may create anincome tax liability.

PolicyA written contract of insurance.

Policyowner

The person(s) typically responsible for making

premium payments. This person has all

ownership rights, including the rights to

make investment decisions, transfer funds,

make withdrawals, name beneficiaries, and

surrender the policy.

Portfolio

An underlying mutual fund in which acorresponding variable investment option

invests under the VUL policy. (See also:

variable investment option.)

Portfolio manager

The investment professional responsible for

managing the securities within a portfolio

while adhering to the portfolios stated

investment objective and policies.

Premiums

All payments made under the policy otherthan loan repayments.

Prospectus

A legal document containing information

about the specific VUL insurance product for

sale. The prospectus contains information on

the investment objectives, risks, sales charges

and management expenses, services offered,

as well as other information.

Reinstatement

Restoring a lapsed policy and coverage. Some

companies require evidence of insurability

and payment of past due premiums and

interest to reinstate some policies.


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Rider

An amendment to a policy that provides

additional specific benefits or amounts of

coverage to a policy (for example, an

accidental death benefit rider).

Separate account

Holds assets which are invested in your VUL

policys variable investment options. The assets

are literally held separate from the general

assets of the insurance company. Any money

held in separate accounts is not accessible to

creditors or others making claims against the

insurance company.

Subaccount

(see Variable investment option)

Surrender

The termination of a policy at the option ofthe policyowner. Canceling your policy

completely and receiving the current value

of your VUL policy, less any surrender charges,

other fees, or taxes.

Surrender charge

The charge some issuers assess for taking

withdrawals or surrendering the policy in the

early years of the policy.

Tax-deferred

The postponement of tax liability onaccumulated earnings until a taxable

distribution from a policy is made.

Transfers

The ability to make a transfer between the

variable investment options available within a

particular VUL policy. You can make transfers

in dollar amounts or percentages.

Underwriting

The process of selecting applications for

insurance and classifying them accordingto their degrees of insurability so that

the appropriate premium rates can be

charged. The process includes rejection

of unacceptable risks.

Universal life insurance

An interest-sensitive, flexible-premium policy

that provides protection under a contract

that separates the protection and

savings components.

Variable investment options

The subaccounts of the separate account that

supports a VUL policy. A typical VUL offers a

range of variable investment options which

invest in underlying mutual fund portfolios

which have investment objectives that range

from conservative to aggressive.

Variable universal life insurance

A form of universal life insurance that allows

the policyowner to invest the cash value in

a wide variety of investment options without

any minimum guaranteed rate of interest orminimum cash surrender value. A fixed

account option may also be available which

provides a minimum guaranteed rate

of interest.

Whole life insurance

Life insurance designed to stay in force

throughout ones lifetime, provided that

premiums have been paid as specified in

the policy.

1035 ExchangeNamed for a section of the Internal Revenue

Code, a 1035 exchange enables individuals to

transfer assets from one life insurance or

annuity contract to another without incurring

income taxes. Life insurance may not be

transferred into an annuity.


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Life insurance products are issued by ReliaStar Life InsuranceCompany (Minneapolis, MN), ReliaStar Life Insurance Companyof New York (Woodbury, NY) and Security Life of DenverInsurance Company (Denver, CO). Variable universal lifeinsurance products are distributed by ING America Equities, Inc.Only ReliaStar Life Insurance Company of New York is admitted,and its products issued within the state of New York. All aremembers of the ING family of companies.

These materials are not intended to be used to avoid taxpenalties, and were prepared to support the promotion ormarketing of the matter addressed in this document. Thetaxpayer should seek advice from an independent tax advisor.

Variable insurance products are subject to investment risk, arenot guaranteed and will fluctuate in value. In addition, there isno guarantee that any variable investment option will meet itsstated objective.

2009 ING North America Insurance Corporationcn34557012010

ReliaStar Life Insurance Company20 Washington Avenue SouthMinneapolis, MN 55401

ReliaStar Life Insurance Companyof New York1000 Woodbury Road, Suite 208Woodbury, NY 11797

Security Life of DenverInsurance Company1290 BroadwayDenver, CO 80203

buyers guide variable universal life-1021884

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