Introduction to Introduction to Whole Life Insurance

John PerreRegional Life Sales Manager

• 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?

Agenda

• Where does it fit?• Dividends• Features• Sales Concepts• Summary

• Equitable Life is the largest federally regulated mutual life insurance company in Canada.

• Our participating whole life policyholders

Introduction to Equitable Life

• Our participating whole life policyholders have received dividends every year since we launched participating whole life in 1936.

• 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

Benefits of dealing with a Mutual Company

• 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

The evolution of whole life insurance

– Term → Whole Life → Universal Life

– First whole life introduced in 1762

Introduction to Participating Whole Life

– 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

36%31%

33%

Univeral Life

Whole Life

Term

Source: 4th Quarter 2010 LIMRA Canadian Individual Life Insurance Sales

Canadian Life Insurance Sales - Premiums

Sales by Total Annualized Premium

29%35%

2012

Source: 4th Quarter 2011 LIMRA Canadian Individual Life Insurance Sales

36%

Term Whole Life Universal Life

Canadian Life Insurance Sales

Number of Policies

as at December 31, 2010

Source: 4th Quarter 2010 LIMRA Canadian Individual Life Insurance Sales

26%

19%

55%

Univeral Life

Whole Life

Term

Canadian Life Insurance Sales - Policies

Sales by Policy Count

25%

2012

Source: 4th Quarter 2011 LIMRA Canadian Individual Life Insurance Sales

54%

21%

Term Whole Life Universal Life

Term Insurance Par Whole Life Insurance

PremiumPremium

Term Life vs Whole Life

Premium

Death Benefit Cash Value Death Benefit

Participating Whole Life

Permanent need

Higher cost but opportunity to use dividends to potentially reduce the premium

Term Insurance

Temporary need

Lower initial cost

The Key Differences

premium

Accumulates a cash value

Eligible to receive dividends

No cash value

Not eligible to receive dividends

Convertible to permanent insurance

Par Whole Life Universal Life Insurance Insurance

Monthly (unbundled) ChargesPremium

Whole Life vs. Universal Life

Monthly (unbundled) ChargesPremium

Death Benefit Cash Value Death Benefit Cash Value

• Low-cost permanent life insurance protection• Flexibility

– Premium Holiday– Riders and Benefits– Death Benefit Configurations

The Key Similarities

– Death Benefit Configurations

• Tax-deferred Cash Accumulation• Access to Cash

– Withdrawals– Policy Loans– Collateral Loans

• Guaranteed “limited pay” periods

Participating Whole Life

The company manages the cash accumulation

•Hands-off investment

Dividend Scales can increase or decrease, but can never be “negative”

Universal Life

The client/advisor manages the cash accumulation

•More investment choices/decisions

Account values can earn negative and positive interest

The Key Differences

decrease, but can never be “negative”

Premium is “bundled”

Little premium flexibility

Guarantees

•Cash Values

•Death Benefits

•Premiums

and positive interest

Premium is “unbundled”

A lot of premium flexibility

Limited Guarantees

•COI Charges

•Administration Charges

•Minimum Interest rates on some GDAs

The Situation

– Male, age 43, non-smoker

– Low risk tolerance

The Need

Whole Life or UL? – Case Study

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

Equimax®

• Equimax Estate Builder

Equation Generation® IV

• Premiums payable for 20 years

• Level Protector as Death Benefit

Whole Life or UL? – Case Study

The Choices

• 20 Pay

• Dividend Option – EnhancedProtection with Lifetime guarantee

• $650,000 of basic with $100,000 of Enhancement

• Excelerator Deposit Option added toincrease premium to $20,000

• Level Protector as Death Benefit Option

• YRT as COI type

• Portfolio Interest Option electedearning 4.0% interest (plus investment Bonus)

• 8% increases to tax shelter the depositand growth

Equimax Estate Builder*

Equation Generation IV

Premium $20,000 $20,000

Death Benefit $750,000 $750,000

Guar. CV Age 65 $409,500 N/A

Age 85 $557,700 N/A

Total CSV Age 65 $764,865 $745,987

Age 70 $1,025,446 $961,211

Age 85 $ 2,125,683 $2,038,313

Total DB Age 65 $1,369,362 $1,160,907

Age 70 $1,653,583 $1,348,160

Age 85 $2,619,828 $2,038,313

*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. Tax-sheltered growth • Dividends accumulation on a tax-sheltered basis. (depending on dividend option selected.)

• 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 a cash reserve • 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)

• Equimax® is a Participating Whole Life Insurance Policy

• Dividends are one of the UNIQUE features

Reaping the rewards of ownership

UNIQUE features

• Par policyholders are eligible to share in the distributable earnings of the PAR Account in the form of dividends.

• Death benefit structure for all Dividend Options except Enhanced Protection

Basic Permanent Protection

• Paid in Cash

– Appealing to clients who like to get a little something back each year

• Premium Reduction

Dividend Options

• Premium Reduction

– Appealing to clients who are looking for a potentially cost-effective way to pay for their permanent insurance

• On Deposit

– Operates like a savings account

– Dividends earned are automatically deposited with Equitable Life® and earn a competitive

Dividend Options

with Equitable Life® and earn a competitive interest rate

• Paid-Up Additions (PUAs)

– Dividends are used to purchase PUAs which are added to the basic

Dividend Options

are added to the basic permanent insurance

– The Cash Value of PUAs accumulate on a tax-deferred basis

• Enhanced Protection

– Consists of a mix of permanent life insurance and one-year term insurance

– Two guarantee options:10 Year and Life

Dividend Options

– Two guarantee options:10 Year and Life

• Enhanced Protection

– Dividends are used to purchase One Year Term Insurance and PUAs

– PUAs replace the One

Dividend Options

– PUAs replace the One Year Term Insurance

– Cash value of PUAs accumulate on a tax-deferred basis

• Enhanced Protection

– Two Enhancement Guarantees

• 10-Year Guarantee

• Lifetime Guarantee

Dividend Options

• 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?

• Mortality and lapse experience

– Cancelled policies (lapse assumptions)

– Paid Death Benefits

The Participating Account

• Taxes and expenses

– Difference between expected and actual

– Can result in either a positive or negative impact to dividends

Investment performance

The Participating Account

As of September 30, 2011

Strong performance of the PAR Account

*data as of December 31, 2010

NEW! Understanding PAR whole life

1038

How dividends affect par whole life insurance

Impacts of Dividends

Actual results will vary.

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”

Premium Offset

– Policy can “pay for itself”

– Dividends are NOT GUARANTEED. Watch for dividend scale changes

• Dividends may result in tax reporting:

– At the time they are paid or credited

Taxation of Dividends

credited

– Annually as income is generated on accumulated dividends on account

– Upon disposition (of either the dividend or the policy)

Equimax – What’s New?

Choice of two plan types

Equimax – Plan types

Equimax Estate Builder

Equimax Wealth Accumulator

Higher long-term value. Ideal for covering estate taxes and fees.

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?

Choice of two premium payment options– Life

• Level premiums guaranteed for life and payable for the life of the policy

Equimax – Payment options

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.

Paid-Up Additions• Total death benefits and

cash values increase as soon as the extra deposits

Enhanced Protection• Policy may reach

the Dividend Conversion point earlier

Excelerator Deposit Option (EDO)

are madepoint earlier

• Single Life

• Joint First-to-Die (2 lives, adults only)

• Joint Last-to-Die (2 lives, adults only)

Coverage Options

• Joint Last-to-Die (2 lives, adults only)

Guarantees– Death Benefit– Premiums– Cash Values – Reduced Paid-Up Insurance

Guarantees & Flexibility

– Reduced Paid-Up Insurance

Flexibility– Premium Holidays– Cash Accessibility

• Withdrawals• Policy Loans• Collateral Loans

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

Optional Riders and Benefits

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

• Estate Creator

• Tax Protector

• The Lasting Gift

Sales Concepts

• The Lasting Gift

• Use a tax-sheltered vehicle to create aninstant estate

• Preserve an estate

Estate Creator

• Preserve an estateby covering tax bills

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

Estate Creator – Case Study

for his 3 children to share

The ChoicesConservative Investment

• GICs

• Invests $9,492.50/year 20 years, 6% before tax interest rate

Equimax Estate Builder

• $250,000 Death Benefit, PUAdividend option

• Premiums $9,492.50/year for 20years

Equimax

Estate Builder

20-Pay

Alternative

Investment

@ 6% (pre-tax)

Estate

Advantage

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

Proceeds used to cover:

– Final expenses

– Capital gains taxes

Tax Protector

– Income taxes

– Probate fees

The Situation– A couple:

• Male, non-smoker, age 51 • Female, non-smoker, age 53 • $300,000 tax liability on the last death

Tax Protector – Case Study

• $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

The Solution– $300,000 Equimax Estate Builder, Joint Last-to-

Die with Life Pay Premium– Enhanced Protection with Lifetime Guarantee– Premium of $4,277 annually (This is less than 2% of their

Non-Registered Assets)

Tax Protector – Case Study

Non-Registered Assets)

– Clients protect their estate by transferring taxable non-registered assets to a tax-exempt life insurance plan

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

Tax Protector – Case Study

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– 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

The Situation– Proud grandmother of 2 year

old Natalie

– $100 a month budget

Lasting Gift – Case Study

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

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)

Lasting Gift – Case Study

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

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

Why a mutual insurance company?

– All Par policyholders are eligible to share in the success of the company

– Par Account is not diluted by shareholder transfers

• The largest federally regulated mutual life insurance company in Canada.

• Our Par policyholders are eligible to share in the success of the company

Why Equitable Life?

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)

How Equitable Life can help

– Equitable Sales Illustrations system

• Easy to use

Equitable Life Advantage

• 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 a great enhancement to

your business

Whole Life, Equitable Life & You

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,

Disclaimer

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?Questions?