prosperity Universal Life product guideivari.ca/files/WFG-LP1213.pdf · prosperity universal life...

prosperity Universal Life™ product guide

iiprosperity Universal Life product guide

About this guideThis guide is effective September 26, 2011, and contains product information for prosperity policies.

This material has been prepared for the use of advisors in conjunction with other product information. The intent of this guide is to provide an overview of the prosperity universal life™ insurance plan. For a precise understanding of the rights and obligations of the policy owner and ivari, please refer to the prosperity universal life insurance contract.

IMPORTANT: This guide is not designed to provide tax, legal, accounting or other professional advice. If you are not a qualified tax advisor, we recommend that you advise your client to seek the advice of a tax professional. It is the owner’s responsibility to determine the consequences to him or her under relevant income tax legislation, and ivari assumes no liability to the owner.

The sections that reference tax information provide a summary only of the current principal Canadian federal income tax consequences arising under the Income Tax Act (Canada) and the regulations thereunder to prospective owners of prosperity policies who are residents of Canada.

The tax information contained in this guide is based upon the provisions of the Income Tax Act (Canada), the regulations thereunder currently in effect, all proposed amendments thereto publicly released by the Department of Finance (Canada) prior to the date of printing this guide and upon ivari's understanding of the administrative practices and policies of the Canada Revenue Agency (CRA) currently in effect. The tax information, wherever contained in this product guide, neither anticipates any changes in law, whether by legislative, governmental or judicial action, nor does it take into account provincial or foreign income tax legislation or considerations.

About the guarantees

ivari makes certain guarantees with respect to prosperity universal life plans. These guarantees do not include:

• The portion of the total fund value attributable to a particular Index Interest Option. This varies in accordance with fluctuations in the daily interest rate formula for each Index Interest Option.

• The interest rate applicable to the Index Interest Options. In fact, this interest rate may be either positive or negative, depending on the performance of a particular index. A negative interest rate will reduce the benefits and values under this policy, which include but are not limited to the total fund value, the cash surrender value, the net cash surrender value, the maximum benefit amount for a Living Benefit and the death benefit.

ivari does not accept responsibility for any errors or omissions contained in these materials. The information contained within this document is current as of the date of publication and is subject to change.

iiiprosperity Universal Life product guide

prosperity universal life: a universal life insurance product that balances the need for protection with the opportunity for long-term wealth accumulation, seamlessly. Please refer to our universal life contract and the Product Guide for full details.

prosperity universal life

Target market prosperity universal life is designed for families needing income and debt protection today while accumulating wealth for the future.

Insurance coverages Issue amounts and ages

Coverage options Single JointMultiple Life

Minimum issue amounts Adults: $50,000 (16 years and over)

Joint life: $100,000

prosperity Term Riders:

$50,000

Level COI Riders: $50,000

Juveniles: $50,000 (0–15)

Non-medical underwriting:

• Up to $500,000 for ages 45 and under

• Below $250,000 for ages 46–55

Preferred underwriting:

$500,001

Death benefit options Level (with ART COI only) orIncreasing (with ART or level COI). Only one option can be selected per policy

Cost of Insurance (COI) option

Annual Renewable Term (ART) to age 100 Level COI

Policy fee $10 per month, no extra charge for extra lives

Premium tax Percentage of each premium payment based on current provincial premium tax rates, in the proposed owner's province of residence.

Joint life

Joint life coverage options

Joint last-to-die• Deductions to last death (up to 5 lives).• Fund value payout options on each death or last

death allowed on policies rated up to 300%.• Single life insurance option.

Joint first-to-die (up to five lives)• Survivor option.• Additional death benefit.• Switch option from joint first-to-die to joint last-to-

die deductions to last death (two lives).

Issue ages (age nearest birthday)

Non-smoker: 0 to 80

Smoker: 16 to 80 (Non-smoker classification for juveniles)

Multiple life

• Up to 15 insurance coverages.• Fund value payout options on each death, last death,

or proportionate, allowed with insureds rated up to 300%.

• Severance option allows coverages to be severed from the policy but continue as issued.

• Substitution of primary life insured.

Riders

prosperity Term Riders 10-, 20- and 30-year renewable and convertible terms

Investment choices

Daily Interest Option Treasury Bill Interest Option – Based on Government of Canada Treasury Bills

with terms up to one year.Fixed-Rate Interest OptionsFixed-Rate Interest Options – Based on Government of Canada Bonds with

terms of 1-, 5-, and 10- years.Guaranteed minimum returns• 5- & 10-year Fixed Rate Interest Options have minimum guaranteed interest

rates of 1.75% and 2.75% respectively.Combination of Passive and Managed Index Interest OptionFour portfolio options based on a blending of major market indices and leveragingForesters Asset Management's fixed-income expertise.• ivari Asset Allocation Portfolio

Twenty-four Interest Options providing passive and managed solutions, including:• six passive total return Interest Options• fifteen third-party managed options that index historically consistent, above-

average performance from managed investment Canadian mutual funds• three imaxx mutual funds that feature outstanding Canadian and international

investment managers with proven performanceManaged Portfolio OptionsA lineup of 13 portfolio Index Interest Options from top Canadian actively managed mutual funds: • AGF Elements – Four asset allocation portfolios that are constructed with

complementary funds and are fine-tuned quarterly to capitalize on market trends.• Franklin Templeton Quotential – Four asset allocation portfolios that offer

diversification by asset class, market capitalization, geographic region and investment style.

• ivari CI Portfolios - Four asset allocation portfolios that offer a balanced asset mix that are not dependent on any one asset class or security to provide returns.

ivprosperity Universal Life product guide

Interest Option fee guarantees

Interest Option Fee is guaranteed not to change for the Managed Index Interest Options. We also guarantee, regardless of market conditions, the availability of at least one Index Interest Option with total fees of 3% or less, and a Fixed-Rate Interest Option with a 2.75% minimum interest rate.

Investing excess funds Side Account holds excess premium funds and automatically transfers them into the policy as tax-exempt room builds.

prosperity bonuses

Persistency Bonus credited in years 5+ with a guaranteed formula based on continued payment of minimum premium amounts.Performance Bonus credited in years 5+ with a guaranteed formula based on qualification for the Persistency Bonus and the policy’s rate of return equal to or greater than 7%.** The rate of return is net of the Interest Option Fee, where applicable the management fee and MER, and the related taxes of the underlying designated index.

Plan flexibility

Policy loans • Policy loans available for amounts up to the fund value less surrender charges, any outstanding loans, any outstanding loan including interest, and twelve monthly deductions

• 2% guaranteed spread between loan rate (10%) and rate credited on Security Account (8%)

• Internal loan repayment provision available in year 15

Withdrawal order for monthly deductions

Monthly Deduction Interest OptionPolicy owner picks one Interest Option, otherwise the default withdrawal order applies

Surrender charges Duration: 10 years Coverage surrender charges (also applies on face amount reductions): multiples of the minimum premium varying by policy year – 1, 2, 3, 4, 5, 4, 2, 2, 2, 1Partial Withdrawal Surrender Charges: Percentage of the withdrawal: 5%, 4%, 3% years 3–10

10% free partial withdrawal

After the second anniversary, the client can withdraw up to 10% of the net fund value. The maximum amount available for a free surrender is equal to the lesser of:• 10% of the net fund value• the net fund value, minus three monthly

deductions, minus half the total policy coverage surrender charges

Optimizer Eligible with face amounts of $100,000 or moreEarliest start year 11Maximum decrease of 15% years 11-20

Optional benefitsAccidental Death and Dismemberment

Pays an additional benefit amount if the life insured dies or loses sight or limbs as a direct result of an accident (not available with joint life coverages).

Children’s Insurance Rider

• Provides low-cost term coverage on the lives of the life insured’s children (including stepchildren or legally-adopted children).

• Allows each child to convert his or her coverage for up to five times the initial coverage amount, subject to certain conditions.

• Provides paid-up term insurance if the life insured dies before the children, prior to their 25th birthday (other conditions may apply).

Waiver and Payor Waiver of Planned Premium

• Premiums, up to a maximum of $1,000 per month, are waived if the insured becomes totally disabled before age 65.

• The amount being waived will be the lesser of the average premiums paid during the 12-month period before disability and $1,000.

• Payor Waiver Rider is also available to insure the payor on a child’s policy (usually a parent), up to $400 per month.

Built-in, no-cost additional benefits

Living Benefits Living Benefits enable your clients to access their fund value by making a request for a lump sum benefit amount upon disability. The policy definition of “disability” includes both (1) “occupational disability” and (2) “critical condition disability” (see contract for 26 covered conditions). There is no age restriction for this built-in feature, which uses new industry-standardized critical illness definitions.

Compassionate Assistance Program (CAP)

This non-contractual feature currently offered by ivari allows an owner to receive a loan against the death benefit of their policy if the life insured is suffering from a terminal illness and has a life expectancy of 2 years or less. Upon death of the life insured, the death benefit payable to any beneficiaries will be reduced by the loan amount, accrued interest and any premiums waived after the loan was issued. (Living Benefit must first be exhausted.)

1prosperity Universal Life product guide

ContentsInsurance coverages 3Coverage and rider issue ages and amounts 3

Coverage types 4

Death benefit options 4

Cost of Insurance (COI) 6

Ratings 8

What is a rating? 8

Extra percentage tables 8

Permanent and temporary flat extra premiums 8

Reconsideration of ratings and declines 8

How do ratings affect the monthly deductions and minimum premium? 9

Policies with multiple universal life coverages 9

Multiple universal life coverages 9

Base universal life coverage 10

Multiple life special options 10

Examples of how Fund Value Payout Options work 10

Change of Primary Life Insured Option 12

Joint life coverages 12

Joint last-to-die 13

Deductions to first death 13

Deductions to last death 13

Switching between joint last-to-die deduction options 13

Joint first-to-die 16

Survivor Option 16

Additional death benefit 16

Single Life Insurance Option 17

Switching between joint options 17

Riders 18

Level Cost Rider 18

prosperity Term Riders 18

Investment choices 19 T-Bill Interest Option and Fixed-Rate Interest Options 20

Index Interest Options 21

Investor Profile Questionnaire 26

Understanding rates of return 28

Policy rates of return 28

prosperity Bonuses 30A closer look at the prosperity Bonuses 30

Optimizing investments while maintaining tax-exempt status 31Tax-exempt testing and policy anniversary processing 31

Tax-exempt testing 31

Maximum premium estimate 32

Optimizer Option 33

Eligibility 33

How the Optimizer works 33

Illustrating Optimizer on LifeView 33

Side Account 35

Side Account as a “safety net” 35

How the Side Account works 35

Plan flexibility 36Easy access to funds when needed 36

Policy loans 36

Policy and coverage surrenders 37

Withdrawal order 40

Taxation of loans, withdrawals and surrenders 40

Taxation of policy loans 40

Easy Interest Option changes when needed 41

Market Value Adjustments (MVAs) 41

Premium flexibility 42

Planned periodic premiums 42

Minimum premiums 42

Maximum premiums 43

Easy insurance coverage adjustments when needed 43

Increasing the face amount 43

Decreasing the face amount 44

COI option changes 44


Living Benefits (including standardized industry definitions) 45Living Benefits features 45

Qualification 45

Types of disability 45

Benefit amount 45

Payment of benefit amount 46

Face amount adjustment 46

Claims for Living Benefits 46

Occupational disability claim 46

Critical condition disability claim 46

Continuous disability 46

Living Benefits: Definitions and highlights 46

Exclusions for disability claims 47

Optional benefits 48Accidental Death and Dismemberment Rider 48

Schedule of losses 48

Definition of "injury" 48

Termination 48

Exclusions 48

Children’s Insurance Rider 49

Coverage availability 49

Waiver of Planned Premiums Rider 51

Common terms and conditions for Waiver Riders 51

Payor Waiver of Planned Premiums on Death or Total Disability (PWPP) Rider 53

Common terms and conditions for the Payor Waiver Rider 53

Plan setup and policy administration 55Administration procedures at policy issue 55

Illustrations 55

Insurance Application and Supplement to the Insurance Application 55

Premium allocation preferences 55

Cover letter 56

Financial underwriting requirements for businesses 56

Issuing policies 56

Claims processing 56

Payment of death claims 56

Monthly deductions 57

Lapse and reinstatement process 57

Shortage 57

Premium Holiday 57

Conditions 58

Lapse 59

Reinstatements 59

Understanding universal life 60What is universal life insurance? 60

Advantages of UL insurance 60

Disadvantages of UL insurance 60

How prosperity universal life insurance works 61

Income protection for today 61

Asset accumulation for tomorrow 61

The situation 61

The opportunity 62

Options for gaining access to the policy cash surrender value 62

Tax-free Living Benefits 62

An example of how prosperity UL works with a level death benefit 63

prosperity UL features 64

Structuring prosperity UL to provide the protection needed today, with the opportunity for investments to increase dramatically in the long term 65

How to optimally achieve your client’s dual protection and accumulation needs with prosperity UL using ART cost of insurance 65

Comparing and illustrating UL plans 66

Choosing a rate for your illustration 67

Historical return analysis for Canadian equities and bonds 67

Other considerations when illustrating competing UL insurance 68

Glossary of common terms 69


SECTION 1

Insurance coveragesprosperity UL provides a number of options to accommodate different insurance needs for your clients at different stages of life.

Coverage and rider issue ages and amounts

Coverage Options Minimum face amount Maximum face amountMinimum issue age

Maximum issue age

Single Life$50,000**

$20,000,000 (ART COI)

$500,001* (Level COI)0 80

$25,000 juveniles (ages 0 to 15)

Joint life $100,000**

Multiple lifeMinimum issue amounts apply based on single or joint coverages added as part of the multiple life coverage.

Rider Options

prosperity10Single life: $50,000**

Joint life: $100,000**

$10,000,000 0 70

prosperity20 $10,000,000 0 60

prosperity30 $10,000,000 0 50

Level Cost RiderSingle $50,000**

Joint $100,000**$500,001* 0 80

* The total face amount for all level cost of insurance coverages and Level Cost Riders for an insured under all prosperity UL policies may not exceed $500,001.

** Preferred underwriting is automatically applied when the underwriting requirement on a life insured is $500,001 and greater and the insured is 16 years of age or older.

Illustrations with face amounts above the stated maximum must be reviewed by ivari’s Head Office.

Any LifeView illustration above the stated maximum will not be valid without Head Office review, and a disclaimer will be printed on the illustration report pages.


Coverage typesCoverage types describe combinations of death benefit and the Cost of Insurance (COI) option. The type selected by the client is noted on the Data Page of each issued policy and other ivari reports.

Death benefit option COI options

Level death benefit ART to 100

Increasing death benefit ART to 100

Level to 100

Only one death benefit option may be selected per policy.

Death benefit options

prosperity UL provides level and increasing death benefit options to reflect different insurance needs and budgets. Regardless of the death benefit option selected, the total death benefit is the net amount at risk (NAAR, defined below), plus the fund value, less any outstanding policy loans, accrued interest, withdrawals and premiums due.

However, with some of the Fund Value Payout Options (page 14), the fund value may not always be included with each death benefit.

Only one death benefit option may be selected per policy.

Increasing death benefit

The death benefit includes the face amount (the amount of insurance coverage selected), plus the fund value, less any outstanding policy loans, accrued interest, withdrawals, and premiums due. The net amount at risk is equal to the face amount selected at issue and remains constant, subject to tax-exempt increases (discussed in Tax-exempt testing on page 31).

The fund value is paid upon death, in addition to the face amount, unless a different Fund Value Payout Option is specified (see Joint life coverages or Multiple universal life coverages.)

This option is available with all Cost of Insurance (COI) options.

= NAAR

= Fund value

= Death benefit

Avoiding pitfalls• The death benefit is affected by the performance

of the Interest Options. A negative interest rate will reduce the benefits and values under this policy, which include, but are not limited to, the total fund value, the cash surrender value, the net cash surrender value, the maximum benefit amount for a Living Benefit and the total death benefit, but the death benefit will never fall below the face amount if the increasing death benefit option is selected.

• As the ART cost of insurance can become very expensive as the insured gets older, potentially depleting the fund value if the face amount is not eventually decreased it is recommended that the Optimizer feature (page 33) be used to reduce the face amount once the need for insurance protection reduces. Alternatively, consider switching to the level death benefit option, which best balances the need for protection and accumulation.

Potential market• Clients who have a longer-term and/or increasing

need for coverage.

• Clients who have higher tax sheltering needs.

• Fund Value Payout Options are available to increasing death benefit policies with multiple universal life coverages and/or joint last-to-die coverages.


During the Cost of Insurance period (up to age 100)

The death benefit is equal to the face amount or the proportionate fund value, whichever is greater. The NAAR is equal to the face amount less the fund value. As the fund value increases, the NAAR decreases, which reduces the amount of insurance risk for which COI is charged. The fund value is not guaranteed, and may increase or decrease, depending on market conditions and the volatility of the Interest Options chosen. The annual renewable term (ART) COI rates per $1,000 of NAAR will increase annually until age 100.

Example: If the amount of insurance is $150,000 and the fund value for that coverage is $25,000, the NAAR is $125,000. The death benefit paid would be $150,000, but monthly costs would be based on the guaranteed COI rate, multiplied by the NAAR of $125,000.

After the Cost of Insurance period (after age 100)

The death benefit is equal to the NAAR as of the last day of the COI period, plus the proportionate fund value. The death benefit effectively switches to an increasing death benefit option. The death benefit, thereafter, is affected by the performance of the Interest Options. However, the death benefit cannot fall below the reset NAAR.

Example: At issue, if a policy with a level death benefit of $150,000 is sold, the NAAR would be $150,000 and the fund value would be zero. Let’s assume that on the last day of the COI period (age 100) the fund value has grown to $160,000. The NAAR of the policy would be zero and, at this point, the death benefit would be switched to an increasing death benefit. The NAAR would be reset to zero with a fund value of $160,000. Monthly COI costs

Avoiding pitfalls

Under the level death benefit option, after the end of the COI period (after reaching age 100), the death benefit switches to an increasing death benefit option. Thereafter, the death benefit is affected by the performance of the Interest Options. A negative interest rate will reduce the benefits and values under this policy, which include, but are not limited to, the total fund value, the cash surrender value, the net cash surrender value, the maximum benefit amount for a Living Benefit and the total death benefit. If the fund value has exceeded the original face amount, there may be no guaranteed face amount, and the death benefit will be entirely a function of the total fund value. Clients in this situation should consider switching to Fixed-Rate Interest Options and other low-risk options to minimize this risk.

On a multiple life policy with a level death benefit option, the proportion of the fund value paid with each death decreases the fund value. Also, the cost of any other coverages that have not yet reached the end of the COI period will continue to be deducted. The face amount may increase under the level death benefit option where there are exempt-test face increases (page 32).

Potential market

This plan design is especially efficient when clients have a level need for insurance protection and an increasing need for wealth accumulation.

In general, the level death benefit also makes insurance more affordable as the client ages, since the NAAR, and in many cases the total COI deducted, decreases as the fund value increases. However, this depends on the performance of the fund value and the applicable COI rates in later years.

Those who wish to minimize the COI in later years and who have decreasing insurance needs may consider the Optimizer feature (page 33).

would be zero and the death benefit would fluctuate with the fund value.

= NAAR

= Fund value

= Death benefit

Level death benefit

This option is available only with ART COI.

This option keeps the face amount at a fixed, level amount of coverage. Therefore, as the investment portion of the plan grows, the NAAR decreases, which may result in decreasing the COI over time.


Cost of Insurance (COI) • Annual renewable term (ART) to 100 COI with

rates increasing yearly on an attained-age basis until age 100. Cost of insurance rates for the applicable coverage will be $0 at the end of the applicable cost of insurance period. While the COI period ends at age 100, the coverage remains in force thereafter until death.

ART to 100 COI provides clients with the lowest COI in early policy years, which allows for maximum fund accumulation. ART 100 is designed to work best with the level death benefit and Optimizer Options.

• Level COI:* term to 100, with rates based on issue age. Level rates are guaranteed for the COI period, to age 100, providing the insurance coverage does not change. While the COI period ends at age 100, the coverage remains in force thereafter until death.

Note that the level COI option is only available with an increasing death benefit option.

Note that joint last-to-die, with deductions to first death, is only available with an increasing death benefit with level COI.

Mixing COI options

COI options can be mixed when a policy is issued on multiple lives, if your client selects the increasing death benefit option. This can be illustrated on LifeView by beginning with a base universal life coverage and then adding a new coverage with a different COI option. Note that level COI is only available with the increasing death benefit.

Key benefits

For policies with an Increasing Death Benefit option, clients may combine coverages with ART and coverages with level COI.

Avoiding pitfalls• For clients who pay with pre-authorized debit

(PAD), ivari will automatically increase the PAD amount each year to reflect the increased COI rates for that policy year, if the policy is in danger of going into shortage within a 12-month period of the anniversary. This is done to reduce the risk of the policy lapsing. We plan to inform clients about the increased amounts approximately 30 days prior to their policy anniversary. This automatic increase is explained in the PAD agreement in the Insurance Application and our current Request for PAD form (PS375). Please ensure your client reviews this component of the Application and understands the implications.

• If paying on a direct billing basis, ivari will automatically increase the amount displayed on the billing notice that is sent to clients approximately 20 days prior to their policy anniversary.

• Projected values on illustrations using ART are very sensitive to investment returns. It is critical to illustrate at appropriate interest rates (See “Comparing and illustrating UL plans” Section 9 Understanding Universal Life).

• Once the need for protection decreases, the Optimizer Option should be considered in order to ensure maximum wealth accumulation and prevent the increasing ART cost of insurance from eroding the fund value. Please refer to Section 4 “Optimizing investments while maintaining tax-exempt status.”

Potential market

ART to 100 COI will appeal to clients with level or decreasing protection needs and long-term accumulation needs, especially when combined with the Optimizer Option. It provides them with the lowest COI in early policy years, which allows for faster fund accumulation.

Level COI is attractive for individuals who have a permanent insurance protection need.

* The total face amount for all level COI coverages and Level Cost Riders for a life insured under all prosperity UL policies may not exceed $500,000.


prosperity UL prosperity term

$50,000 to $99,999 $ 50,000 to $99,999

$100,000 to $250,000 $100,000 to $250,000

$250,001 to $500,000 $250,001 to $500,000

$500,001 and up $500,001 to $999,999

$1,000,000 to $2,499,999

$2,500,000 and up

COI deductions

The COI is calculated and deducted on a monthly basis from the tax-deferred fund value, regardless of the mode of premium payment. The monthly COI is calculated as the Net amount at risk (NAAR) multiplied by the applicable annual COI factor (found in the policy data page of the contract), divided by 12. With the level death benefit option, the NAAR fluctuates from month to month; therefore, the COI will fluctuate in tandem.

Switching COI options

In some instances, we allow the COI option for a particular coverage to be changed in a future year. (Please refer to “Plan flexibility” Section 5 in this guide for details.) The COI factors are guaranteed for the life of the policy unless there is a material change, such as a change of the life insured or the total face amount per life insured. Surrender charges will continue to apply and, for a switch from ART to Level COI, the surrender charges will be based on the original cost of insurance type after a switch.

The COI factors are expressed as a rate per $1,000 and vary by gender, smoking status, preferred underwriting classification (if applicable), amount of insurance and issue age (and attained age for ART) of the life insured. The monthly COI is adjusted by any applicable ratings. Monthly deductions include the monthly COI, rider costs and the policy fee.

Combined banding

The COI factor applicable to all coverages for a life insured on any given month will vary, based on the total face amount at the beginning of that month for the life insured. To determine the appropriate COI band for a life insured, we add the face amount of all coverages (including UL coverages, prosperity term and additional coverage riders) for the life insured. This “combined banding” approach can result in a discount at higher face amounts. Please note that this feature does not apply to joint life coverages.

Combined banding also determines the underwriting program and requirements that are applicable.

Key benefits

Combined banding is an attractive COI feature that is rare in the industry.


Ratings

What is a rating?

Certain factors such as our gender, age, family history, current conditions, lifestyle choices and whether or not we smoke can affect when we are likely to die. Depending on these factors, one individual may have a greater risk of dying earlier than another. If there is an increased risk of an individual dying earlier than normal, then the individual’s mortality is also considered to be higher than normal. To offset that risk, an individual who presents a greater than average risk with regards to mortality, may be charged a higher premium rate. In the insurance industry, individuals with a higher mortality are said to have Extra Mortality. The increased risk, and thus the extra premium charged, of an individual is quantified using one of two methods:

• Extra percentage tables

• Permanent and temporary flat extra premiums

Extra percentage tables

When there are health issues, for example, elevated blood pressure, the extra percentage tables are used.

The increased risk or Extra Mortality, of an individual is quantified as a percentage where 100% represents the normally expected health risk (mortality). This percentage is then applied to the standard premium or cost of insurance.

As an example, consider two individuals, Anne and Sally. Both are female, both age 35 and both are non-smokers. However, Anne has a health condition, which increases her risk of dying sooner than Sally, who is healthy. Thus, Anne would receive a rating for elevated mortality. Say that Anne’s health condition has a rating of 50%; this would mean Anne’s insurance policy would carry a rating of 150% (100% Normal Mortality + 50% Extra Mortality).

If Anne’s health condition improves over time, the rating may be reduced or removed if she applies to have it reviewed, and if the underwriting is favourable with regard to the entire medical history. An application for a rating review can be made at least two years after the rating was applied.

In some cases, when the risk is particularly high (typically higher than 400%), an insurance company may not be prepared to assume the risk and the proposed insured may be declined.

Permanent and temporary flat extra premiums

Permanent

This approach calls for a fixed extra premium per thousand dollars of sum insured/face amount over and above the standard premium charge. The additional mortality risk is likely to be present over a certain period of time.

For example, Bob has a history of reckless driving and has received five speeding tickets over the last two years. Because those who drive recklessly are more likely to die sooner than those who don’t, Bob will receive a rating. If Bob changes his driving habits and no longer speeds, he may apply after two years to have the rating removed or decreased.

Some avocations, such as scuba diving or mountain climbing, could draw an extra premium for the life of the policy or until the lifestyle of the insured has changed and an application is made to have it removed.

Temporary

Similar to permanent extra premiums, this approach also calls for a fixed extra premium per thousand dollars of sum insured/face amount over and above the standard premium charge. However, unlike a permanent flat extra, a temporary flat extra is charged on a temporary basis or for a designated period of time. The extra premium may only be charged for a fixed number of years.

For example, Gary is a hobby pilot and does not have enough experience time according to his record. In two years, he will have achieved his required number of experience hours. So, Gary receives a temporary rating for those two years, which will drop off automatically without the need for application or review.

Reconsideration of ratings and declines

If your client receives a rating, he or she may be eligible for future reconsideration of that rating. Likewise, if your client has been declined, there may be circumstances under which we would review that decision. Reconsideration will only be possible if the overall medical history and lifestyle have improved.

Reconsideration of medical ratings is not always possible. Some conditions are unlikely to improve over time. For example, consider Type 1 diabetes (insulin dependent).


Policies with multiple universal life coverages

Multiple universal life coverages

With prosperity UL, more than one universal life coverage can be included under the same policy without any additional policy fee.

Each coverage must satisfy the minimum and maximum face amount requirements. (See “Coverage and rider issue ages and amounts” on page 3.)

The main difference between multiple universal life coverages and a Level Cost Rider (see "Riders" on page 18 for more information) is that when calculating the death benefit or NAAR, no fund value is attributed to the face amount payable for the Level Cost Rider. As well, no surrender charges are applicable for additional coverage. Since there are no surrender charges associated with riders, the maximum tax-exempt room is lower than when using UL coverages.

Within the universal life contracts, a “primary life insured” is someone who is insured under a universal life coverage. There may be several “primary life insureds” on a policy having multiple universal life coverages. Each "primary life insured" will appear on the Contract Data Page as a "life insured." In general, upon the death of any life insured, his or her death benefit will be paid to the beneficiary specified for that coverage, and the policy will continue with the remaining lives insured, provided at least one primary life insured is surviving.

Under the level death benefit option, the fund value that is attributed to each coverage in order to calculate the NAAR and the associated COI is determined proportionately, based on the face amount for each coverage.

How do ratings affect the monthly deductions and minimum premium?

Any type of rating will increase monthly deductions from the fund value and minimum premium. However, extra percentage tables will not increase the minimum premium for ART COI coverages. The following table summarizes the type of rating that will increase the minimum premium.

The longer the client has Type 1 diabetes, the greater the risk of complications and thus the greater the mortality. As such, Type 1 diabetic ratings are unlikely to be eligible for reduction in subsequent years. Knowing that reconsiderations may be a possibility will help you deliver the rated policy to your client. It will also provide you with a basis to follow up with your client in the future with the chance to review the rating or to turn a declined individual into a client (insured).

Good to know

Generally, percentage and permanent extra premiums can only be reviewed after two years, and new medical evidence will be required. The change of the rating is subject to the new evidence received and the assessment by the underwriter at that time.

Good to know

For joint life policies, for the rating of any of the lives to be reviewed, new medical evidence is required on all lives insured. The rating reconsideration may be declined if any of the lives insured are no longer in the same risk class as when the policy was originally issued.

Good to know

For the review of certain lifestyle ratings, such as those related to an avocation, we will request only the appropriate questionnaires and will not require medical requirements or information. For other ratings, however, we will complete a full review, which can include medical, financial, travelling and lifestyle underwriting.

Type of ratingCOI type

Level ART

Extra Percentage Table Increases No Impact

Flat Extra Permanent Increases Increases

Flat Extra Temporary Increases Increases


The policy matures when the last universal life coverage terminates.

Only one death benefit option may be selected.

Base universal life coverage

The base universal life coverage is usually indicated as “Proposed Insured 1” on the Insurance Application or “Base Coverage” on the LifeView illustration software. There are certain privileges attributed to the base universal life coverage. For example, on a multiple life policy, the Optimizer Option, if selected, will reduce the face amount for the base universal life coverage only. As well, some riders and optional benefits are only available with the base universal life coverage, such as the Children’s Insurance Rider.

Multiple life special options

Fund Value Payout Options – Only with increasing death benefit option

Unless a different Fund Value Payout Option is specified, the death benefit will include the applicable proportionate fund value, based on the total face amount for the life insured. Proportionate fund value payout is specified in the contract and does not require a separate contract endorsement.

Alternate Fund Value Payout Options are available at time of issue with an increasing death benefit option. ivari offers Fund Value Payout Options for all lives who are issued without a rating or who are rated up to a maximum of 300% total mortality. The Fund Value Payout Options must be illustrated with LifeView and specified on the Supplement to the Insurance Application. These options are added to the policy as contract endorsements and will be specified on the Data Page and Policy Statement.

Depending on the option selected, in addition to the face amount for each coverage, the death benefit will include:

• Proportionate – The proportionate fund value is payable upon each death (default).

• Each death – The total fund value, less three monthly deductions, is payable upon each death (minimum $500 payout).

• Last death – The total fund value is payable at last death only.

Key benefits

• Only one policy fee applies.

• The investment component is conveniently administered through centralized policy Interest Options.

• Premium billing and policy administration are applied to the entire policy, rather than to each life insured.

• Up to 15 coverages (any combination of base coverages and riders) can be included under one policy, including the support of up to five lives on joint first-to-die coverages.

• The policy owner can assign separate beneficiaries for each coverage under the policy.

• If your clients select the increasing death benefit option, they may have either ART or level COI options for different lives.

• Any coverage can be severed from the original policy and continued under a different policy, at any time. (See “Severance Option.”) A policy fee will be added to a severed coverage under its own policy.

• A life insured for a specific coverage can be changed (See “Change of Primary Life Insured Option.”)

Potential market

Multiple life coverages are attractive to both businesses (corporations and partnerships) and families, because they offer great flexibility, without additional policy fees.

Insured 1 Insured 2 Insured 3

Face amount $200,000



Total fund value = $80,000 at date of deathMonthly deduction = $1,000

Example of how Fund Value Payout Options work


Example of proportionate fund value payout






Proportionate fund value$40,000



If Insured 1 dies first, the death benefit = $240,000



Each death






Death benefit = face amount + total fund value – 3 monthly deductions


If Insured 2 dies first, the death benefit

= $177,000

If Insured 3 dies first, the death benefit

= $177,000

Last death






If Insured 2 dies second, the

death benefit = $100,000

If Insured 3 dies last, the death benefit = $100,000 + fund value = $180,000

Multiple extras or table ratings

ivari offers Fund Value Payout Options for all lives who are issued without a rating or who are rated up to a maximum of 300% total mortality.

Severance Option

The Severance Option is a provision in the base universal life contracts that allows universal life coverages to be severed from the original policy and continued under another policy.

How does it work?

Over time, changes in circumstances may lead the owners of a multiple life policy to re-evaluate their needs. The Severance Option allows the policy owner(s) to sever a coverage from the multiple life policy and maintain that coverage independently, and, if applicable, to keep the remaining coverages together on the multiple life policy.

A severed coverage is a continuation of the original coverage and will include the same coverage date, face amount, rates, surrender charge schedule, owner and proportionate fund value. The funds that are transferred to a severed coverage do not incur surrender charges and are not considered taxable† providing that ownership of the coverage has not changed. Currently, no administrative fee is charged for this service; however, ivari reserves the right to charge a fee. A policy fee will apply to the severed policy.

Life 2 Life 3 Life 4Life 1 –

Primary insured

Life 1:1. Wants to leave

the policy.2. Passes away.

Life 2, 3 and 4 may:1. Apply for separate single

life policies.2. Stay together on a

multiple life policy.

Avoiding pitfalls

Although ownership can be changed at any point after the coverage is severed, this may be deemed a taxable† disposition. Under rollover rules, a taxable disposition may not apply if ownership changes to a spouse, child or grandchild†.† Based on current provisions of the Income Tax Act (Canada)

and CRA guidelines.


Change of Primary Life Insured Option

The Change of Primary Life Insured Option is a provision within the base universal life contracts that allows an owner to change one primary life insured for another primary life insured. The new person to be insured, who must be less than 70 years of age, is fully underwritten, and the COI will be payable based on the current age of the newly added life insured. Currently, an administrative fee of $150 is charged for this service.

Key benefits

• Useful for corporate-owned policies where an employee has left the company. If ownership for the severed coverage is changed to the insured, this may be considered to be a taxable disposition.

• Useful for families; allows severing coverages due to a dissolution of marriage or for children who have become adults and wish to have separate insurance coverage.

Key benefits

• Useful for business purposes where one employee may leave the company and the business now wants to insure a new employee.

• Useful in situations involving dissolution of marriage.

Joint life coveragesivari’s prosperity UL contract can also be issued with joint first-to-die or joint last-to-die coverages. Joint life coverages are provided as an endorsement to the contract.

The lives insured under a joint life coverage – the joint insureds – share a single death benefit, and the lives are combined to produce a single equivalent age and underwriting class for the purpose of calculating the COI. Joint life coverage(s) may be combined with single life coverage(s) on one universal life policy. ivari requires a minimum face amount of $100,000 for each joint life coverage. In the event of simultaneous deaths, or where the sequence of deaths cannot be determined, the death benefit will be divided by the number of such deceased joint insureds. Joint last-to-die and joint first-to-die coverages are identified on the contract Data Page with the applicable single equivalent age.

The Children’s Insurance Rider is available on the first life of a joint first-to-die coverage, providing this coverage is the base universal life coverage (identified as Proposed Insured 1 in the Insurance Application).

Exclusions

Optional benefits, including the Accidental Death and Dismemberment Rider and the Waiver and Payor Waiver Riders, are not available with joint life coverages.

Potential market

• Traditionally, joint life coverages have been used in family situations: joint first-to-die is used for income protection needs, and joint last-to-die is used for estate planning needs.

• There is an increasing trend toward using joint life coverage for insuring business interests. For example, joint first-to-die can be used to fund a buy-sell agreement or for key person insurance.


Key benefits

• On a joint last-to-die basis, there is usually a lower COI, in comparison with single life coverage on either of the individuals.

• On a joint first-to-die basis, there is usually a lower COI, in comparison with the total cost of separate coverages on each life (e.g., one joint face amount of $500,000, versus having two separate coverages with face amounts of $500,000 each). For example, say a husband and wife ages 35 and 30, respectively, who are both non-smokers, require $500,000 of life insurance. The cost for separate coverages is $2,395 and $1,535; if they purchase a joint-first-to-die universal life plan, the cost would be $3,210. These costs do not reflect the policy fee.

• On each joint coverage, up to five lives can be supported.

Joint last-to-dieJoint last-to-die universal life coverages are available with two options for deductions: deductions to first death and deductions to last death.

The deduction option must be specified on the LifeView illustration report that is submitted to ivari, as well as on the Supplement to the Insurance Application. This option is added to the policy as a contract endorsement and is displayed on both the data page and on the policy statement.

Instead of using different insurance rates for these two options, different single equivalent age (SEA) formulas are used. Deductions to last death are less expensive (based on a younger SEA) than deductions to first death. The Fund Value Payout Options and the Single Life Insurance Option are available with both deductions to first death and deductions to last death. However, you may not combine deductions to first death with deductions to last death on one contract.

Refer to the “Glossary of common terms” for a definition of SEA.

Deductions to first death

This option is only available on a base universal life joint last-to-die coverage with level COI and an increasing death benefit. This option is limited to two lives, with each joint insured being between 18 and 80 years of age; neither of the joint insureds may be a substandard risk. When this option is selected and the first joint insured dies, insurance charges for this joint last-to-die coverage cease.

Deductions to last death

This option is available for any joint last-to-die coverage and includes up to five lives, including substandard lives. When this option is selected, insurance charges are applicable for this coverage until the death of the last life insured.

Potential market

A joint last-to-die policy with deductions to first death is attractive for estate preservation, covering the COI for the surviving insured, and is often purchased in combination with the “each death” Fund Value Payout Option (see following section).

Switching between joint last-to-die deduction options*

From To Administrative rules



• No underwriting is required.• Signed illustration with new

SEA based on attained ages.• Up to five lives.



• Underwriting is required: Part 2 of Policy Change Application (LP386).

• Signed illustration with new SEA based on attained ages.

• Level COI (only after change).• Available with two lives.• No substandard risk.

ART and Level COI deductions continue to SEA age 100

* These administrative rules are non-contractual and are subject to change and other criteria based on administrative guidelines in effect on the date of the request.


Avoiding pitfalls

If the policy only includes one joint last-to-die with deductions to first death, upon the death of a joint insured, no further monthly deductions, including the policy fee, will be deducted. However, the deductions to first death option do not cover insurance costs for multiple life coverages, additional coverage riders and optional benefits that are included on the same policy. It only covers the COI for the applicable joint last-to-die coverage. As well, for policies with multiple universal life coverages, the policy fee will continue as long as deductions are taken from the fund value for the other insurance coverages, optional benefits and riders. If a potential joint insured is rated during the underwriting process, the joint last to-die with deductions to first death coverage will not be available. However, joint last-to-die with deductions to last death may be issued.

Fund Value Payout Options

These options are available only at time of issue. They are available on policies with one joint last-to-die universal life coverage with an increasing death benefit option, issued on lives that are rated up to a maximum of 300%.

The Fund Value Payout Options must be specified on the LifeView illustration report that is submitted to ivari and specified on the Supplement to the Insurance Application.

These options are added to the policy as contract endorsements and will be specified on the Data Page and Policy Statement. If the client does not specify an option, “last death” will be selected automatically as the default.

Depending on the option selected, in addition to the face amount for each coverage:

• Last death – pays out the total fund value at last death (default).

• Each death – pays out the total fund value, less three monthly deductions, upon each death (minimum $500 payout), with the remaining fund value paid at the last death.

Multiple extras or table ratings

Fund Value Payout Options are available for insureds rated with a total mortality equal to 300% or less.

Example of “each death” Fund Value Payout Option

Insured 1 Insured 2

Face amount: $500,000Monthly deduction = $500Total fund value = $50,000

Total fund value – 3 monthly deductions = $48,500Remaining policy fund value = $1,500

Insured 1 dies

Insured 1 Insured 2

Face amount: $500,000Monthly deduction = $500Total fund value = $50,000

No fund value is paid out. The face amount and total fund value

are paid at last death.

Insured 1 dies

Example of “last death” Fund Value Payout Option


Key benefits

With each Fund Value Payout Option, a different beneficiary can be specified for the fund value and for the face amount. In this way, for example, children may be designated as beneficiaries for the face amount, to offset estate taxes, and the surviving spouse may be designated as the beneficiary for the fund value, to help cover funeral expenses and other costs. This can be specified in the general comments section of the Insurance Application or provided to ivari in a letter from the owner.

Avoiding pitfalls

With the “each death” option, there will be very little fund value remaining to pay for the monthly deductions; accordingly, additional premiums will be needed to maintain the policy in force.

Single Life Insurance Option

This option is included in both joint last-to-die endorsements (deductions to first death and deductions to last death), and is available at no extra charge. It allows a joint last-to-die universal life coverage to be split into two or more separate coverages (depending on the number of joint lives insured under the original coverage) without further medical evidence of insurability. The split coverage is a continuation of the original coverage or another eligible plan then designated by ivari. The proportionate fund value will be transferred to each of the split coverages without incurring surrender charges. This transfer should not trigger taxation, providing that ownership has not changed. (See “Avoiding pitfalls” under “Multiple Life Special Options: Severance Option” on page 11.)

Life 1 $500,000 Life 2 $500,000

Life 1 – Life 2 (up to five) $1,000,000 payable on last death

Divorce or dissolution of a business partnership

This special option is similar to the Multiple Life Severance Option and the joint first-to-die Single Life Insurance Option (page 11). The most significant differences are that with the joint last-to-die version, the split may only occur subject to the contingent events specified below, and the net amount at risk is split equally amongst the joint insureds.

Eligibility for exercising the option

• Must be exercised prior to age 70 of the oldest of the joint life insureds.

• Not available if any of the joint lives are issued as substandard risks.

• Although no medical evidence of insurability is required, we reserve the right to financially underwrite any one of the joint insureds prior to the time the new policy takes effect. Please refer to a sample contract for the detailed terms.

Contingent events

• Within 180 days of a certificate of divorce being issued for the joint life insureds.

• On the dissolution of the corporation or partnership, except in the case of bankruptcy, providing that the coverage was being used to fund a bona fide purchase obligation under a written partnership or shareholder’s agreement, contingent on the death of a joint insured.


• The current coverage date is used.

• The maximum death benefit is the lesser of the original face amount divided by the number of joint lives insured and $1,000,000 (for amounts that exceed $1,000,000, underwriting is required).

• Original rates apply, based on attained age

• An administrative fee may be charged to split the policies.

• Suicide period runs anew

• exercising this option may cause ivari to establish a new joint equivalent age for the joint insureds who remain under the original coverage.

Please refer to a sample endorsement for full details related to this option.

Key benefits

• Provides future flexibility in case of dissolution of marriage or business dissolution.


Joint first-to-die

Survivor Option

This option is included in the joint first-to-die endorsement and is available at no extra charge. Within 90 days of the death of the first joint insured, the surviving insured(s) may apply for single insurance coverage without medical evidence of insurability. The new insurance coverage is based on current age and rates and uses the current issue date.


• Not available for substandard risks.

• Not available if any of the surviving joint insureds have reached age 70.

• Available within 90 days of the date of death of the first to die.

• Available if the policy was in force and all monthly deductions have been paid to the date of death of the first to die.

Terms of new insurance policy

• Same plan of insurance or another eligible plan then designated by ivari.

• Maximum face amount for each joint insured is the NAAR applicable for the original coverage immediately prior to the date of death of the first to die.

• The new policy will take effect on the 90th day following the date of death of the first to die, providing at least three monthly deductions have been received.

• An annual policy fee will apply.

• The age of the person insured is based on the date of the new policy (attained age).

• Same class of risk as original coverage.

Life 1 $1,000,000

Life 3 $1,000,000

Life 4 $1,000,000

Life 1 – Life 2 – Life 3 – Life 4 $1,000,000 payable on first death

Death of Life 2

Potential market

Attractive for the income protection market.

• Although no medical evidence of insurability is required, we reserve the right to financially underwrite any one of the joint insureds prior to the time the new policy takes effect. A one time administrative fee may be charged.

Additional death benefit

The additional death benefit is included in the joint first-to-die endorsement and is available at no extra charge.

It provides for an additional death benefit to be paid, providing that the second death occurs within 90 days of the first death and is not the result of suicide or self-inflicted injury. Below is an example of how it would apply for a Level Death Benefit plan with ART cost of insurance:

Exclusions for exercising the option

• Not available if any of the joint lives insured under the applicable coverage are substandard risks or are 70 years of age or older at issue of the original policy.

• Not available if an application for a new life insurance policy was made for the surviving insureds under the Survivor Option.*

* Not available if either death is the result of suicide or self-inflicted injury.

Life 2 passes away – $300,000 death benefit paid. ($250,000 NAAR + $50,000 Fund Value)

Life 1 survives – coverage terminates.

Life 3 passes away – within 90 days of Life 2: $250,000 additional death benefit. (Net Amount at Risk at time of first death equaled $250,000)

Life 1 – Life 2 – Life 3 $300,000 payable on first death

90 Days


Potential market

Beneficial for the income protection market. Provides an additional source of income to a family should both parents die within a short period of time.

Subject to the terms of the additional death benefit

• The additional death benefit is equal to the NAAR applicable for the joint first-to-die coverage at the time of the first death.

• It excludes any additional benefits or riders that may be attached to the policy.

• The additional death benefit is payable only once, regardless of the subsequent deaths of other joint insureds within the same 90-day period.

Life 1 – Life 2 (up to five) $1,000,000 payable on first death

Coverage needs change

Life 1 $1,000,000

Life 2 $1,000,000

This special option is similar to the Multiple Life Severance Option and the joint last-to-die Single Life Insurance Option. The most significant differences are that with the joint first-to-die version, the split is at the discretion of the owner and is not subject to contingent events, and the net amount at risk for each split coverage is equal to the net amount at risk prior to the split.


• Must be exercised prior to age 70 of the oldest of the joint life insureds.

• ivari reserves the right to require medical evidence of insurability for joint insureds classified as substandard at time of issue.

• ivari reserves the right to financially underwrite any of the joint insureds for whom the split coverage is requested.


• The current coverage date is used.

• The maximum face amount is as follows: – with a level death benefit, equal to the original face amount less the proportionate fund value – with an increasing death benefit, equal to the

original face amount

• Original rates apply, based on attained age.

• An administrative fee may be charged to split the policies.

Please refer to a sample joint first-to-die rider endorsement for full details related to this option.

Key benefits

Provides future flexibility in case there is a need to split the insurance coverage.

Switching between joint options

The Switch Option allows clients to change from joint first-to-die to joint last-to-die, should their insurance needs change. The SEA will be calculated based on the individual ages and the original issue date of the joint first-to-die coverage. In other words, the clients will get the same SEA had they purchased a joint last-to-die coverage originally. The issue date is preserved when the Switch Option is exercised.


This option is included in the joint first-to-die endorsement and is available at no extra charge. This option allows a joint first-to-die universal life coverage to be split into two or more policies (depending on the number of joint lives insured under the original coverage) without medical evidence of insurability.

The split coverage is a continuation of the original coverage. The proportionate fund value will be transferred to the split policy without incurring surrender charges ivari reserves the right to charge a fee for this service.

This transfer should not trigger taxation, providing that ownership has not changed (see "Avoiding Pitfalls" under Multiple Life Special Options – Severance Option).


Avoiding pitfalls

• The switch is not automatic, regardless of the illustration. Clients must notify ivari to execute change.

• A taxable disposition could occur at the time of the switch.

Key benefits

Adaptable to lifecycle needs as income replacement gives way to estate succession or tax liability coverage.

RidersYour clients may require temporary or long-term additional insurance protection to cover additional lives or to protect loan payments, mortgages or university expenses. Riders may be added at the time of issue or once the policy is in force. Full underwriting is required, based on current age and amount.

The two main differences between base coverages and riders is that

• No fund value is allocated to the rider.

• Surrender charges are not applicable to riders.

Level Cost Rider

The Level Cost Rider is similar to the level COI universal life coverage, and may be established as either single life or joint life insurance protection. The advantage of adding this rider is that it is available with no surrender charges, for the same cost as level COI coverage. The Level Cost Rider can only be purchased with a level death benefit policy and an ART COI base universal life coverage.

By adding the Level Cost Rider to a prosperity UL plan, your clients benefit from one policy fee, combined premium payments and increases to the Maximum Tax Actuarial Reserves (MTAR) room in the policy, which allows for additional premium to be tax-sheltered. Since the rider does not share in the fund value, it is able to coexist with a level death benefit policy, unlike traditional level COI coverage.

A Level Cost Rider may be severed and maintained as a stand-alone plan; however, some differences will be applicable, including surrender charges and policy fees.

prosperity Term Riders

Your clients may require temporary additional insurance protection to cover additional lives or to protect liabilities, such as a debt or income protection. prosperity Term Riders provide low-cost term insurance for 10- and 20- and 30-year terms. By adding an additional prosperity Term Rider to a prosperity UL plan, your clients benefit from one policy fee, combined premium payments and increases to the Maximum Tax Actuarial Reserves (MTAR) room in the policy, which allows for additional premium to be tax-sheltered. As well, no surrender charges are applicable for prosperity Term Riders. prosperity term compensation applies to term riders.

Mortality costs are deducted monthly, and accordingly the costs should be compared to a stand-alone term product on a monthly pre-authorized debit (PAD) basis.

A prosperity Term Rider can only be converted to a prosperity UL policy.

A prosperity Term Rider can be severed from the base UL coverage. Upon severance, the underwriting class would still maintained, but combined banding and any preferred underwriting status may no longer apply.

From To Administrative rules

Joint first-to-die

Joint last-to-die

• No underwriting required.

• Available any time after the 10th policy anniversary.

• Must be exercised prior to the policy anniversary nearest the oldest insured’s 69th birthday.

• This feature applies to two insured lives only.

For level death benefit, is reset at the time of the switch.

Joint last-to-die

Joint first-to-die

Not available.


The power of universal life over pure term insurance lies in its tax-deferred investments. Funds invested in universal life policies accumulate on a tax-exempt basis, within limits set out in the Income Tax Act (Canada) and its regulations. Over the long term, this generally has the advantage of generating higher net returns than taxable investments having the same risk/return profile.

Once you determine the need for life insurance, you can use LifeView, ivari’s illustration software, to show your clients the benefits of investing in universal life rather than taxable investments.

Your clients may choose any combination of Interest Options:

SECTION 2

Investment choices

Daily Interest Option

Fixed-Rate Interest Options

Passive Index Interest Options Managed Index Interest Options

Blended Portfolio Index Interest

Options (combination of Passive and Managed Index Interest Options)

Individual Options Individual options Portfolio options Portfolio option

T-Bill Interest Option

Terms of one, five and 10 years

• Canadian Bond II • Canadian Equity Total

Return • European Equity Total

Return • Japanese Equity Total

Return • U.S. Large

Capitalization Total Return

• U.S. New Technologies Total Return

• CI Harbour Growth & Income

• Fidelity Canadian Asset Allocation

• imaxx Canadian Bond • imaxx Canadian Fixed

Pay • imaxx Canadian

Equity Growth • Dynamic Strategic

Yield• Invesco Canadian

Balanced• Invesco International

Growth Class • CI Canadian Small /

Mid Cap • CI Signature Select

Canadian • CI Value Trust

Corporate Class• Fidelity Canadian

Balanced • Fidelity NorthStar® • Fidelity Canadian

Disciplined Equity® • Mackenzie Cundill

Canadian Balanced • Mackenzie Cundill

Value • Mutual Beacon • TD Dividend Growth

• AGF Elements• Franklin Templeton

Quotential Portfolios• ivari CI Portfolios

• ivari Asset Allocation Portfolios


Key benefits

You can use LifeView, ivari’s illustration software, to show your clients the benefits of investing in universal life rather than taxable investments. Also, under the Insured Retirement Strategy, you have the ability to illustrate prosperity UL in comparison with buying term insurance and investing in an RRSP, a TFSA or taxable investments.

Key benefits

• ivari guarantees the availability of at least one Fixed-Rate Interest Option with a minimum per annum interest rate of 2.75% in the universal life contract.

• ivari guarantees the availability of at least four Index Interest Options, provided the designated indexes are available for trading by ivari.

• Unlike some competitors, ivari does not charge an MVA on monthly deductions from our Fixed-Rate Interest Options.

• ivari’s bonuses are deposited based on the client’s investment allocation, unlike the offerings of some competitors, who deposit the bonus to their equivalent of the T-Bill Interest Option on each bonus anniversary.

T-Bill Interest Option and Fixed-Rate Interest Options

Interest Option

Provides interest based on the return of Guaranteed calculation Guaranteed minimum

T-Bill InterestOption

Government of CanadaTreasury Bills

90% of the yield of Government of Canada Treasury Bills with terms to maturity of up to one year, less 1.50%

0% per annum

In addition to being available as an Interest Option, the T-Bill Interest Option also holds money until the $500 minimum deposit requirement is met for Fixed-Rate Interest Options. The automatic transfer feature can be applied for on the Supplement to the Insurance Application.

One-, five- and 10-yearFixed-Rate Interest Options

Government of Canada bonds with one-, five- or 10-year terms

Interest fixed at time of premium payment 90% of the yield of a comparable bond, less 1.50%

One 0% per annum

Five 1.75% per annum

Ten 2.75% per annum

All Fixed-RateInterest Options

A market value adjustment (MVA) will apply if money is withdrawn from a Fixed-Rate Interest Option prior to the maturity of the term; note that MVAs do not apply for monthly deductions (covering the cost of insurance and policy fee) and the payment of death benefits.

Key benefits

• These Interest Options may suit very risk-averse clients who want secure fund growth.

• They can be used for a portion of a client’s portfolio, to balance more aggressive investment options.

• The T-Bill Interest Option is ideal when used with the Monthly Deduction Interest Option. (Please refer to page 40.)

Minimum deposit requirements

The minimum deposit requirements are as follows:

• T-Bill Interest Option: no minimum.

• All Fixed-Rate Interest Options: $500.


Index Interest Options

ivari’s Index Interest Options are index-linked interest accounts, as opposed to mutual funds, in which clients own an interest in underlying securities. To qualify as a tax-exempt insurance policy, the funds in a universal life policy must form part of ivari’s general assets. ivari offers both currency-neutral and currency-exposed options that link to foreign market indexes, as well as managed Index Interest Options that link to mutual funds and portfolios.

Designated index

The credited interest rate for each Index Interest Option is related to the performance of an underlying financial instrument or index, such as units of a mutual fund or segregated fund, equity shares, a particular stock, bond or other financial index, and/or a combination of such instruments or indexes. Each such financial instrument, index or combination thereof, is referred to as a "designated index".

ivari reserves the right to substitute one designated index, or component thereof, for another designated index with similar investment objectives, and to adjust the percentage weightings of particular components of any composite designated index in accordance with market conditions.

Interest rate calculation

The return on any Index Interest Option is guaranteed to be 100% of the comparative daily increase or decrease of the corresponding designated index, including any dividends, adjusted to Canadian dollars (where applicable), less an Interest Option fee, if applicable. Note that for all Index Interest Options, the Interest Option fee is deducted on each calendar day.

Passive Index Interest Options

Having no discretionary portfolio management, Passive Index Interest Options closely follow the performance of major stock and bond benchmarks such as the S&P/TSX 60 or the S&P 500. This includes price variations – both negative and positive – of the component stocks and any dividends they pay.

Individual Passive Index Interest Options

The individual Passive Index Interest Options are currency-exposed and are subject to the fluctuations between the currency of the underlying investment and the Canadian dollar. The daily credited return is affected by each day’s change in the Canadian dollar exchange rate. Therefore, while the investment is held, a declining Canadian dollar enhances returns, and a rising dollar diminishes returns.

Some clients may have difficulty understanding the currency-exposed Interest Options available in UL plans. We have developed a tool to help you explain to your clients that their returns are affected by the exchange rate between the Canadian dollar and the currency of the country where the option’s underlying investments have been made, and that because of this, exchange rates can significantly increase or decrease the return of an Interest Option, regardless of the investments’ return in their native country.


Managed Index Interest Options

Managed Index Interest Options offer returns linked to the performance of AGF Elements Portfolio, Franklin Templeton Investments’ Quotential Portfolios, ivari CI Portfolios, and eighteen third-party balanced funds from CI Harbour Investments*, Dynamic Funds®, imaxxFunds*, Invesco Trimark Investments*, Fidelity*, MacKenzie Cundill*, Mutual Beacon and TD.

These Index Interest Options are not mutual funds: they simply “index” the performance of certain mutual funds. Clients are not purchasing units in the mutual funds, but are receiving an interest rate that is credited each business day and is guaranteed to be 100 per cent of the fund’s retail class return (net of the retail class mutual fund MER).

1 The indexed dividend is an index number that represents the dividend distribution on securities comprising the applicable index, and such number will be obtained from such internationally recognized quotation service as ivari may choose from time to time.

2 The applicable exchange rate on any day will be calculated by ivari on the basis of the end-of-day value of the Canadian dollar as compared with the relevant foreign currency as determined by ivari. Such end-of-day value of the Canadian dollar will be the rate obtained from such internationally recognized quotation service as ivari may choose from time to time.

® Dynamic Funds is a registered trademark of its owner, used under license, and a division of GCIC Ltd.

Index Interest Option Designated index Indexed dividend1

Foreign currency

exchange2

Guaranteed interest option fee (annual

equivalent)

Canadian Equity Total Return

S&P/TSX 60 Composite Stock Price Index*

Yes Not applicable

0.00475316%(1.75%)

U.S. Large Capitalization Total Return

Standard & Poor’s 500 Composite Stock Price Index*

Yes Yes

U.S. New Technologies Total Return NASDAQ 100 Stock Index* Yes Yes

European Equity Total Return

• 75% Dow Jones EURO STOXX 50 Price Index

• 25% Financial Times Stock Exchange (FTSE) 100 Share Index*

Yes Yes

Japanese Equity Total Return Nikkei 225 Stock Average* Yes Yes

Canadian Bond II Scotia Capital Markets Universe Bond Index*

Yes Not applicable

Passive Index Interest Options available

* ivari’s universal life policies and contracts are not issued, sponsored, endorsed, sold or promoted by Toronto Stock Exchange, Standard & Poor’s (The McGraw-Hill Companies Inc.), The Nasdaq Stock Market, Inc., STOXX Limited (Dow Jones & Company, Inc.), FT-SE International Limited, Nihon Keizai Shimbun, Inc., or Scotia Capital Inc., AGF Funds Inc., Invesco Trimark., CI Investments Inc., Fidelity Investments, Foresters Financial Investment Management Company of Canada Inc., Franklin Templeton Investments Corp., TD Asset Management Inc. and Mackenzie Financial Corporation. None of such entities or their affiliates makes any representation or warranty, express or implied, whatsoever regarding the advisability of selecting any Interest Option, making any investment or acquiring the policy contract, and none of such entities bears any liability with respect to the policy or contract.


Index interest option Designated index Guaranteed interest option fee

CI Canadian Small / Mid Cap Index Interest Option CI Canadian Small/Mid Cap

CI Harbour Growth & Income Index Interest Option CI Harbour Growth & Income

CI Signature Select Canadian Index Interest Option CI Signature Select Canadian

CI Value Trust Corporate Class Index Interest Option CI Value Trust Corporate Class

Dynamic Strategic Yield Index Interest Option Dynamic Strategic Yield

Fidelity Canadian Asset Allocation Index Interest Option Fidelity Canadian Asset Allocation

Fidelity Canadian Balanced Index Interest Option Fidelity Canadian Balanced

Fidelity Canadian Disciplined Equity Index Interest Option Fidelity Canadian Disciplined Equity®

Fidelity NorthStar® Index Interest Option Fidelity NorthStar®

imaxx Canadian Bond Index Interest Option imaxx Canadian Bond

imaxx Canadian Equity Growth Index Interest Option imaxx Canadian Equity Growth

imaxx Canadian Fixed Pay Index Interest Option imaxx Canadian Fixed Pay

Invesco Canadian Balanced Index Interest Option Invesco Canadian Balanced

Invesco International Growth Class Index Interest Option Invesco International Growth Class

Mackenzie Cundill Canadian Balanced Index Interest Option Mackenzie Cundill Canadian Balanced

Mackenzie Cundill Value Index Interest Option Mackenzie Cundill Value

Mutual Beacon Index Interest Option Mutual Beacon

TD Dividend Growth Index Interest Option TD Dividend Growth

These Interest Options are not mutual funds; they simply “index” the performance of certain mutual funds.

Individual Managed index interest option solutions available


1. Franklin Templeton Quotential Portfolios provide a world of diversification with one simple solution. No matter which of the four asset allocation portfolios best suits your clients' needs, your clients will benefit from multi-level diversification by asset class, investment style, market capitalization and region. Each portfolio is built from a range of proven Franklin Templeton Funds and combines strategic and tactical asset allocation through active management. Quotential is managed by a dedicated management team that includes 13 proprietary investment professionals. Quotential also benefits from the global reach of the Franklin Templeton organization.

Index Interest Option Designated index Guaranteed interest option fee

Quotential Balanced Income Portfolio Index Interest Option Quotential Balanced Income Portfolio

0%Quotential Balanced Growth Portfolio Index Interest Option Quotential Balanced Growth Portfolio

Quotential Growth Portfolio Index Interest Option Quotential Growth Portfolio

Quotential Diversified Equity Portfolio Index Interest Option Quotential Diversified Equity Portfolio


Portfolio Index Interest Options

ivari offers four powerful ways to offer an asset allocation strategy based on your clients’ risk tolerance and investment goals:

1. Franklin Templeton Quotential Portfolios

2. AGF Elements Portfolios

3. ivari CI Portfolios

4. ivari Asset Allocation Portfolios

The four programs feature options with specific risk/return profiles that make it easy to strike the right balance. To assist you in determining the risk profile of an investor, ivari offers the Investor Profile Questionnaire (WFG-LP1222). The results are used to select an appropriate asset allocation Interest Option for a UL plan. This questionnaire is also available within LifeView and can be printed as part of the illustration report.

Below is an overview of each asset allocation portfolio offering available to your clients when they purchase a prosperity UL plan, including the designated index and the guaranteed interest option fee for each option.

Managed Portfolio Index Interest Options


2. AGF Elements Portfolios offers four innovative portfolio solutions carefully constructed to ensure successful investing. AFG Elements are portfolios designed using AGF’s family of complementary funds with core holdings and exposure to niche funds. Wilshire Associates, a third-party consulting firm, oversees the ongoing monitoring and quarterly asset allocation. The portfolios offer diversification by asset class, region, and management style.


AGF Elements Conservative Portfolio Index Interest Option AGF Elements Conservative Portfolio

0%AGF Elements Balanced Portfolio Index Interest Option AGF Elements Balanced Portfolio

AGF Elements Growth Portfolio Index Interest Option AGF Elements Growth Portfolio

AGF Elements Global Portfolio Index Interest Option AGF Elements Global Portfolio


3. ivari CI Portfolios match their investor profiles by investing in a blend of underlying equity and fixed-income funds. The portfolios are fully diversified by asset class, geographic region, economic sector, investment style and investment manager.

A balanced asset mix ensures that investors are not dependent on any one asset class or security to provide returns. ivari CI Portfolios are diversified and strategically engineered for efficiency – that is, maximizing return for a given level of risk. Each portfolio is constructed to suit client needs for capital preservation, income generation and long-term growth.

The four ivari CI Portfolios lie on the efficient frontier – meaning they are designed to maximize returns while minimizing volatility for that level of risk tolerance.


ivari CI Conservative Portfolio Index Interest Option ivari CI Conservative GIP

0%ivari CI Balanced Portfolio Index Interest Option ivari CI Balanced GIP

ivari CI Growth Portfolio Index Interest Option ivari CI Growth GIP

ivari CI Maximum Growth Portfolio Index Interest Option ivari CI Maximum Growth GIP



Blended Portfolio Index Interest Options (combination of Passive and Managed Index Interest Options)

4. ivari Asset Allocation Portfolios combine both passive and active management for long-term growth potential in a well-diversified portfolio. There is a passively managed equity component, through ETFs and an actively managed fixed-income component, through Foresters Asset Management's (FAM) imaxx Canadian Bond Fund. These portfolios are designed with the intention of providing a low cost exposure to equities globally. The asset mix was determined to maximize investment returns based on the fund manager's outlook for overall country returns. The managers at FAM review the Portfolios’ asset mix on an annual basis, at a minimum, or more frequently based on prevailing market conditions and their assessment of risk and return. There are four options available:

• Conservative

• Balanced

• Growth

• Aggressive Growth

If your clients’ financial goals or risk tolerance levels change, they may switch to another ivari Asset Allocation Portfolio Interest Option at any time.

For ivari Asset Allocation Portfolios, the interest option fee is guaranteed not to change, and the fee is deducted on each calendar day. The interest option fee for the ivari Asset Allocation Portfolios results from the combination and weightings of each designated index making up the portfolios.

For the current percentage weighting and weighted interest option fee, please refer to ivari's Performance Update pages located at ivari.ca

Investor Profile Questionnaire

The Investor Profile Questionnaire (WFG-LP1222) is built into LifeView and is available for order through ivari express. This questionnaire helps you identify your clients’ investment risk tolerance so that you can advise them of the appropriate investment mix. We encourage you to use this questionnaire to structure a dialogue about investment strategies with your clients, even if your client chooses his or her own investment mix. The Investor Profile Questionnaire may suggest that your client invest in the T-Bill Interest Option or Fixed-Rate Interest Options, where there is no risk of negative returns.

For a comprehensive investment solution, you can recommend one or more asset allocation portfolios using the Quotential, AGF Elements, ivari CI or ivari Asset Allocation Portfolio index interest options.

Designated indexesGuaranteed

interest option fee (annual equivalent)

imaxx Canadian Bond 0%

iShares S&P/TSX 60 ETF (TSX SYMBOL: XIU-T)

0.00475316%(1.75%)

iShares MSCI EAFE ETF (NYSE ARCA SYMBOL: EFA-N)

SPDR S&P 500 ETF (NYSE ARCA SYMBOL: SPY-N)

NASDAQ 100 Powershares (NASDAQ SYMBOL: QQQQ)

iShares SUP/TSX GL Gold ETF (TSX SYMBOL: XGD-T)

List of indexes that form a part of each ivari Asset Allocation Portfolio option


Relative risk rating

Relative risk represents ivari's assessment of the potential volatility of the Interest Option selected, relative to other Interest Options. While higher-risk Interest Options may be more volatile in the short term, they generally offer the potential for higher returns over the long term.

Relative risk

Low Moderate High Very high

Daily Interest Option T-Bill Interest Option

Fixed-Rate Interest Options

Terms of one, five and 10 years

Passive Index Interest Options

• Canadian Bond II • Canadian Equity Total Return

• U.S. Large Capitalization Total Return

• U.S. New Tech. Total Return

• European Equity Total Return

• Japanese Equity Total Return

Managed & Blended Index Interest Options

• imaxx Canadian Bond Index Interest Option

• ivari CI Conservative Portfolio Index Interest Option

• Dynamic Strategic Yield Index Interest Option

• ivari Asset Allocation Portfolio Conservative Index

• ivari Asset Allocation Portfolio Balanced Index

• ivari CI Balanced Portfolio Index Interest Option

• ivari CI Growth Portfolio Index Interest Option

• AGF Elements Conservative Portfolio Index Interest Option

• AGF Elements Balanced Portfolio Index Interest Option

• Quotential Balanced Income Portfolio Index Interest Option

• Quotential Balanced Growth Portfolio Index Interest Option

• CI Harbour Growth & Income Index Interest Option

• Fidelity Canadian Balanced

• Fidelity Canadian Asset Allocation Index Interest Option

• Invesco Canadian Balanced Index Interest Option

• Mackenzie Cundill Canadian Balanced

• imaxx Canadian Fixed Pay

• imaxx Canadian Equity Growth

• ivari Asset Allocation Portfolio Growth Index

• ivari Asset Allocation Portfolio Aggressive Growth

• ivari CI Maximum Growth Portfolio Index Interest Option

• AGF Elements Growth Portfolio Index Interest Option

• AGF Elements Global Portfolio Index Interest Option

• Quotential Growth Portfolio Index Interest Option

• Quotential Diversified Equity Portfolio Index Interest Option

• CI Signature Select Canadian

• CI Value Trust Corporate Class

• Fidelity Canadian Disciplined Equity®

• Fidelity NorthStar®

• Invesco International Growth Class

• Mackenzie Cundill Value

• Mutual Beacon

• TD Dividend Growth

• CI Canadian Small/Mid Cap Fund

® Disciplined Equity and NorthStar are registered trademarks of FMR Corp.


Avoiding pitfalls

• Index Interest Options are not advisable if your client is only making minimum or near-minimum deposits.

• It is a good planning technique to test projections made using the LifeView illustration software under various interest scenarios to understand the potential for variability.

• CLHIA guidelines require that an alternate rate of return also be illustrated to demonstrate interest sensitivity, which LifeView illustration software provides for your convenience.

• Please refer to Comparing and illustrating UL plans (page 66) regarding accounting for Interest Option Fees in illustrations.

While the potential long-term rewards of our Index Interest Options may be greater than for our Fixed-Rate Interest Options, the risk associated with the Index Interest Options is also higher. A negative interest rate will reduce the benefits and values under this policy, which include but are not limited to the total fund value and the death benefit.

Key benefits

• The daily interest option fee is guaranteed not to change for the Passive Index Interest Options and the ivari Asset Allocation Portfolio Index Interest Options. Note that some competitors may not guarantee the daily fee and only state an approximate annual fee.

• There is no additional interest option fee above the underlying MER for all Managed Index Interest Options.

• No minimum investment in any Index Interest Option is required.

• The Investment Income Tax (IIT) is built in to our fees, and we will not deduct any amount above the guaranteed total fee or the interest option fee.

Understanding rates of return

Rates of return for our universal life Interest Options are displayed on the public ivari website (ivari.ca). Rates of return are measures of historical performance at a specific point in time. They are not indicative of future interest returns.

Policy rates of return

The policy rate of return is used in the calculation of the prosperity performance bonus. This return is calculated using the recognized Modified Dietz Method endorsed by the Investment Funds Institute of Canada (IFIC) and the Association for Investment Management and Research (AIMR).

Differences between published and policy rates of return

There are three main reasons a difference may exist.

Market fluctuation

The market changes on a daily basis. In fact, a published rate of return for January 31 may be substantially different than the rate of return for the following business day (February 1), the previous business day (January 30) and for other days throughout the year. The traditional industry benchmark for reporting published rates of return is based on the calendar year. In contrast to public published rates, the policy rate of return reports on a policy year basis.

Cash flow

The fund value in a universal life policy increases and decreases on many occasions during the policy year. Monthly deductions occur on the first day of every policy month. Your clients will pay their premium, make withdrawals and take policy loans at various times during the policy year. With the Modified Dietz Method, the policy’s cash flow is time-weighted in the formula, such that the impact of both the amount and timing of the cash flow is reflected. Because the cash flows are reflected, this method approximates, with a high degree of accuracy, the policy’s specific rate of return, as opposed to the underlying Interest Options’ rate of return. In contrast, the traditional benchmarks assume that there is no cash flow activity during the period reported.


Currency exchange

When newspapers quote rates of return, they usually quote these amounts in the currency of the applicable market index or exchange. For example, the S&P 500 Index is quoted in U.S. dollars. The U.S. Large Capitalization Total Return Interest Option credits the S&P 500 performance after conversion to Canadian dollars.

ivari Interest Option Performance Update pages

We are committed to keeping you up to date on the performance of our Interest Options. Our Performance Update pages contain information that will assist you in selecting and monitoring Interest Options that are consistent with your clients’ evolving financial goals. These pages include historical rates of return, top 10 holdings, sector weightings, fees and relative risk rankings. The Performance Update pages are available on our website under "Resources" and "Fund Facts and Performance Updates."

Interest Option transactions

Interest Option allocation instructions

Interest Option allocation instructions can be modified at any time to take full advantage of market conditions and to meet your clients’ financial objectives.

Interest Option transfers

Your clients can request fund transfers between Interest Options at any time. Transfers can also be made to and from the Fixed-Rate Interest Options (although an MVA will apply if the transfer is made before the applicable terms mature). Your clients may make four transfers per policy year within their universal life policies without incurring transfer fees. We reserve the right to charge a fee if more than four transfers are made per policy year.

For your convenience, we’ve created an online fund look-up chart, which can be found at ivari.ca. Please refer to the Allocation Form (WFG-LP1221) for Interest Option transfers.


prosperity UL has a Persistency Bonus and a Performance Bonus that help build wealth. With the Persistency Bonus, clients are rewarded simply for paying their premiums. With the Performance Bonus, clients are rewarded when the rate of return of their investments is 7% or greater.

A closer look at the prosperity bonuses

* The rate of return is net of the interest option fee, where applicable, the management fee and/or MER, and the related taxes of the underlying designated index.

SECTION 3

prosperity bonuses

Persistency Bonus Performance Bonus

Years credited Payable at the end of each policy year commencing year five.

Payable at the end of each policy year commencing year five.

Conditions

Bonus is based on continued payment of the minimum premium in years one to five, or if the net fund value is greater than or equal to the sum of all minimum premiums from the policy date.

Bonus is based on meeting the conditions for the Persistency Bonus, and if the policy rate of return for the current policy year is greater than or equal to 7%.*

Calculation

A = B x CWhere:A is the Persistency bonus amount in respect of a policy

year;B is 0.25%; andC is the sum of the net fund value on each monthly date

in the current policy year divided by 12.

A = B x CWhere:A is the Performance bonus amount in respect of a

policy year;B is 0.25%; andC is the sum of the net fund value on each monthly date

in the current policy year divided by 12.

Key benefit

ivari’s bonuses are deposited based on the client’s investment allocation, unlike the offerings of some competitors, who deposit the bonus to their equivalent of the T-Bill Interest Option on each bonus anniversary.

Common features of both bonuses

• Payable at the end of the policy year.

• Credited proportionately to each Interest Option in accordance with the most recent allocation instructions (this is an advantage over some competitors, who credit to a specified account).


We test each policy on its annual policy anniversary date and, if necessary, make required adjustments to ensure that it retains its tax-exempt status under the current legislation. We offer features such as the Optimizer Option and the Side Account that work in conjunction with this process to provide your client with optimal tax deferral.

Tax-exempt testing and policy anniversary processing

Tax-exempt testing

It is the intention of ivari that each policy will maintain its tax-exempt status as defined in Section 148 of the Income Tax Act (Canada). This section defines a notional exempt-test policy and an associated accumulating fund that sets the benchmark for maximum tax-exempt cash surrender value accumulation in any given policy year.

The following graph illustrates how the accumulating fund for a $1,000,000, ART to 100 years COI, exempt-test policy grows over time for a male non-smoker, starting at age 45.

SECTION 4

Optimizing investments while maintaining tax-exempt status

In order to maintain tax-exempt status, policies must pass a tax-exempt test. We will test each policy at the policy anniversary to ensure that the total cash surrender value, including outstanding policy loans, is less than the accumulating fund of the applicable exemption test policy, as defined in the Income Tax Act (Canada) and its regulations.

ART exempt-test policy (ETP) line

Max

imum

Tax

Act

uaria

l Res

erve

s (M

TAR)

Am

ount

($,0

00)

Policy Year

1 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38

1,200

1,000

800

600

400

200

0


If a policy fails a tax-exempt test

One or both of the following actions will be taken to maintain the tax-exempt status of the policy.

1. Process exempt-test face increases Subject to legislative maximums and other conditions, we will increase the sum insured (face amounts plus any previous exempt-test face adjustments, for all coverages, including additional coverage and Term Riders) without evidence of insurability. In general, the death benefit (including the fund value) can increase a maximum 8% per policy year.

2. Process a withdrawal of excess funds and deposit to the Side Account This withdrawal does not incur surrender charges but may incur a Market Value Adjustment (MVA) (if applicable). The withdrawal would only occur if the policy does not pass the tax-exempt test even after an exempt test face increase has been administered.

If a policy passes a tax-exempt test

ivari will reduce exempt-test face increases that were previously made to the face amount by an amount that maintains the tax-exempt status of the policy, up to the total amount of exempt-test face increases. If the Optimizer Option has been elected, all exempt-test face increases must be reduced to nil before the Optimizer can be applied.

The 250% Rule (or “Anti-Dump-in Rule”)

Starting at the 10th policy anniversary, ivari will ensure that each policy passes the 250% (Anti-Dump-in Rule) test at each policy anniversary. In general terms, starting at the end of the 10th policy year and every year thereafter, we must ensure that the cash surrender value of the universal life policy is not greater than 250% of the cash surrender value three years earlier. In the worst-case scenario, where the CSV is equal to zero at the end of the seventh year, the policy in the 10th year will have close to the same exempt room as a policy in its third year (in other words, the duration of the policy will be reset for exempt-test purposes).

Please note, however, that if your clients do not make any excess deposits until after the seventh year, it does not mean they will not be able to invest any excess funds after that point. In fact, our Maximum Taxable Actuarial Reserve (MTAR) process will effectively reset the policy’s MTAR duration such that the policy will start a new exempt line. However, your clients will have more room

to shelter funds if they actually invest prior to the end of year seven.

Maximum premium estimate

Upon settling a new policy, and at the beginning of each subsequent new policy year, a maximum premium estimate is calculated for the policy year, based on the current tax-exempt testing requirements, the policy status and the projected accumulation rate for the total fund value. This estimate is illustrated on LifeView and is shown on the Policy Statements. It is used as follows:

• Throughout the year, when premiums are being paid, ivari will accept premiums up to the maximum premium estimate, and the balance of excess funds will be deposited in the Side Account on behalf of the owner and not deposited in the tax-exempt Interest Options as UL premium.

• At the beginning of any policy year, if there are funds in the Side Account, we will automatically transfer funds from the Side Account back into the universal life policy’s tax-exempt Interest Options subject to the maximum premium estimate for that policy year. This transfer will also be subject to premium tax.

Recalculating maximum premium estimates

The maximum premium estimate is recalculated if a coverage face amount increases or decreases, or if there are material non-financial changes, such as a change in smoker status, lives insured, etc.

Avoiding pitfalls

• A policy may still fail a tax-exempt test even though premiums have been accepted into the policy and are less than the maximum premium estimate. This may occur if the investment performance of the policy exceeds the return projected in calculating the maximum premium estimate.

• Please caution your clients that the Income Tax Act (Canada) may change at any time, and this may affect the tax status of their policy. ivari reserves the right to refund premiums paid and to modify policies in order to reflect changes in applicable income tax laws or Canada Revenue Agency requirements, including the requirements for tax-exempt status.


Optimizer OptionThis option is suitable if and when the need for insurance protection decreases and the need for maximizing the accumulation takes precedence. The Optimizer works in conjunction with the tax-exempt processing by automatically monitoring and reducing the face amount, where possible, to the Optimizer minimum face amount that has been specified by the owner (which must be no lower than the plan minimum). The owner also selects the starting year (which must be no earlier than the end of the 11th policy year).

Eligibility

This option may be elected at the time of issue or after the policy is issued, providing the applicable starting face amount is at least $100,000 and the COI type is ART.

How the Optimizer works

We will notify your client 60 days in advance of the Optimizer start date; then we will automatically reduce the face amount on each policy anniversary following the Optimizer start date, providing the policy has passed the tax-exempt test and all applicable exempt-test face increases have been removed. The annual amount of optimization will be equal to the maximum decrease that can be made while maintaining the tax-exempt status of the policy and while respecting the Optimizer minimum face amount.

However, in the following circumstances, optimization will not occur or the rate of optimization will be limited:

• Optimization will not occur if there is more than $100 in the Side Account. We reserve the right to change this minimum amount.

• Optimization will not reduce the face amount below the client-specified Optimizer minimum face amount.

• Optimization will not reduce the face amount below the plan minimum ($50,000 for single life policies or $100,000 for joint life policies).

• The annual rate of optimization for policy years 11 through 20 is limited to 15%. This safeguard helps protect your clients against market fluctuations.

• Any reductions in face amount will occur in decrements of $1,000, rounding down to the nearest $1,000.

Optimizing policies with multiple universal life coverages

With multiple universal life coverages, only the face amount for the base (first) universal life coverage will be optimized. This coverage is identified on the contract Data Page.

Changing the Optimizer Option

• Optimizer start year – May be changed, provided that we receive a written request to do so at our Head Office at least 30 days prior to the date optimization is scheduled to begin.

• Optimizer minimum face amount – May be changed, provided that we receive a written request to do so at least 30 days prior to the next scheduled optimization date. This amount may not be lower than the minimum face amount for the plan ($50,000) or higher than the applicable face amount immediately prior to the effective date of the change.

• Client-requested termination – Clients may choose to terminate the Optimizer Option. Notice must be received at our Head Office at least 30 days prior to the next optimization date.

Termination

The Optimizer Option will terminate when one of the following occurs:

• The cost of insurance period has ended for the coverage being optimized.

• The COI is switched from ART to level

• The policy lapses.

• At the written request of the owner.

If optimization has been terminated, it can be reactivated at any time.

Illustrating Optimizer on LifeView

In order to limit the potential for unjustifiable face amounts, from an underwriting perspective, we require that premiums be spread over a few years. The specific rule we will enforce is that the first year’s premium cannot exceed 40% of the total premiums for all years up to and including the Optimizer start date.


Key benefits

• The Optimizer performs best when premium streams have stopped or are reduced to minimal amounts. You don’t have to start optimization at the end of the 11th policy year, but that is the earliest start date allowed.

• The rate limit of 15% that is in place until the end of the 20th policy year protects the performance of the policy in its early years from an accelerated decrease that may result from market declines that might leave little room for future increases in value.

Potential market

• Attractive in situations where the need for protection eventually decreases and maximizing the accumulation takes precedence.

• The Optimizer Option is available on policies with single life, joint life and multiple life coverages. However, on multiple-life policies, the Optimizer Option can only be applied to the first coverage.

• The Optimizer usually works best with a level death benefit. However, some clients understand “face plus fund” or increasing death benefit better than a level death benefit, and in these cases, the Optimizer may be appropriate when added to an increasing death benefit.

Avoiding pitfalls

• In some cases, it may be more efficient to select a lower starting face amount and deposit the excess funds in the Side Account. Taxes for these excess funds may be less than the cost of insurance of the higher initial face amount.

• Large withdrawals, fund value payouts, Living Benefits, policy splits or severances and large market fluctuations may affect the rate of optimization. When a significant amount of the fund value is withdrawn from a policy with the Optimizer option, you should explain the potential impact to your clients, i.e., the possibility of a large decrease in the face amount.

• If optimization results in the adjusted face amount falling into a lower rate band, higher COI rates may apply. You might want to consider keeping the Optimizer minimum face amount in the same rate band as the starting face amount to prevent this from happening.

The excess funds will be deposited into the Side Account and will come back into the policy when this is allowable in conjunction with the tax-exempt rules.

For example:

If your client wants to deposit a total of $100,000 into the tax-exempt policy, we will allocate $40,000 to year one and calculate the face amount needed to deposit that amount. The excess $60,000 will be deposited into the Side Account.


Side AccountThe Side Account is a deferred annuity contract established between the owner and ivari in conjunction with each UL policy.

Side Account as a “safety net”

The main function of the Side Account is to act as a processing account, or “safety net,” in conjunction with tax-exempt processing. Throughout the year, when new premiums are processed, any premiums in excess of the maximum premium estimate will be transferred to the Side Account. At the policy anniversary, if a policy fails the tax-exempt test, funds may have to be transferred to the Side Account.

In the new policy year, funds are transferred from the Side Account back into the policy, up to the maximum premium estimate for the new policy year.

How the Side Account works

Application and ownership

We don’t require a separate Application for the Side Account. When your client applies for a new universal life policy, the Supplement to the Insurance Application also includes a request for the Side Account deferred annuity contract, and this contract is automatically issued with every prosperity UL policy. In this way, the owner of the UL policy will also be the owner of the Side Account and will retain control of his or her funds, regardless of where the funds reside.

Of course, the owner may remove funds from the Side Account at any time, at no additional cost or surrender charges.

Key benefits

• The Side Account benefits generally from the same creditor protection rules that apply to an annuity contract issued by a life insurance company.

• The Side Account is automatically issued with every new universal life policy; you don’t have to request it.

Side Account interest rates

The Side Account matches the return of the T-Bill Interest Option; however, the interest is not tax deferred. Interest is taxed and a T-5 slip (Relevé 3 for Quebec) is issued each year.

Deferred annuity contract

As it is a deferred annuity contract, the funds are paid out at the death of the annuitant as a tax-free benefit to the beneficiary. However, the owner must pay taxes annually on the accrued interest. The annuitant is defined as the last surviving life insured from the linked universal life policy, and the beneficiary for the Side Account is the beneficiary designated by that life insured. The maturity date is equal to the 100th birthday of the last surviving life insured under the applicable universal life policy. In most cases, there will be no funds remaining in the Side Account at maturity. However, if there are funds remaining in the Side Account, they are paid as an annuity when the contract matures.


prosperity UL has a substantial amount of flexibility to accommodate future changes.

SECTION 5

Plan flexibility

Easy access to funds when neededFunds accumulate in ivari’s prosperity UL plan on a tax-deferred basis. The policy fund value is accessible to your client, subject to surrender charges, and can be used for a variety of purposes, or the funds can remain in the policy and become payable as a tax-free death benefit. Your clients may access their net cash surrender value by making partial withdrawals or by fully surrendering their policies.

The net cash surrender value equals the total fund value minus any applicable surrender charges, Market Value Adjustments (MVA) and any outstanding policy loans and accrued interest. Clients may also access funds through policy loans.

Accessing cash from a policy may result in tax consequences (refer to “Taxation of loans, withdrawals and surrenders”). Alternatively, your clients might want to consider ivari’s Insured Retirement Strategy as a tax-effective means of using a portion of the fund value as collateral for a third-party loan from a bank or other financial institution to provide funds at any time during retirement.

Policy loans

The fund value of the policy can be used as collateral for a loan from ivari.

The mechanics of a policy loan

A policy loan can be requested by completing the applicable section of the Policy Service Application (PS339) or by a letter submitted by the policy owner. The policy owner must provide the policy number, and can request either a specific amount or the maximum policy loan available.

The maximum policy loan is the contractual maximum amount available to the policy owner. This amount is the total fund value, less any outstanding loans and accrued interest, less the applicable coverage surrender charges and any applicable MVA (for Fixed-Rate Interest Options) and, for years one to five, the sum of twelve monthly minimum premiums and, for policy years six-plus, the sum of twelve monthly deductions. This calculation also reserves an additional 0.5% to allow for approximately three months of loan interest.

The maximum policy loan can be illustrated using the LifeView software. The maximum loan amount is also displayed on Policy Statements and on webcappow.

The minimum loan amount a policy owner may choose is $500 (after any applicable MVA). Unlike a cash withdrawal, the total fund value of the policy is not reduced by the amount of the loan. In fact, the funds backing the loan do not leave the policy; the loan amount is transferred to the Security Account Interest Option, following any applicable MVA (for Fixed-Rate Interest Options). The loan amount is moved to the Security Account Interest Option according to the default withdrawal order or according to the policy owner’s instructions (see Withdrawal order). Note that if the money is in the Managed or Passive Index Interest Options, taking a policy loan may be a two-day process.

The funds held in the Security Account Interest Option may not be withdrawn or transferred to another Interest Option until the loan or a portion of the loan is repaid. The cash surrender value of the policy, as well as the death benefit, is reduced by the amount of the outstanding policy loan and accrued interest. These funds are also excluded from the bonus calculation.


Loan interest rates

The policy owner is charged 10% annual interest on the loan, calculated daily. The funds backing the loan, residing in the Security Account Interest Option, are credited at the guaranteed annual rate of 8%. The resulting interest is credited to the T-Bill Interest Option on a daily basis. Funds in the T-Bill Interest Option can be transferred to other Interest Options or used to pay monthly deductions. All interest rates are fully guaranteed in our contract.

Loan repayment

ivari offers owners several options for loan repayment.

No loan repayment

If a loan repayment is not received before the policy anniversary, ivari will add the accrued interest to the existing policy loan and the new loan amount will be comprised of the original loan amount, plus any interest accrued since the previous policy anniversary. The amount to cover the accrued interest will be transferred from other Interest Options to the Security Account Interest Option, using the default withdrawal order, such that there are sufficient funds backing the new loan amount. In the new policy year, interest will accrue on the new loan amount.

Loan repayment

An owner may decide to pay any amount towards the loan. Any loan repayment must be clearly marked as such; otherwise, it will be considered a premium payment and will be allocated to the fund value in accordance with the owner’s premium allocation instructions. When all or a portion of the loan amount has been paid, the equivalent amount will be released from the Security Account Interest Option to the T-Bill Interest Option or assigned in accordance with the owner’s specific instructions. Loan repayments pay down outstanding loan balances first, and then accrued interest.

Internal loan repayment

At any time after the 15th policy anniversary, the owner may request the repayment of all or part of any outstanding loan and/or accrued interest by internal loan repayment, meaning first, from the portion of the total fund value then allocated to the Security Account Interest Option, and then from any another Interest Option, in accordance with the owner’s instructions.

Policy and coverage surrenders

Monthly deductions are structured to spread the cost of compensation, underwriting, administration and setup of the universal life policies over a number of years. However, when policy owners cancel their plans or coverages or reduce the face amount early, ivari collects a surrender charge in order to recover some of the up-front costs, so those who continue their insurance policies aren’t penalized.

Key benefits

• Policy loans provide owners with greater access to the equity of their universal life policy in the early contract years than cash withdrawals.

• Loan interest rates are fully guaranteed for life in the policy contracts.

• The LifeView illustration system is equipped to illustrate policy loans and the repayment of loans, including the impact of a particular loan on a policy and internal policy repayments.

• If the policy loan has been made for “qualified investment” purposes, the interest may be a tax-deductible investment expense. The owner is responsible for submitting a T2210 tax form to ivari for verification. ivari will verify an amount up to the amount of interest accrued since the last policy anniversary and within certain limitations.

Avoiding pitfalls

• If loan interest is not paid out of pocket (from outside the policy), the owner increases the risk of the policy’s lapsing.

• Owners should be made aware of the possible tax consequences of taking out a policy loan (see Taxation of loans, withdrawals and surrenders).

• Owners are advised to consult a tax professional to discuss questions about whether the interest can be tax-deducted and to discuss the amount of the deduction for the specific circumstances.


prosperity UL may be fully surrendered (full surrender of all coverages) at any time for its net cash surrender value. Net cash surrender value refers to the total fund value of the policy, less any applicable policy loans (including principal and accrued interest), surrender charges and MVA (if applicable).

Types of surrenders

The owner may request the following types of surrenders.

Coverage surrenders

(a) Full surrender – The full surrender of a UL coverage and the associated proportional fund value associated with the UL coverage. The surrender of all coverages in a policy constitutes a full surrender of the policy.

• The surrender charge for a particular coverage surrender is equal to the surrender factor (which varies by coverage duration; see below) for the coverage, multiplied by the minimum premium, excluding the policy fee (or portion thereof being surrendered) for the coverage.

• Coverage surrender charges run for 10 years from the coverage effective date. The total policy surrender charge is equal to the sum of the surrender charges applicable to each and every in-force coverage on the policy.

When a COI option change is made from ART to 100 to Level COI, the minimum premium used in the calculation of surrender charges will continue to be based on the original ART minimum premium after the switch has taken place and will not be based on the new minimum premium for Level COI.

Let’s look at an example using coverage with a current face amount of $100,000:

(b) Partial surrender – A partial surrender is a withdrawal from the fund value. The policy is fully surrendered when fewer than three months of deductions remain within the policy after a withdrawal.

The minimum amount that may be surrendered from a policy is $500. The maximum that may be requested as a partial surrender is equal to the net cash surrender value, less three monthly deductions. Any request for surrender greater than the maximum would constitute a request for full surrender.

The partial surrender charge is determined according to the following formula:

Table of surrender factors

Coverage Year Factor

1 1

2 2

3 3

4 4

5 5

6 4

7 2

8 2

9 2

10 1

Formula:B * (A – C)where: A: Minimum premium

B: Surrender factor C: Policy fee

Formula:PSC = A * Bwhere PSC: the partial surrender charge

A: the partial surrender amount B: the partial surrender factor, as indicated in

the table of partial surrender factors for the applicable coverage year

Example:• Original face amount of $100,000.00

• Minimum premium of $1,000.00 per year including policy fee

• Full surrender in year three

• Surrender charge = 3 * (1,000 - 120) = $2,640


Partial surrender charges are deducted from the surrender amount requested, and the net amount is paid to the client. The client may ask for a net surrender amount, and we will calculate what the gross amount needs to be.

10% free partial surrender amount once per year

Your clients can make cash withdrawals from their prosperity UL plan. In each policy year after the second policy anniversary, the owner may request one free partial surrender amount, to which partial surrender charges will not apply (“free partial surrender”).

The maximum amount available for a free partial surrender is equal to 10% of the net cash surrender value.

The written request for a partial surrender must specifically indicate that the right of free partial surrender is being exercised; failure to do so will result in the forfeiture of that right for the applicable partial surrender request. The right may be used for a subsequent partial surrender request within that policy year. The right of free partial surrender may be used for any one partial surrender request in each policy year.

Table of partial surrender factors

Coverage Year %

1 5

2 4

3 3

4 3

5 3

6 3

7 3

8 3

9 3

10 3

(c) Face reduction – The reduction of the face amount of a particular coverage. When the client requests a reduction in face amount, the surrender charge will be proportionate.

Let’s look at an example using a coverage with a current face amount of $100,000 and a reduction in the face amount of $40,000 in year three:

Avoiding pitfalls

• An MVA will apply to any withdrawals from Fixed-Rate vInterest Options.

• The death benefit is always reduced by any partial surrenders.

• In addition, if the level death benefit option has been selected, a partial surrender will cause the face amount to be reduced by the amount of the funds withdrawn. For a multi-life policy, the reduction will be proportional across all UL coverages.

Example:• Net cash surrender value prior to withdrawal is $6000

• Withdrawal of $3,000 in year three

• Surrender charge = $3,000.00 x 3%= $90.00

Formula:[B * (A – C) ] * Dwhere A: Including policy fee

B: Surrender charge factor C: Policy fee D: % Decrease in face amount

Example:• Original face amount of $100,000.00, minimum

premium of $1,000.00 per year

• Face reduction of $40,000.00 (40% decrease in face amount)

• Surrender charge = 3 * (1,000 - 120) * 40% = $1,056

The Optimizer Option provides automatic face amount reductions in conjunction with tax-exempt testing without incurring surrender charges. (For more information, please refer to Optimizer Option and Optimizing investments while maintaining tax-exempt status.)


Withdrawal order

Monthly Deduction Interest Option

Clients can use either the Supplement to the Insurance Application or the Policy Service Application to specify one Interest Option from which their monthly deductions are to be withdrawn. Contractually, clients may change the Monthly Deduction Interest Option once a year at no charge; however, we reserve the right to charge a fee if this option is changed more frequently.

Default withdrawal order

If a monthly deduction Interest Option is not specified, the default withdrawal order for monthly deductions is as follows:

1. T-Bill Interest Option

2. Index Interest Options – In proportion to the value in each option, compared to the total value of all index Interest Options.

3. Fixed-Rate Interest Options – Funds are removed from Fixed-Rate Interest Options last. Funds that are closest to maturity are selected first.

Partial surrenders

For withdrawals, funds will first be taken from the Side Account. When these funds are depleted, the default withdrawal order applies, or as specified by policy owner.

Surrender charges deducted upon face amount reduction

These are deducted using the default withdrawal order.

Policy loans

The default withdrawal order applies to funds (sufficient to back the loan) being transferred into the Security Account Interest Option for policy loan purposes.

However, the client may request that funds be transferred from specific Interest Options.

Taxation of loans, withdrawals and surrenders

Clients should be made aware that any partial surrender or loan might be subject to taxation. Policy loan taxation differs from the taxation of partial surrenders. Policy loans reduce the Adjusted Cost Basis (ACB) on a dollar for- dollar basis. On the other hand, withdrawals are taxed using a proportional ACB amount.

Taxation of policy loans

Any policy loan up to the policy’s ACB is not taxable, but reduces the ACB dollar-for-dollar. Once the ACB is reduced to zero, any additional loan is fully taxable. In general, the ACB is defined as the total amount of deposits received at a given point, less the cumulative net cost of pure insurance, as defined in the Income Tax Act, and less the taxable portion of previous loans and withdrawals.

On client statements, the “Maximum Amount Available for Loan on a Tax-Free Basis” is displayed. However, for more up-to-date information, we recommend that you contact your office just prior to a loan’s being requested and ask for the maximum amount available for a loan on a tax-free basis. Your office has access to our webcappow system, which provides information based on the policy fund value from the previous business day. Note that this amount is not guaranteed and is subject to change with fluctuations of the policy fund value.

Taxation of withdrawals and surrenders*

If the cash surrender value is greater than the ACB, then a portion of the withdrawal will be taxable. If your clients choose to make a withdrawal from the contract’s cash surrender value, or if the entire contract is surrendered, the tax liability will be based on the realized gain of the total cash surrender value. This realized gain is defined as follows:

• Upon surrender: the excess of the total cash surrender value over the adjusted cost basis.

• Upon partial surrender: the excess of the withdrawal over the proportional amount of the contract’s adjusted cost basis, where the proportional adjusted cost basis is equal to the adjusted cost basis of the contract, multiplied by the partial withdrawal and divided by the total cash surrender value.

* Based on current interpretation of the Income Tax Act (Canada), its regulations and any other relevant legislation.

Example:• Net fund value = $10,000

• Total policy coverage surrender charges = $3,000

• Net cash surrender value = $10,000 – $3,000 = $7,000

• Maximum amount available for free partial surrender = 10% x $7,000 = $700


ACB example

The following assumes the partial surrender occurs after the surrender charge period.

Easy Interest Option changes when needed

Allocation instructions for new premiums

Interest Option allocation instructions can be modified at any time to take full advantage of market conditions and to meet your clients’ financial objectives.

Interest Option transfers

Your clients can request fund transfers between Interest Options to reflect their changing risk profile or financial objectives.

Transfers can also be made to and from the Fixed-Rate Interest Options (although an MVA will apply if the transfer is made before the applicable terms mature). Contractually, your clients may make four transfers per policy year within their universal life policies without incurring transfer fees. We reserve the right to charge a fee if more than four transfers are made per policy year. The current fee is $25 per transfer.

Cash surrender value = $60,000

Adjusted cost basis (ACB) = $30,000

Partial surrender request = $20,000

Proportional ACB = 30,000 x 20,000/60,000

$10,000

Taxable amount of partial surrender = $20,000 - $10,000 =

$10,000

Market Value Adjustments (MVAs)

An MVA applies to funds that are withdrawn from the Fixed-Rate Interest Options, including transfers, Living Benefits payments, partial surrenders, policy surrenders and loans. MVAs do not apply for monthly deductions or the payment of a death benefit. The MVA is determined separately for each amount being withdrawn or transferred, and will start with the Fixed-Rate Interest Option closest to maturity. An MVA also applies to forced surrenders due to tax-exempt testing. In general, MVAs are fees that are charged for early withdrawal of funds from the Fixed-Rate Interest Options and help recover the costs that ivari incurs for the early termination of this investment.

Key benefits

• You might want to consider using the four free Interest Option transfers per policy year as part of a quarterly review of your clients’ financial portfolio mix. With ivari, you have access to quarterly electronic UL statements.

• Fund transfers within a universal life policy are not subject to taxation.

MVA formula:

MVA = current value of requested surrender amount – discounted value of requested surrender amount

The discounted value is the projected value at the guaranteed rate to the end of the term, discounted to the current date at current interest rate + 1%.

The MVA formula compares the actual credited interest rate for the account being redeemed against the current rate credited for a Fixed-Rate Interest Option of a term closest to the remaining term. It reflects this calculation against the number of days left to maturity, divided by 365 days. The MVA formula can only result in a decrease in the value of the withdrawal (i.e., no credits will be given).


Premium flexibilityThe minimum premium is required to be paid in the first five years. Your clients will have the flexibility to increase or decrease premiums, pay at unscheduled dates or stop and restart payments, providing the policy does not go into shortage (for more details, see Section 9 of this guide).

Planned periodic premiums

When you illustrate your clients’ financial solution and apply for insurance coverage, you will be asked to specify the planned periodic premiums (also known as the sundry amount) and the mode of premium payment (monthly or quarterly PAC, or quarterly, semi-annual or annual direct payment). Unlike term insurance, the premium mode does not change the manner in which the cost of insurance is calculated: all costs, including the policy fee, are deducted monthly from the fund value. For UL insurance, the equivalent of the monthly mode is always used for optional benefits and Term Riders in conjunction with the monthly deductions. The planned periodic premiums and the premium mode can be changed at your client’s convenience.

Minimum premiums

Premiums are subject to minimum requirements, to keep the coverage in force, as well as maximum limits, to keep the policy tax-exempt. The minimum premium is specified on the policy Data Page and is the minimum annual amount payable for the policy in each of the first five policy years that will keep the policy in force. The minimum premium amount is also used in the calculation of the coverage surrender charges and the qualification for prosperity bonuses (the Persistency Bonus and the Performance Bonus). The minimum premium for a coverage will change when a material change is made to a coverage. The monthly minimum premium is equal to the minimum premium, divided by 12.

Example:

A client puts $1,000 into a five-year term Fixed-Rate Interest Option with a guaranteed interest rate of 5%. Two years later, the client wants to withdraw this money from the Fixed-Rate Interest Option. An MVA reduces the value of the surrender amount if interest rates for the remaining term are greater than the original interest rate, less 1%.

For example, if the interest rate for an equivalent three-year term period at that time is 4% or less, an MVA would not apply. However, an MVA is applicable if the interest rate for an equivalent-year term is greater than 4%. For example, if the interest rate at that time is 6%, the MVA is calculated as follows:

MVA = A*B

A = The value of the original deposit at the end of two years

A = $1,000 x (1 + 5%) ^ 2 = $1,102.50

B = MVA%

B = 1 - [(1 + C)/ (1+D) ] ^(E / 365) = 1 - [ (1 + 5%) / (1+ (1% + 6%)) ] ^ ( 3 * 365 / 365) = 5.503%

where

C: is the per annum interest rate for the applicable Fixed-Rate Interest Option Term, the funds allocated to which are to be transferred, surrendered or withdrawn

D: is 1% per annum, plus ivari’s then-current per annum interest rate on the effective date of the transfer, surrender or withdrawal for the closest term to E below

E: is the number of full days remaining to the maturity date of the applicable Fixed-Rate Interest Option Term, the funds allocated to which are to be transferred, surrendered or withdrawn

The MVA charge is then 5.503% x $1,102.50 = $60.67

The minimum premium for the policy in the first five years is equal to:the minimum premium for each UL coverage, plus

the minimum premium for each term Rider (T10 and/or T20), plus

the minimum premium for each benefit Rider (CIR, AD&D, WPP, PWPP), plus

the policy fee


Avoiding pitfalls

• The minimum premium must be paid in the first five policy years; otherwise, the policy will lapse.

• Please be sure to explain to your clients the risk of market fluctuations, and that additional premiums may be required to keep the policy in force.

• If the policy is in danger of going into shortage within a 12-month period of the anniversary then

i. If paying by Pre-Authorized Debit (PAD), ivari will automatically increase the PAD amount each year to reflect the increased COI rates for that policy year. This is done to reduce the risk of the policy lapsing. We plan to inform clients about the increased amounts approximately 30 days prior to their policy anniversary.

ii. If paying on a direct billing basis, ivari will automatically increase the amount displayed on the billing notice that is sent to clients approximately 20 days prior to their policy anniversary.

• These automatic increases are explained in the PAD agreement in the Insurance Application and our current Request for PAD form. Please ensure your client reviews this component of the Application and understands the implications.

The minimum premium for Term and Benefit Riders is equal to the cost of insurance for these Riders, divided by (1 – premium tax rate).

The minimum premium for the policy in policy year six and onward is equal to:cost of insurance for the policy, divided by (1 – premium tax rate), which is equal to

(COI for each ART coverage, plus

COI for Term Rides, plus

COI for each benefit Rider, plus

the policy fee, divided by (1-premium tax rate)

Maximum premiums

Upon settling a new policy, and at the beginning of each subsequent new policy year, a maximum premium estimate is calculated for the policy year. Premium payments made throughout the year that exceed the maximum premium estimate will be credited to the Side Account. As well, each policy is tested at every policy anniversary, and ivari takes certain measures to retain the tax-exempt status of a policy, including transferring excess funds to the Side Account. A new maximum premium for the following year is calculated at every policy anniversary and shown on the Policy Statement. (For more information about the maximum premium estimate and tax-exempt testing, please refer to the Tax-exempt testing and policy anniversary processing section of this guide.)

Easy insurance coverage adjustments when neededYour clients’ UL insurance coverages may be modified after the policy has been issued to reflect changing needs.

Increasing the face amount

The face amount for a coverage may be increased at any time, subject to new evidence of insurability and new underwriting. The minimum increase amount is $50,000. A new surrender charge schedule will apply to each increase in the face amount, and new suicide and incontestability periods are established for the increase. No administrative fee is currently charged for this service; however, we reserve the right to charge a fee in the future.


No further medical evidence of insurability is required. Other changes to coverage types may be allowed, subject to ivari’s current business practices. If the NAAR is increased as the result of a COI change, two options are available:

• The face amount(s) may be adjusted to maintain the risk to ivari at the time of change, with no further evidence of insurability required.

• The client may choose to increase the NAAR. However, this change will be subject to underwriting, and a $150 policy change fee will be charged for this service.

When a COI option change is made from ART to 100 to level COI, the minimum premium used in the calculation of surrender charges will continue to be based on the original ART minimum premium after the switch has taken place and will not be based on the new minimum premium for level COI. As well, any accrued Premium Holiday months, if applicable, will decrease as of the date of change.

The total face amount for all level COI coverages and Level Cost Riders for a life insured may not exceed $500,001. An administration change may apply for making a COI option change.

Coverage Type Timeline to switch

From:

• Increasing death benefit with ART to 100

• Level death benefit with ART to 100

Can be made any time up to the primary life insured's age 80

To:

• Increasing with level cost

COI option changesThe following coverage type options may be changed at any time, at current rates, on an attained age basis:

Decreasing the face amount

The face amount may be reduced at any time without any underwriting requirements. The minimum decrease amount is $25,000, and the face amount may not be reduced below the plan minimum. However, when a client requests a reduction in face amount within the surrender charge period, a charge will apply, in proportion to the amount of the face amount being reduced. No administrative fee is charged for this service; however, we reserve the right to charge a fee in the future. (For more information about the surrender charges as the result of decreasing the face amount, please refer to Policy and coverage surrenders.)

The Optimizer Option provides automatic face amount reductions in conjunction with tax-exempt testing without incurring surrender charges. (For more information, please refer to the Optimizer Option and “Optimizing investments while maintaining tax-exempt status” sections of this guide.)

Death benefit option changes

The client may change the death benefit option after it has been issued. If the NAAR increases as the result of the death benefit option change, underwriting will be required, and a policy change fee (currently $150) will apply for this service. If the NAAR does not increase as the result of the death benefit option change, underwriting will not be required, and no fee is charged for this service.


SECTION 6

Living Benefits (including standardized industry definitions)

Living Benefits featuresLiving Benefits enable your clients to access their fund value by making a request for a lump sum benefit amount upon a disability. The policy definition of disability includes “occupational disability” and “critical condition disability.” Living Benefits are a powerful feature that can help your clients deal with the financial hardships caused by a disability.

Qualification

To qualify for the Living Benefit, the following conditions must be satisfied:

• The life insured is not excluded by amendment.

• The disability exists on the date the claim is made.

• One of the following occurs while the policy is in force:

– The life insured is diagnosed with an occupational disability and continues to be disabled without interruption until the waiting period has expired.

– The life insured is diagnosed with a critical condition disability and the survival period has expired.

Types of disability

A critical condition disability is a disability that results from either of the following:

• a critical condition that first occurs after the effective date, while the policy is in force, and prevents the life insured from performing the regular substantial activities the life insured was engaged in prior to the onset of the critical condition

• any condition that has been diagnosed as terminal and is expected to result in death within 24 months of diagnosis

A critical condition disability excludes any disability resulting from a cause described under the “Exclusions” section of the policy.

An occupational disability is a disability that:

• results from a disease that first appears or a bodily injury that first occurs after the effective date, while the policy is in force

• continues without interruption during the applicable waiting period

• prevents the life insured from either of the following:

i. performing substantially all of the material duties of his or her occupation

ii. if the life insured is not engaged in a gainful occupation, prevents the life insured from performing the regular substantial activities the life insured was engaged in prior to the onset of the injury or sickness

An occupational disability excludes any disability resulting from a cause described under the “Exclusions” section of the policy.

Benefit amount

The benefit amount is determined according to the following formula:

BA = A – (B + C + D) where: BA: the benefit amount. A: the total fund value. B: the sum of all principal, accrued interest and

other amounts outstanding in respect of any loans under the policy.

C: the sum of all monthly deductions due but not then paid.

D: the sum of three monthly minimum premiums.

This benefit is included in the base contract. Eligibility is based on the following:

• issue ages: 0–80 for non-smokers and 16–80 for smokers (same as base plan)

• available on policies with single life, multiple life and joint coverages

• available to coverages where none of the lives insured have a rating greater than 300% total mortality


Payment of benefit amount

The benefit amount is payable as a lump sum. The benefit amount payable to the policy owner will be the benefit amount, less the MVA (if applicable). The benefit amount and MVA (if applicable) will be deducted from the total fund value, based on the policy owner’s instructions. If the policy owner does not provide such instructions, then the benefit amount will be deducted in accordance with the default withdrawal order.

Face amount adjustment

If a Living Benefit has been paid, the face amount(s) for the policy will be adjusted to preserve the NAAR that is in effect on the date the benefit amount is paid.

A payment of the Living Benefit will reduce the death benefit(s) and the total fund value of the policy by the benefit amount (and MVA, if applicable) paid.

Claims for Living Benefits

A claim for Living Benefits may be made by written request to Head Office, and must include the evidence described below.

Occupational disability claim

A claim for a Living Benefit resulting from an occupational disability must be received within one year from the date the occupational disability occurred. ivari must receive, at Head Office, evidence satisfactory to it of:

• the life insured being diagnosed with the occupational disability

• the date(s) on which the occupational disability began

• the life insured remaining under the normal and customary care of a doctor, such doctor being competent to provide appropriate care for the condition causing occupational disability

• such supplementary evidence as required by ivari, from time to time, including, without limitation, an examination of the life insured by a doctor or doctors designated by ivari

Critical condition disability claim

A claim for a Living Benefit resulting from a critical condition disability must be received within 90 days from the diagnosis of the critical condition disability.

ivari must receive, at Head Office, evidence satisfactory to it of:

• the life insured being diagnosed with the critical condition disability

• the date(s) on which the critical condition disability was diagnosed

• such supplementary evidence as required by ivari, from time to time, including, without limitation, an examination of the life insured by a doctor or doctors designated by ivari

Continuous disability

The waiting period or survival period for a Living Benefit claim is waived when:

• Such claim is made within 12 months of a previous claim, and both claims are for the same or a related cause for which the waiting period or survival period has expired, such determination to be made by ivari.

• Such disability begins within 12 months of the date on which the previous disability has ceased.

Living Benefits: Definitions and highlights“Critical condition” means any one of the following conditions:

• Alzheimer’s disease• Aortic surgery• Aplastic anemia• Bacterial meningitis• Benign brain tumour• Blindness• Cancer (life-threatening)• Coma• Coronary angioplasty• Coronary artery bypass surgery• Deafness• Heart attack• Heart valve replacement• Kidney failure• Loss of independent existence• Loss of limbs• Loss of speech• Major organ failure; on waiting list• Major organ transplant• Motor neuron disease


• Multiple sclerosis• occupational HIV infection• paralysis• Parkinson’s disease• severe burns• stroke

See the contract provisions for the definitions of these critical conditions.

“Survival period” means the period starting on the date of diagnosis of the critical condition disability and ending 30 days following the date of diagnosis of the critical condition disability, except where modified elsewhere under the policy. The survival period does not include the number of days on life support. The life insured must be alive at the end of the survival period and must not have experienced irreversible cessation of all functions of the brain. For those conditions which have a qualifying period, for example, 90 days for bacterial meningitis and paralysis, the survival period runs concurrently with that condition’s qualifying period.

“Waiting period” means the 90-day period following the date on which the occupational disability first occurs, as provided under the terms of the policy.

Exclusions for disability claims

General exclusions

ivari will pay no benefit amount if the disability in respect of the life insured results directly or indirectly from:

• any bodily injury that occurs while a life insured has been determined to be legally intoxicated, under the influence of any alcohol, non-prescription drugs, including, but not limited to, narcotics or sedatives, or using or taking any prescription drugs other than as prescribed by a doctor and in accordance with a doctor’s instructions when the use of such substances was a proximate cause for the disability

• the voluntary taking of poison, inhalation of gas, or taking of a non-prescription drug or chemical

• the life insured’s commission of or attempted commission of a criminal act, or any loss sustained while incarcerated for a criminal act

• the life insured’s engaging in an illegal occupation

• the operation of any vehicle, however powered, while the life insured has alcohol in the blood in excess of the legal limit

• declared or undeclared war, invasion, hostility, acts of a foreign enemy or any act incident to war or any armed conflict, including service in the armed forces

• the life insured’s participating in any riot, civil commotion, revolution, rebellion, insurrection, explosion of war weapons or terrorist activities

• the life insured’s intentional self-inflicted injury or any act of, or attempt to commit suicide regardless of whether the life insured is sane or insane

• service, travel, flight or descent from any kind of aircraft if the life insured acted in any capacity other than as a fare-paying passenger

Exclusions for pre-existing conditions

No Living Benefit will be payable if ivari determines that the life insured, in respect of whom a Living Benefit would otherwise be payable, suffered from a disability or a disease, bodily injury or critical condition causing the disability at the issue date or a date of reinstatement of this policy. That determination will be based on disabilities, diseases, bodily injuries, critical conditions or other conditions specifically identified in, or that can reasonably be inferred to have existed at that time of, the Insurance Application, an application of reinstatement, a related declaration of health or other information available to ivari.

Key benefits

Living Benefits provide added peace of mind for your clients. They provide tax-free and surrender-charge free benefits.* Clients do not have to worry about the funds in a long-term contract when they need emergency access in case of disability.

Avoiding pitfalls

Clients with a rating greater than 300% total mortality are not covered by the benefit. The policy owner is cautioned that a payment of the Living Benefit will reduce the death benefit(s) and the total fund value of the policy by the total benefit amount and MVA (if applicable) paid.

* Based on ivari’s interpretation of the Income Tax Act, claims for Living Benefits disability benefits are not currently administered as taxable dispositions from our universal life policies. However, ivari does not guarantee, and is not responsible for, the tax treatment applicable to this policy feature. ivari’s interpretation does not constitute advice or an opinion to clients regarding taxation of this policy feature, and relevant tax authorities could decide to challenge it. Please advise your clients to consult their legal or tax experts for an opinion on this matter in relation to their particular circumstances.


SECTION 7

Optional benefitsAccidental Death and Dismemberment Rider

The Accidental Death and Dismemberment (AD&D) Rider provides an additional benefit amount between $25,000 and $350,000 should your client die, lose limbs or lose sight as a direct result of an accidental injury. This additional benefit amount may not be greater than the face amount of the base coverage.

This additional benefit amount doubles should your client die or lose limbs or sight as a direct result of an injury while travelling in a building elevator or as a passenger in a public conveyance, or as a direct result of fire or explosion in a public building.

Schedule of losses

Full benefit amount is payable for the following:

• loss of life

• total and irrecoverable loss of sight of both eyes

• loss of both hands

• loss of both feet

• loss of one hand and one foot

• loss of sight of one eye and the loss of either one hand or one foot

Half benefit amount is payable for the following:

• loss of both thumb and index finger on one hand

• loss of one hand or one foot

• total and irrecoverable loss of sight of one eye

• Issue ages: 15 to 55.

• This rider must be added at time of issue.

• Available with single life or multiple life coverages.

• Not available with joint life coverages.

Definition of “injury”

For the purpose of this rider, the loss must be a direct result of bodily injury caused exclusively by an external violent and accidental means, without negligence on the rider life insured’s part, and resulting directly and independently of any disease, sickness, medical disorder or medical treatment, or any other causes specified in the exclusions while the rider is in force.

In addition, the loss must occur within one year of the date of the injury and before the policy anniversary nearest the life insured’s 65th birthday.

TerminationThis rider terminates at the earlier of:

• the date a benefit amount is paid; and

• the policy anniversary nearest the life insured’s 65th birthday.

• the date the policy to which the rider is attached terminates, lapses or is surrendered.

ExclusionsA benefit is not paid if the loss resulted directly or indirectly from

• any accidental death or bodily injury that occurs while a rider life insured has been determined to be legally intoxicated, under the influence of any alcohol or nonprescription drugs, including, but not limited to narcotics or sedatives, or using or taking any prescription drugs other than as prescribed by a physician, when the use of such substances was the proximate cause for the loss

• the voluntary taking of poison, inhalation of gas or taking of a drug or chemical

• the rider life insured’s commission of or attempted commission of a criminal act, or any loss sustained while incarcerated for a criminal act


Key benefits

• This rider provides quality accidental death and dismemberment benefits at a low cost, and the cost is conveniently included in the monthly deductions.

• If an insured loses limbs or sight as a direct result of an accidental injury, the family may need extra money to provide for lost income or to provide for home modifications and other extra expenses not covered.

Avoiding pitfalls

The Accidental Death and Dismemberment Rider should not be confused with the Accidental Death Benefit (ADB) rider that was offered as part of a special marketing program for a limited time to qualifying ivari clients. The ADB rider is not for sale outside of this special program. It is important to note that evidence of loss must be received by ivari within one year of the date the loss occured.

ivari also reserves the right of examination (see section 5 of the rider).

• the rider life insured’s engaging in an illegal occupation

• bodily or mental infirmity, disease of any kind, or medical or surgical treatment of that infirmity or disease (this does not include bacterial infections resulting from an accidental cut or wound or accidental ingestion of a poisonous food substance)

• injuries which are not evidenced by a visible contusion or wound on the outside of the rider life insured’s body (this provision will not apply in the case of a drowning or exposure, and it also will not apply to internal injuries caused by accidental means revealed by an autopsy)

• the operation of any vehicle, however powered, while having alcohol in the blood in excess of the legal limit

• declared or undeclared war, invasion, hostility, acts of a foreign enemy or any act incident to war or any armed conflict, including service in the armed forces

• participating in any riot, civil commotion, revolution, rebellion, insurrection, explosion of war weapons or terrorist activities

• suicide, self-inflicted injury or any act of, or attempt to commit, suicide as stated in the provisions of the policy to which the rider is attached

• service, travel, flight in, or descent from any kind of aircraft if the rider life insured acted in any capacity other than as a fare-paying passenger

Benefit amount

Minimum benefit $5,000

Maximum benefit $30,000

(sold in units of $5,000)

Children’s Insurance Rider

• Issue ages: 15 days to not yet 19 years old for children.

• Age 20 to 55 years old for the parent (the policy owner).

Coverage availability• This rider may be added after issue.

• Available with single life.

• Available with joint first-to-die coverages.

• Only available on the base universal life coverage.

• Not available with joint last-to-die coverage.

This rider is designed to provide low-cost life insurance coverage for the unmarried children (including adopted children and stepchildren) of the base life insured. It includes an attractive conversion option that can provide up to five times the initial coverage amount without evidence of insurability. If the parent dies, the rider provides paid-up term life insurance up to the child’s 25th birthday or until marriage (if earlier).

This benefit amount is payable for every child insured under the rider.


Key benefits

• Provides inexpensive coverage for children without requiring a separate policy.

• Includes an attractive conversion option that ensures that your clients’ children will qualify for life insurance.

Avoiding pitfalls• Although insurance coverage ends for a particular

child when he or she turns 25 or is married, the rider will continue on the policy, and the cost of insurance will continue to be deducted as part of the monthly deductions. We remind the owner about the rider coverage period and expiry date on both the contract Data Page and the Policy Statements. We require the owner to provide instructions to terminate this rider before age 65, if no more children are covered.

• To ensure all eligible children are covered, please notify ivari’s Head Office when insuring any new children.

• This rider is available to the Proposed Insured 1, as specified on LifeView and the Supplement to the Insurance Application. If insurance is required for the children of another insured, you may wish to suggest a prosperity Term Rider or another insurance coverage.

Eligibility

The children must be at least 15 days old and not yet 19 years of age. While this rider is in force, notification must be given to ivari of any additional children born to or legally adopted by the life insured. This rider provides coverage for the children until they have married or have reached 25 years of age, whichever occurs first.

Both the life insured and the children are underwritten at the time of issue or when this rider is added to an existing policy. However, this rider does not trigger any medical requirements. Underwriting is done on the basis of a medical questionnaire that is included in the Insurance Application. A child who is considered a sub-standard risk at the time of issue will not be covered under this rider. The child rider may still be accepted even if the parent (life insured) is considered sub-standard, providing that the rating does not exceed 200% total mortality.

Paid-up term insurance

If the life insured dies before the children, the rider will be exchanged for a non-participating paid-up term insurance policy for each unmarried child under the age of 25.

Each paid-up term insurance policy:

• provides the same amount of coverage as the rider

• terminates on the child’s 25th birthday or 90 days after marriage, whichever is earlier

• contains the same conversion privileges as the rider

Conversion option

Each child may convert the rider to any eligible permanent or universal life insurance plan for up to five times the child’s coverage (but not less than the published minimum for the new plan) without new evidence of insurability. We must receive the conversion request in writing within a 31-day period following the earliest of any of the following events:

• the expiry date of the rider (parent’s age 65)

• the date the child marries (within 90 days following the event)

• any time between the child’s 21st and 25th birthday

Coverage termination

The rider provides insurance coverage for the children until the earliest of:

• the date the children have reached age 25

• the date the children are married

• the termination of the rider

Rider termination

This rider terminates at the earliest of:

• the policy owner’s request to terminate the rider;

• the date of lapse due to insufficient premiums;

• the expiry date of the rider (parent’s age 65)

• the death of the parent.


Waiver of Planned Premiums RiderBecoming totally disabled may affect your clients’ ability to maintain the planned growth of their fund value. This may have a serious impact on their retirement strategy or their plans to preserve their estate for future generations.

We offer a waiver rider that can only be added at time of issue for waiving planned premiums. Clients can become eligible for rider benefits according to either an occupational total disability definition or a severe total disability definition.(Please refer to "Common terms and conditions for waiver riders.")

Total disability begins Maximum benefit period

Before age 60 To age 65

Between ages 60 and 65

The later of:

• two years

• age 65

Please note that the benefit actually ends at the end of the disability, if earlier

Common terms and conditions for waiver riders

Definition of total disability

The rider insured may qualify for waiver or fund value payout benefits providing we receive satisfactory proof that the rider insured meets the definition of total disability and that the condition causing disability is not an excluded condition and began after the rider issue date.

Total disability is defined as either occupational total disability or severe total disability.

Occupational total disability

The disability must begin before the policy anniversary nearest the life insured’s 65th birthday and is defined as follows:

• During the first 24 months, total disability means the life insured under the rider is unable to practise his or her regular occupation.

• After the first 24 months, total disability means the life insured under the rider is unable to practise any occupation for which the life insured is, or may be, reasonably suited by reason of education, training or experience.

It is important to note that these definitions differ from the Living Benefits and payor waiver definitions.

• Issue ages: 16 to 55 years.

• This rider may not be added after issue.

• Available on the base coverage for multiple life policies.

• Not available with joint life coverages.

This rider waives premiums should the life insured under this rider be considered totally disabled under the terms of the rider (please refer to “Common terms and conditions for waiver riders”).

At time of application, your client must specify the insured annual waiver amount (up to a maximum of $12,000). The monthly cost of insurance for this rider will be based on a percentage of 1/12th of the insured amount:

• Male: 3% for the first $400 per month, 5% thereafter.

• Female: 5% for the first $400 per month, 7% thereafter.

When a claim for this rider is approved, the monthly waiver amount will be the lesser of:

• the insured monthly waiver amount;

• the total amount of premiums paid to the policy within the 12 months directly before total disability began, divided by 12; and

• $1,000.

This rider terminates if premiums have been made on a monthly (PAC) basis and premiums are not received for a period of 90 consecutive days prior to a claim for benefits. The maximum benefit period for the waiver benefits depends on when the disability begins, as follows:


• the voluntary taking of poison, inhalation of gas or taking of a drug or chemical

• the rider life insured’s commission of or attempted commission of a criminal act, or any loss sustained while incarcerated for a criminal act

• an attempt to commit suicide, self-inflicted injury as stated in the provisions of the policy to which the rider is attached

• service, travel, flight in, or descent from any kind of aircraft if the rider life insured acted in any capacity other than as a fare-paying passenger

• the rider life insured engaging in an illegal occupation

Request for benefit

A claim resulting from an occupational disability must be received within one year from the date the occupational disability occurred. ivari must receive, at Head Office, evidence satisfactory to it of:

• the Total Disability;

• the date(s) on which the Total Disability began;

• the Total Disability, continuing without interruption, for the duration of the applicable Waiting Period;

• the Rider Life Insured remaining under the normal and customary care of a physician licensed to practice in Canada other than the Rider Life Insured or his or her spouse, such physician being competent to provide appropriate care for the condition causing Total Disability; and

• such supplementary evidence as required by ivari, from time to time, including without limitation an examination of the Rider Life Insured by a physician or physicians designated by ivari.

Key benefits

Waiver riders provide valuable disability protection. After all, when clients become disabled and are unable to pay their planned premiums, this will affect more than their life insurance coverage. It will also affect the growth of their fund value, and that may have a serious impact on their retirement plans, estate preservation needs, etc.

Waiting Periods

Occupational total disability 180 days

Severe total disability 90 days

In order to receive Waiver benefits that have been credited to the policy during the waiting period once the claim is

approved written instruction to ivari must be given, otherwise the amount is automatically credited to the fund value.

Severe total disability

Defined as any one of the following:

• Total and irrecoverable loss of sight in both eyes, loss of use of both hands, or of both feet, or of one hand and one foot.

• The rider insured is terminally ill and the condition is expected to result in death within 24 months

• The rider insured is unable to perform two or more basic activities of daily living without receiving substantial daily physical assistance from another person.

Basic activities of daily living include bathing, dressing, toileting, continence, eating and cognitive functioning. If the rider life insured is able to perform the two basic activities of daily living with modification or adaptive devices, he or she will not be considered disabled under the terms of this rider.

Eligibility for benefits

Waiting period

To qualify for benefits under these riders, payment of the rider premium and the total disability must continue for the duration of the waiting period. The waiting period varies by definition of total disability, as follows:

Exclusions

Benefits under these riders will not be paid if the total disability results directly or indirectly from:

• bodily injury that occurs while a rider life insured has been determined to be legally intoxicated, under the influence of any alcohol or nonprescription drugs, including, but not limited to narcotics or sedatives, or using or taking any prescription drugs other than as prescribed by a physician, when the use of such substances was the proximate cause for the loss


Avoiding pitfalls

The Waiver of Planned Premium Rider is only available at time of issue. Many people buy life insurance when they are young, and make the mistake of thinking they’ll never need waiver riders. At a later time in their life, due to deteriorating health or uncertain employment, they may not qualify for stand-alone disability insurance coverage, or may have to pay very high premiums for this coverage.

Payor Waiver of Planned Premiums on Death or Total Disability (PWPP) RiderWe offer the payor Waiver of Planned Premiums on Death or Total Disability Rider which provides additional protection for single life policies issued to children and that insure the payor, usually a parent of the child, for the amount of the premiums. If the payor dies or becomes totally disabled, he or she may no longer be able to make planned premium payments for the child’s insurance policy, and this may have a serious affect on the planned growth of the fund value.

This rider waives premiums should the payor be considered totally disabled under the terms of the rider (please refer to "Definition of total disability" and "Benefit period for waiver benefits" below). This rider also waives premiums should the payor die.

At time of application, the owner must specify the insured annual waiver amount (up to a maximum of $4,800), and the rider premium is based on a percentage rate, multiplied by this amount. This percentage varies with the age of the payor and the maximum possible waiver benefit period.

• Issue ages: child 15 days to 15 years; payor 20 to 55 years.

• This rider may not be added after issue.

• Available with single life policies only.

• Available for one or two payors.

• Not available with joint life coverages or policies with multiple coverages.

When a claim for this rider is approved, the monthly waiver amount will be the lesser of the insured annual waiver amount and the total amount of premiums paid to the policy 12 months directly before total disability began, or when death occurs, divided by 12. The monthly waiver amount will not exceed $400.

This rider terminates at the earlier of the following events:

• the policy anniversary nearest the child’s 25th birthday

• the policy anniversary nearest the payor’s 65th birthday

Common terms and conditions for the payor waiver rider

Definition of total disability

To qualify for benefits under these riders, we require satisfactory proof of total disability.

In addition, the total disability must begin before the policy anniversary nearest the payor’s 65th birthday (and before the policy anniversary nearest the child’s 25th birthday).

• During the first 24 months, total disability means the payor is unable to practise his or her regular occupation.

• After the first 24 months, total disability means the payor is unable to practise any occupation for which the payor is, or may be, reasonably suited by reason of education, training or experience.

The payor will also be considered totally disabled if he or she experiences the entire and irrecoverable loss of the sight of both eyes, or of the use of both hands, or of both feet, or of one hand and one foot.


Please note that the benefit actually ends at the end of the disability, if earlier.

Death benefit under payor waivers

If the payor dies, the benefit amount is payable to the policy anniversary nearest the child’s 25th birthday.

Total disability begins Benefit period ends

Before age 60Earlier of child's age 25; and payor's age 65

Between ages 60 and 65

The later of:

• two years

• the earlier of the child's age 25; and payor's age 65

Please note that the benefit actually ends at the end of the disability, if earlier

Waiting period

To qualify for benefits under these riders, payment of the rider premium must continue during a waiting period of at least six months.

The monthly waiver amounts that would have been credited to the policy during the waiting period will be payable once the claim is approved.

Exclusions

Benefits under these riders will not be paid if the disability results directly or indirectly from

• an attempt to commit suicide, or any intentional, self-inflicted injury, regardless of whether the life insured is sane or insane

• an attempt to commit a crime

• the operation of a motor vehicle while having alcohol in the blood in excess of the legal limit

• any act or occurrence related to war or insurrection

• the flight in, or descent from, any aircraft if the insured acted in any capacity other than as a farepaying passenger

• the use of any drug or substance, including the use of narcotics and sedatives, other than as prescribed and administered in accordance with a physician’s instructions

• the voluntary inhalation or taking of any gas or poison

Maximum duration of benefit period

The maximum benefit period for the waiver benefits depends on when the disability began, as follows:


SECTION 8

Plan setup and policy administration

Administration procedures at policy issue

Illustrations

The LifeView illustration and the Supplement to the Insurance Application must show the same planned periodic premium amount, face amount and other details. In particular, if your client would like to select the Optimizer Option, the submitted illustration must display the same Optimizer start year and Optimizer minimum face amount as stated on the Supplement to the Insurance Application.

The illustration and Supplement to the Insurance Application must be signed by the advisor and the applicant, and submitted with the Application.

Key benefits

The Supplement to the Insurance Application conveniently prints at the end of the illustration report. Information that you have entered in the LifeView illustration about your client is automatically entered in the form.

Avoiding pitfalls

To avoid delays, please make sure that you are using the latest version of LifeView.

Avoiding pitfalls

If you do not specify Interest Options on the Supplement to the Insurance Application, we will automatically transfer funds to the T-Bill Interest Option when the policy settles.

Insurance Application and Supplement to the Insurance Application

The Applications, together with the policy contract and any applicable endorsements, amendments and riders, form ivari’s contract with your clients. It is essential that these Applications be completed properly, signed and dated by you and your clients in the appropriate places. Any changes or corrections made throughout the documents submitted must be signed by the proposed owner. The electronic version of the Supplement to the Insurance Application is conveniently produced from LifeView illustration software.

Premium allocation preferences

Indicate the client’s premium allocation preferences on the Supplement to the Insurance Application (WFG-LP1220) or on the Allocation Form (WFG-LP1221) when submitting money.

If the planned periodic premium is less than the minimum required for a Fixed-Rate Interest Option, the client will need to authorize the automatic transfer of funds from the T-Bill Interest Option to the Fixed-Rate Interest Options. Please refer to the Allocation Form. It is important to note that any money submitted with the Application, or received prior to all delivery requirements being met, will be held in a suspense account, where no interest will be credited or debited. Once all of the requirements have been received in good order, the funds will be deposited according to the client’s premium allocation preferences.


Cover letter

In addition to signed copies of the Insurance Application, the Supplement to the Insurance Application and the illustration report, we also recommend that you provide us with a cover letter for complex cases and for cases that request insurance for amounts of $1 million or greater or for a premium deposit of $10,000 and greater. The cover letter is very useful for underwriting purposes and helps identify and resolve potential issues at an early stage in the underwriting process. The cover letter can be used to discuss potential problems, highlight key medical information and explain age and amount requirements ordered. This letter can also be useful in providing an understanding of why the insurance coverage is needed, that is, how it benefits your clients for accumulation or insurance protection purposes. It can also be used to explain net worth calculations and other financial information, as well as prior adverse insurance history.

Financial underwriting requirements for businesses

The recommended requirements are as follows:

• A Business Beneficiary Report (provides a snapshot of the structure and financial position of the business) and a Confidential Business Financial Questionnaire (UW-BFINQ361) should be presented. The financial documentation submitted must support the total amount of coverage to be used where various individuals are involved. For example, if four shareholders are each applying for $250,000, the financial documentation should support $1,000,000 in insurance coverage needs.

• For key-person applications, income and salary figures may be confirmed by obtaining copies of the proposed insured’s income tax returns. We may request confirmation by the client’s chartered accountant.

Determining business equity

In establishing business equity for underwriting purposes, the most significant measure is Fair Market Value (FMV). Capitalization of earnings involves multiplying net income by a factor to arrive at an estimated FMV. The earnings for the period selected will often have to be adjusted to eliminate non-recurring or non-representative events, such as extraordinary income or expense items. If bonuses are being paid to shareholders, an adjustment to pre-tax net income may be required.

Issuing policies

Note that all prosperity UL contracts are current-dated unless otherwise specified and in accordance with current administrative guidelines.

webcappow

webcappow is a great tool to obtain up-to-date information on policies, whether pending issue or in force.webcappow can be accessed through the ivari.ca website and provides instant access to information.

Claims processing

Payment of death claims

Unless specified otherwise, we require the claimant to provide evidence of the following.

Claimant entitlement

• The claimant’s statement, completed by the claimant, and signed by a witness and by either the named beneficiary or the executor of the estate. This form details the beneficiary’s name, address, social insurance number, age and reasons for filing the claim.

• The original prosperity UL policy contract.

• A notarized copy of the probated will (in Quebec, the notarial will) or letters of administration required for any claim that is payable to a life insured’s estate (not required when the claim is payable to a named beneficiary).

Proof of life insured’s age

A copy of the life insured’s birth certificate or driver’s licence.

Proof of death

• The death certificate (an original or notarized copy must be supplied.)

• The physician’s statement, completed by the attending physician, documenting the medical condition causing death. It also outlines the details of the diagnosis, the date when the condition was first diagnosed and whether the death was accidental or resulted from suicide or homicide.


Disclosing the reason for death is important, because it could affect the amount of the claim, depending on the contract’s benefits or riders. For example, the Accidental Death and Dismemberment rider provides an additional benefit amount to the named beneficiary for a death that is the direct result of an accident.

Suicide limitation

The death benefit is not payable if within two years from the later of the effective date of the policy or the last reinstatement or change of the policy, the life insured dies by suicide or an attempt to commit suicide. This is regardless of whether the life insured is sane or insane. Instead, ivari’s liability will be limited to refunding the lesser of:

• the amount by which the total fund value exceeds any outstanding policy loans (including accrued interest)

• the total of all premiums received for the life insured, less any withdrawals or premium refunds

Monthly deductionsMonthly deductions are charged against the total fund value at each “monthiversary” (the first day of each policy month, which is based on the policy issue date), and include the costs for base coverages, riders and benefits, as well as the $10 guaranteed monthly policy fee.

Lapse and reinstatement processYour clients will have the flexibility to increase or decrease premiums, pay at unscheduled dates or stop and restart premiums, providing the policy does not go into shortage.

Shortage

Essentially, “shortage” is a warning to your clients that their policy is at risk of lapsing. A policy is considered to be in shortage if the following conditions are met:

Shortage Conditions

Policy Years One to Five

a. The net fund value is less than the then-current monthly deduction; or

b. i. the cash surrender value is less than $0; and

ii. the sum of all premiums received by ivari prior to such time, less any withdrawals and all principal, accrued interest and other amounts then outstanding in respect of any loans, is less than the sum of all monthly minimum premiums calculated from the policy date to such time.

Policy Years Six and On

The net fund value is less than the then-current monthly deduction.

When a policy is in shortage, the owner will receive a shortage notice from ivari. A policy will lapse if a premium holiday is not available and a premium equal to or greater than the shortage amount (so that the policy no longer meets either of the shortage conditions) is not received during the 31-day grace period. We recommend that at least the equivalent of three additional monthly minimum premiums be paid as a “buffer” to reduce the risk of lapsing. In this situation, your clients may also want to increase their planned periodic premium payment.

If a primary life insured dies during the grace period, the portion of any overdue monthly deduction applicable to any insurance coverages for that individual will be deducted from the death benefit.

Premium Holiday

The Premium Holiday feature is like a safety net for clients if they are unable to pay their minimum premiums, for any reason whatsoever. The Premium Holiday is measured in whole months during which time a monthly minimum premium is not payable.

How does it work?

By simply paying the minimum premium, holiday months are automatically accrued, at no additional cost, as early as the beginning of month four of the policy. As premiums are paid, banked “holiday months” will accrue, allowing up to three months off from paying premiums by the start of the second policy year and up to six months off from paying premiums by the start of the fifth policy year. Although missed premiums never need to be repaid, use of this feature without repayment of the skipped minimum premiums will preclude the policy from qualifying for the persistency and performance bonuses in any year when such bonuses may be applicable.


While the policy is on Premium Holiday, the policy may still be at risk of lapsing if the net fund value decreases or if the owner makes a change to the policy or takes a withdrawal or loan from the policy.

In order to exercise the Premium Holiday, the owner may make a written request to ivari, at its head office, based on the following conditions.

Conditions(a) A Premium Holiday request will not be available if:

(i) the request exceeds the number of accrued Premium Holiday months as at the date of the request less the number of accrued Premium Holiday months previously taken; or

(ii) the policy is already in shortage in accordance with Shortage Condition (a) noted under the Shortage section.

(b) In the event that a scheduled minimum premium has not been paid and this policy is at risk of lapse in accordance with the Shortage Condition noted under the Shortage section (b) then ivari will automatically initiate a Premium Holiday, if available, to keep the policy from lapsing.

Accrued premium holiday schedule*

Beginning of month 4 8 12 18 24 30 36 42 48 54

Accrued PremiumHoliday months** 1 2 3 3 4 4 5 5 6 6

* This schedule is based on the assumption that a policy with a single coverage with ART to 100 cost of insurance has been selected.

** It is important to note that the number of Premium Holiday months that can be accrued will be decreased depending upon such factors as: if a policy has a substandard extra rated premium, Term Riders, Level COI coverage and riders, optional benefits, loans, or partial withdrawals. Accordingly, the schedule above may vary based on the policy structure. In order to find out the number of Premium Holiday Months that have accrued for a policy, you may contact ivari’s Head Office.

Key benefits

Another way of interpreting the shortage conditions is that the policy will not lapse as long as the following conditions are met:

• In the first five years, if the fund value is sufficient to cover the monthly deductions, and the minimum premiums have been paid to date (net of withdrawals and outstanding loans), then the policy will remain in good standing.

• After year five, if the policy has sufficient fund value to pay the monthly deductions, the policy will remain in good standing.

If is also important to note that monthly deductions will continue to be withdrawn from your policy fund value during the Premium Holiday, and the policy may lapse if the fund value is insufficient to cover monthly deductions.

Policy owners who pay their premiums through Pre-Authorized Chequing (PAC) must provide seven business days, advanced written notification to ivari of the intended start date. For clients who do no have a PAC account, the Premium Holiday is automatically administered subject to certain conditions. Refer to the policy contract for further details.

(c) Monthly deductions will continue to be withdrawn from the total fund value of the policy during the Premium Holiday.

(d) In order to qualify for the prosperity bonuses in any given year, the owner must have paid all the minimum premiums to that date and have met the other conditions as defined in Section 10 of the policy contract.


Lapse

If a policy is in shortage, and a Premium Holiday is not available, and a premium equal to or greater than the shortage amount is not received within the 31-day grace period, the policy lapses as of the date that the shortage first occurred.

Reinstatements

Reinstatements are allowed on lapsed policies, but are not available on policies that have been surrendered or otherwise terminated. Requests for reinstatement must be made in writing within two years of the effective date of lapse, and are subject to ivari’s underwriting requirements. At time of reinstatement, a premium must be paid for an amount equal to:

• any loans which existed at the time of lapse, and all other amounts outstanding in respect thereof

• an amount sufficient to ensure that the policy does not meet the shortage conditions at the date of reinstatement


SECTION 9

Understanding universal lifeWhat is universal life insurance?Universal life (UL) insurance is permanent insurance that provides protection in case of death, as well as a tax-preferred savings or cash value component. The cash value of a UL policy is based on the amount of premiums you pay, the interest earned on the savings, and the deductions for insurance charges and administration fees. Unlike term life insurance, UL policies permit flexibility in the amount and timing of premium payments (within limits), and combine valuable tax-preferred savings opportunities with permanent protection.

Because of its unique classification in the Income Tax Act, tax-exempt UL insurance provides the ability to accumulate growth inside the policy, within certain legislative limits, without paying income tax on the growth while it remains inside the contract. Upon death, the insurance and accumulation are paid tax-free to the beneficiaries.

Advantages of UL insurance• It offers the greatest growth potential of any type of

life insurance, since you have the opportunity to invest in a variety of different portfolios.

• You can determine the amount and timing of premium payments, within certain limits.

• You can increase or decrease the face amount, subject to certain limits.

• The product is unbundled and transparent: all insurance charges and policy fees, as well as the formulas for calculating returns, are spelled out and guaranteed.

Disadvantages of UL insurance• The flexibility to skip premiums, if not monitored, can

lead to policy funding problems.

• Poor investment performance can lead to increased premiums – or policy lapse. It is wise, therefore, to project UL illustration policy values with conservative rates of return.

In addition to other product characteristics, UL plans also include these benefits and features:

• Tax-advantaged growth to maximize your clients’ capital. Interest growth earned in the universal life policies is tax-exempt to a maximum determined under the Income Tax Act (Canada).

• Pre-funding option provides the ability to pay COI with pre-tax investment dollars. In other words, to pay annual COI of $500 using taxable income such as a salary would require up to $925 of a client’s pre-tax income (depending on his or her marginal tax rate). However, that same client, once he or she accumulates $10,000 in a UL plan, and if he or she earns a 5% return, would realize $500 per year pre-tax in investment income with which to pay the COI.

• Probate bypass and tax-free benefits. The proceeds from prosperity UL can be paid directly to the named beneficiary tax-free, bypassing the estate and the delays and expenses surrounding probate (probate is not applicable in Quebec).

• Creditor protection may be available if a certain family relationship exists between the life insured and the beneficiary (in Quebec, between the policy owner and the beneficiary), or if a beneficiary designation is irrevocable.

• Premium flexibility. Providing the policy does not go into shortage, your clients may change premium payments by increasing or decreasing their premiums, paying at unscheduled dates, stopping and restarting payments or paying monthly deductions with the accumulated tax-deferred fund value.

• Accessible cash values. Your clients can withdraw a portion of the cash surrender values that have built up in their policy at any time. Convenient withdrawal and loan methods are available, subject to current tax laws and policy surrender charges and Market Value Adjustments (MVAs).


How prosperity universal life insurance worksWith prosperity UL insurance:

• You can choose one of two death benefit options:

– A level death benefit equal to the policy’s original face amount. This option maximizes fund value accumulation.

– An increasing death benefit equal to the original face amount, plus any existing policy account value. This option maximizes the insurance protection.

With both options, the death benefit always includes the tax-free payout of the policy’s fund value.

• Premium payments are flexible. While a minimum premium is required for the first five years, you make additional premium payments at virtually any time and in any amount (subject to certain minimums and maximums). After five years, there is total premium flexibility as long as the fund value is sufficient to cover the monthly deductions for the guaranteed cost of insurance and the policy fee.

• With prosperity UL insurance, brand-name investment portfolios provide long-term growth potential, tax-preferred earnings and the ability to make tax-free transfers among the investment portfolios. You can invest premiums in one or more underlying portfolios that offer differing management styles.

Income protection for today

Life is full of surprises, and bad news can come at any time. However, just because we’re not expecting it doesn’t mean we can’t prepare our clients. Insurance is one of the easiest and most affordable ways to manage those unpleasant surprises, ensuring the financial security of your clients and their families.

Having proper protection can help ensure that when a person dies, the surviving family members will have the funds necessary to meet their current and future financial needs. With prosperity UL, your client’s family will be able to:

• cover their debts and monthly income

• ensure they have a place to call home

• cope with emergencies and unexpected expenses

• enable their children to live their dreams of higher education

• maintain their lifestyle

Asset accumulation for tomorrow

Planning for tomorrow is just as important as planning for today. The earlier your clients begin their retirement planning, the easier it becomes to realize their retirement dreams. With prosperity UL, they can feel secure knowing that in addition to paying for their insurance needs, part of their premiums are also their investment; in fact, the policy cash value grows on a tax-advantaged basis and can help provide cash accumulation for the future, including their retirement.


The situation

Today, protection against loss of income is of primary importance. But over time, as your clients’ children grow and their mortgages get paid off, their financial responsibility to their families decreases, while their need to save for retirement increases. They need a solution that provides income protection today and increasing wealth accumulation for tomorrow. When it comes to finding one product that meets both needs, one of the easiest, most affordable and most tax-effective ways to fulfill the need for income protection and accumulation is with UL insurance.

Simply, here’s what this may look like when shown pictorially (this example uses a level death benefit option with ART cost of insurance):

The opportunity

Because of its unique classification in the Income Tax Act (Canada), tax-exempt life insurance can also be a powerful tool in providing supplemental retirement income, in addition to the valuable insurance protection it provides Canadian families.

Options for gaining access to the policy cash surrender value

There are several methods to gain access to the accumulated cash surrender value in a UL policy. Each has a unique set of advantages and disadvantages, and each is subject to a different set of tax consequences. It’s important to analyze all of the methods for gaining access to policy cash surrender value at the time cash is needed. Four commonly used methods are:

• collateral loan or line of credit

• partial surrender of cash surrender value

• policy loan

• tax-free Living Benefits*

Accessing the cash surrender value of a life insurance policy, either through direct withdrawals or through policy loans, may result in taxable income for the policy owner for the year in which the funds are taken. Under current Canadian income tax legislation, using a life insurance policy as collateral to secure loan proceeds from a lending institution will generally not result in taxation. Depending on the interest rate charged by the lender and the rate of growth in the policy cash surrender value, collateral loans may provide increased after-tax income, compared with the other means of accessing policy cash surrender value.

ivari’s Insured Retirement Strategy uses the cash surrender value of a tax-exempt UL insurance policy as collateral for a personal line of credit or loan.

Tax-free Living Benefits*

In addition to providing the ability to access the policy value through tax-free collateral loans, ivari’s prosperity UL plan offers Living Benefits. Living Benefits provide access to the net fund value in the event of a critical illness, disability or need for long-term care – tax-free and without surrender charges. If an accident or life-threatening medical condition disrupts your clients’ financial plan, the money accumulated in their UL plan will be available to help them protect their quality of life, while their life insurance coverage remains in place.

* Under the Income Tax Act (Canada) and at the date of publication of this guide, the receipt of Living Benefits is not currently taxable. ivari does not guarantee nor is it responsible for the tax treatment applicable to this policy feature. Please consult your legal or tax advisor for an opinion on this matter in relation to your client's particular circumstances.


• A face amount is selected. This is the amount of life insurance that will be available on the death of the insured under a level death benefit option.

• The premium payer (usually the policy owner) pays a premium. This premium may be any amount desired, anything from the contractual minimum up to the maximum amounts permitted by Income Tax Act (Canada), and may be paid any time during a policy year.

• The net premium is the premium paid, less provincial premium tax. This incoming net premium is added to the policy’s Interest Options that the policy owner has selected.

• The difference between the face amount and the fund value is the net amount at risk (NAAR). The NAAR is also known as “pure” insurance, since from the insurance company’s view, it is the coverage that exceeds the assets represented by the policy’s fund value. The net amount at risk is what determines the cost of insurance.

• The value in the Interest Options is adjusted daily with the returns (gain/loss) or interest from the underlying indexes.

• The following items reduce the fund value:

– Monthly deductions, which are made up of:

• the guaranteed monthly policy fee

• the cost of insurance (COI). This is the monthly charge deducted for NAAR. The COI rates are guaranteed in the policy

• Additional riders and optional benefits

– Policy owner cash withdrawals. Withdrawals are deducted from the cash value, along with any surrender charges and MVAs that may be levied. Surrender charges apply only in the first 10 years of the policy.

– Policy loans (principal amount plus any accrued interest)

– Benefit payments (death benefits, fund value payout, Living Benefits)

An example of how prosperity UL works with a level death benefit

• Accessing the value in the policy can occur in several ways

– policy surrender or cash withdrawals

– Living Benefits

– policy loan

– collateral loan or line of credit

– death benefit payout


prosperity UL featuresivari’s non-medical underwriting program is available for:

• Face amounts up to $500,000 and applicants ages 45 and under

• Face amounts up to $250,000 and applicants age 46–55

Our industry-leading non-medical underwriting with higher limits, built for WFG, is designed for ease, making it easier to get the protection your client needs. Non-medical underwriting means a better experience for you and your client, quicker processing of Applications and speedier delivery of policies.

Preferred Underwriting above $500,000: Preferred underwriting is automatically applied when the underwriting amount for a life insured is $500,000 and greater and the insured is 16 years of age or older.

• A wide range of Interest Options are available, including:

− Fixed-Rate Interest Options

− Brand-name managed mutual fund individual and portfolio options (AIM, AGF, CI, Fidelity, Mackenzie, TD, Templeton, Foresters Financial Investment Management Company of Canada Inc.), which provide your client with access to the actual returns of the underlying mutual funds

− ivari Asset Allocation portfolios — four portfolios leveraging Foresters Asset Management's fixed-income expertise with passive, ETF-based equity returns

• Low-fee investing: prosperity UL requires no additional investment fees above those charged by the brand-name managed mutual fund portfolio options (AGF, Templeton, Foresters Financial), providing your client with the actual returns of the underlying mutual fund portfolios. And prosperity UL offers low interest option fees on ivari Asset Allocation portfolios.

• Living Benefits: available regardless of age and at no additional charge, providing your clients with access to their net fund value in the event of critical illness, disability or need for long-term care – tax-free* and without surrender charges. Living Benefits are applicable on cases rated up to and including total mortality of 300%.

• prosperity bonuses: reward clients starting at the end of the fifth policy year and work to increase their investment. The Persistency Bonus rewards clients simply for paying their minimum premium. If they qualify for the Persistency Bonus, clients will also receive the Performance Bonus if the policy net rate of return is 7% or higher.

• Solid guarantees: including the factors used to calculate the cost of insurance and the policy fee. We guarantee the interest option fees on our ivari Asset Allocation Portfolios and the minimum rates of return for our Fixed-rate Interest Options. We also offer guaranteed the Persistency Bonus (subject to paying the minimum premiums), and guarantee to always offer at least four Interest Options and a Fixed-Rate Interest Option with a 2.75% guarantee, subject to certain limitations.

• Annual renewable term (ART) and level to age 100 COI with the coverage becoming paid up at age 100.

• The Optimizer Option: automatically reduces the face amount to minimize insurance costs while enhancing tax-deferred accumulation.

• Multiple universal life coverages: with prosperity UL, more than one universal life coverage can be included under the same policy. This is attractive for both businesses and families, because it offers great flexibility and an enhanced tax-sheltering ability without additional policy fees.

• Combined banding: means that ivari looks at all non-joint insurance coverages (including UL and prosperity Term Riders) for an insured per policy when determining rate bands. We band the COI factors in order to provide a discount at higher face amounts.

* Under the Income Tax Act (Canada) and at the date of publication of this guide, the receipt of Living Benefits is not currently taxable. ivari does not guarantee nor is it responsible for the tax treatment applicable to this policy feature. Please consult your legal or tax advisor for an opinion on this matter in relation to your client's particular circumstances.


policies also pay an additional death benefit if a second death of a life insured occurs within 90 days of the first death.

– As clients’ needs evolve to estate succession or tax liability coverage from income protection, ivari offers a switch option to change from JFTD to JLTD.

The switch option allows clients to change from JFTD to JLTD with deductions to last death, should their insurance needs change. The SEA will be calculated based on the individual ages at original issue date of the JFTD coverage.

Structuring prosperity UL to provide the protection needed today, with the opportunity for investments to increase dramatically in the long term Designed for middle-market Canadian families, prosperity UL offers your clients long-term, tax-deferred asset accumulation with the immediate financial protection of comprehensive life insurance. By meeting both their protection and accumulation needs, prosperity UL can help your clients ensure their family’s financial security – for today and tomorrow.

Protection: The death benefit is intended to provide the insured’s family with the coverage needed to pay off the mortgage and other debts, replace lost income, pay for funeral expenses and provide funding for education.

Accumulation: As the need for protection decreases over time, the fund value grows and can act as a source of supplemental retirement income and/or funds to help deal with the financial hardships related to disability, critical illness or the need for long-term care.

How to optimally achieve your client’s dual protection and accumulation needs with prosperity UL using ART cost of insurance

Step 1: Perform a needs assessment with your clients to determine the insurance protection, or face amount, that would best meet their needs.

• 10% free withdrawal: offers access to a portion of the policy’s fund value without incurring surrender charges. This option can be exercised once a year after the second policy anniversary.

• Optional benefits and riders, including Accidental Death and Dismemberment, Children’s Insurance, Term Insurance, Level Cost, Waiver of Planned Premiums and Payor Waiver of Planned Premiums.

• Flexible protection to adapt to changing needs: ivari’s prosperity UL plan offers a long list of built-in features that give your clients flexibility and control of their insurance plan. Options include:

• Ability to increase the face amount on lives already insured, subject to underwriting.

• Change of Primary Life Insured Option: allows you to replace any primary life insured with another primary life – a perfect solution when you replace a key person in your business. The new life insured is subject to underwriting, and premiums will be based on the new insured’s age and underwriting status.

• Severance Option: lets your client sever a life insured from a multiple life policy to allow that person to maintain coverage separately.* This is often used in cases of dissolution of marriage, or when a child has grown up and wishes to own the policy on his or her life. Businesses can use the Severance Option to provide departing employees or shareholders with a chance to maintain the coverage.

• COI option changes on all ART coverage type options may be changed at any time, at current rates, on an attained age basis to level COI up to age 80

• A number of options are also available for joint coverages:

– For joint last-to-die coverages, the Single Life Insurance Option allows you to split coverage in the event of divorce or dissolution of a business partnership.

– For joint first-to-die policies, we offer a survivor benefit, which allows the surviving lives on a policy to purchase insurance coverage after the death of the first insured life within 90 days without new evidence of insurability. This ensures that policyholders are not left without insurance coverage in the event that a family member or business partner dies. ivari’s universal life insurance

* Certain conditions may apply.


Step 2: Select a level death benefit option.

This option ensures the death benefit equals the face amount and allows for faster accumulation by reducing the net amount at risk and the associated cost of insurance.

Step 3: Select the Optimizer feature.

This feature automatically reduces the face amount to the minimum required to maintain the policy’s tax-exempt status. You will need to select the following options:

• Start year: Select the year when the protection is no longer needed or when less protection will be needed. It is best to select a start year that is after the last year when premiums are expected to be paid.

• Minimum face amount: The Optimizer will not reduce the face amount below the minimum specified. This amount represents the minimum long-term coverage the insured needs.

Step 4: Determine other needs.

Determine any other temporary insurance needs that can be covered with prosperity Term Riders, for example, funding for education or coverage for a spouse.

Determine if there is a need for one of the many other valuable benefits offered by prosperity UL.

Step 5: Determine the premium.

The LifeView illustration software will calculate the minimum and maximum premiums for the insurance coverage. Your client can chose to pay any amount between these limits.

Step 6: Select the investment options.

Walk your clients through the Investor Profile Questionnaire in order to determine which Interest Options are most suitable for their needs and risk tolerance.

Comparing and illustrating UL plans Here are a few things to remember when illustrating different UL plans:

Don’t forget to deduct all investment fees when choosing an illustration rate of return!

The rate of return assumption is usually the most powerful assumption in an illustration, due to the effects of compounding over many years. A small difference in this assumption can change results dramatically. Remember to look at the following when selecting a rate of return:

• The rate of return you choose to illustrate the UL plan is assumed to be net of all fees that apply to the underlying investment. You need to account for the following:

– The fees of the underlying index, fund or portfolio the UL option is linked to. This is typically referred to as the MER.

– UL plans also typically charge an additional fee, while some have some extra costs, such as investment income tax.

– Since prosperity UL is a low-fee UL, you only need to account for the underlying fund or portfolio MER, since there are no additional interest option fees. (For the ivari Asset Allocation Portfolios, the index interest option fee should be used.)


Choosing a rate for your illustration

So what is an appropriate rate of return for illustrating prosperity? Well, that depends on the investment or portfolio selected. Below is an analysis based on the returns of Canadian equities and bonds for the period 1924–2008.

Historical return analysis for Canadian equities and bonds

Table calculates the average Compound Annual Return (CAR) for all 15- and 30- year periods.

Common Stock Index

Canada Long Bonds

15-Year Average Car

30-Year Average Car

# of years 85 85 71 56

100% Equities0% Bonds

LowHighAverageMedian

-33.0%51.8%11.3%12.0%

-10.5%43.0%

6.8%4.8%

0.6%17.2%10.2%10.5%

7.6%12.6%10.6%10.5%



2.0%14.7%9.6%9.7%

7.2%12.0%

9.9%9.8%



3.0%13.8%8.9%8.9%

6.6%11.8%9.0%8.7%



3.9%13.8%

8.1%7.5%

5.7%11.8%8.0%7.2%



3.2%14.2%

7.2%5.5%

4.2%11.2%6.8%5.7%

Source: TSX. All Rights Reserved. Historical Period: 1924-2008.

Since UL is a long-term plan, we can tie the realistic rate of return assumption to the average of the 30-year compound average annual returns. Assuming an average portfolio MER of 2.5%, the following are potential rate of return assumptions for prosperity and comparison rates for WealthAdvantage:

• Since each company charges different fees for UL investment options, it is important to account for these fees when selecting a rate of return for each product. In other words, the rate of return for different products will differ due to the fees; accordingly, the projected rate of return should reflect this.

* Average compound annual return for all 30-year periods. TSX. All Rights Reserved.

** Assumes an average portfolio MER of 2.5%

PortfolioEquity/Bond

Historical Average*

prosperity** Illustration

Rate of Return

Aggressive growth

100/0 10.6% 8.1%

Growth 80/20 9.9% 7.4%

Balanced growth

60/40 9.0% 6.5%

Balanced 40/60 8.0% 5.5%

Conservative 20/80 6.8% 4.3%

Minus2.50%


This is just a guide; each company will disclose its particular fees. (ivari’s can be found in Section 2: Investment Choices.) But because of variations in fees, two companies offering the same index-linked funds can actually yield completely different results!

Other considerations when illustrating competing UL insurance• How are MERs calculated? Beware of daily compounded MERs that are actually higher than the published (estimated)

numbers on an annual basis.

• Are bonuses conditional? Watch out for policies that reduce or eliminate the investment bonuses on certain options or in certain market environments.

• Do bonuses change based on investment option selected? Make sure you illustrate the effect of moving to fixed rates as the client gets older.

• How are bonuses invested? If bonuses are invested somewhere other than the client’s chosen investment option and this is not factored into the illustration, actual long-term investment results could be reduced by up to 20%, unless the advisor or client is prepared to request a fund transfer every year.

• Does the product charge MVAs when insurance charges are drawn from Fixed-Rate Interest Options? If so, you will need to ensure that there are sufficient funds invested in other investment options potentially earning lower investment returns. For prosperity UL market value adjustment is not applied when insurance charges are drawn from fixed-rate accounts.

prosperityCompetitor

low-fee productCompetitor

high-fee product Comments

Underlying Fund Return 9.0% 9.0% 9.0%

This is the gross long-term rate of return expected for the fund prior to all fees.

Portfolio MER 2.4% 2.4% 2.4%This is the mutual fund portfolio’s MER. It is the same in all three products, since all three link to the same portfolio.

UL interest option fee 0% 0.4% 1.2%

This is UL’s version of the MER and is charged in addition to the underlying portfolio’s MER.

Net ROR 6.6% 6.2% 5.4%This is the projected rate of return to use in the UL illustration for each product.

The table below is an example of how to set the projected rate of return for the three products linked to the same mutual fund portfolio, accounting for all the fees.


Glossary of common termsACB or adjusted cost basis is the policy owner’s net cost of the policy, as defined by the Canada Revenue Agency. This amount is used to determine whether monies surrendered from a policy are subject to tax, and also affect the amount of CDA credit for corporate owned policies.

Age means the age of a life insured on the nearest birthday.

Base universal life coverage is usually “Proposed Insured” on the Insurance Application or “Base Coverage” on LifeView. There are certain privileges attributed to the base universal life coverage. For example, on a multiple life policy, the Optimizer Option will reduce the face amount for the base universal life coverage only.

Cash surrender value is the amount of cash accessible by the policy owner, excluding any applicable MVA adjustment. Should the policy owner choose to make a withdrawal from the policy during the surrender charge period, the cash surrender value amount will reflect the fund value net of applicable surrender charges and any outstanding loans.

The catastrophic events provision of the UL contracts address situations in which we are prevented from carrying on regular business functions due to events beyond our control, and is intended to provide ivari with additional time to discharge its obligations during extenuating circumstances. The provision is as follows:

If ivari’s performance of any of its obligations under the Contract is delayed or otherwise made impractical by reason of any flood, riot, fire, acts of nature, labour unrest or any other causes beyond its control, such obligations shall be postponed until such time as the cause ceases to preclude or make impractical ivari’s performance of such obligations.

Cost of insurance period means the period of time during which a charge is payable for an applicable coverage.

Exempt-test face increase is the amount by which a face amount is increased, subject to legislative maximums and other conditions, as part of the policy anniversary exempt-test processing to keep a policy tax-exempt. This increased amount may be removed (“clawed back”) in subsequent years.

Market value adjustment (MVA) applies to funds that are withdrawn from the Fixed-Rate Interest Options, including transfers, cash withdrawals and policy surrenders, if the interest rate at the time of withdrawal is greater than or equal to the guaranteed rate at time of deposit. MVAs do not apply for monthly deductions or the payment of a death benefit.

Monthly deductions include the monthly cost of insurance, rider costs and the policy fee, which are all deducted monthly from the fund value.

Net amount at risk (NAAR) means the amount of insurance for which the cost of insurance is charged. The net amount at risk for a coverage is calculated by subtracting the proportionate fund value from the death benefit.

Net cash surrender value means the cash surrender value, less any applicable market value.

Policy date means the date used to determine the monthly dates, policy anniversaries and policy years in respect of the policy.

Primary life insured means someone who is insured under a universal life coverage. There may be several primary life insureds under a policy having multiple life coverages.

Proportionate fund value means the amount obtained when the total fund value is multiplied by a fraction, the numerator of which is the face amount for the primary life insured, and the denominator of which is the sum of the face amounts for all primary life insureds.

Quick pay means maximizing premium payments in early policy years.

The Side Account is a separate taxable deferred annuity contract that is automatically issued with every prosperity UL policy. The Side Account is used to hold monies that exceed the maximum amount that can be deposited in the tax-exempt Interest Options of the universal policy.

Single/joint equivalent age (SEA) is the insurance age at which premium rates are based for joint coverage. It reflects the combined life expectancy of all the individuals on the joint coverage.

Sum insured means the face amount, plus any exempt-test face increase.

With a national network of thousands of independent advisors, ivari provides a full

range of insurance products designed to help Canadians make the right choice for their

protection needs. The people, products and service that make up ivari have stood the test

of time and have been around for over 80 years in the Canadian marketplace. Through

our commitment to always being approachable and transparent in everything we do,

we are dedicated to starting a fresh, new conversation about insurance. And we will stand

by our word.

Visit us at ivari.ca.

British Columbia Prairies Ontario Quebec 1-866-669-6117 1-888-220-2881 1-888-245-5501 1-800-361-7242

WFG-LP1213 5/16For Advisor use only

™ prosperity universal life and prosperity term are trademarks of ivari Canada ULC.

™ ivari and the ivari logos are trademarks of ivari Canada ULC. ivari is licensed to use such marks.

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