Life

1. What are the general purposes of Life Insurance

Life insurance is a unique asset which is a valuable addition to your overall estate due to its potentially high yield and tax-favored benefits. Life insurance can be used for any number of reasons. Some of the most common uses are:

• Creating an estate where time or other circumstances have kept the estate owner from accumulating sufficient assets to care for his or her loved ones. Life insurance can create an instant estate.
• Paying estate taxes and other estate settlement costs. These costs can vary from a low percentage of three to four percent to over 50% of the estate. Federal Estate Taxes are due nine months after death.
• Funding a business transfer. Business owners often agree to buy a deceased owner's share from his or her estate after death. Life insurance provides the ready cash to finance the transaction.
• Funding college for children or grandchildren. Cash value increases, in a policy on a minor's life or the parent's life, can be used to accumulate funds for college.
• Paying off the home mortgage. Many people would like to pass the family residence to their spouse or children free of any mortgage. Often a decreasing term policy is used, which decreases in face amount as the mortgage balance is paid down.
• Protecting a business from the loss of a key employee. Key employees are difficult to attract and retain. Their untimely death may case a severe financial strain on the business.
• Creating a retirement fund. Current insurance products provide competitive returns and are a prudent way of accumulating necessary funds for retirement years.
• Replacing a charitable gift. Charitable Remainder Trusts provide tax benefits and life insurance can replace the value of the donated asset. Policies can also be paid directly to a charity.
• Guaranteeing loans. Personal or business loans can be paid off with insurance proceeds.
• Equalizing inheritances. When the family business passes to children who are active in it, life insurance can give an equal amount to the other children.

2. How much life insurance should an individual own?

Rough "rules of thumb" suggest an amount of life insurance equal to 6 to 8 times annual earnings. However, many factors should be taken into account in determining a more precise estimate of the amount of life insurance needed. Important factors include income sources (and amounts) other than salary/earnings, whether or not the individual is married and, if so, what is the spouse's earning capacity, the number of individuals who are financially dependent on the insured, the amount of death benefits payable from Social Security and from an employer-sponsored life insurance plan, whether any special life insurance needs exist (e.g., mortgage repayment, education fund, estate planning need), etc. It is recommended that a person's insurance advisor be contacted for a precise calculation of how much life insurance is needed.

3. How much will it cost?

The cost for life insurance varies widely depending on the health and age of the person to be insured and the coverage amount of the policy. Individuals are rated by their age, health history and in some cases, by their careers. All other things being equal, younger people will generally have lower premiums that older people. The best way to find out how much life insurance will cost is to get quotes from multiple carriers.

4. What's the difference between term and cash value life insurance?

Although a difficult question--one whose answer will vary depending on circumstances--several principles should be followed in addressing this issue. It must first be recognized that in any life insurance purchasing decision, there are at least two basic questions that must be answered:

A. "How much life insurance should I buy?"

B. "What type of life insurance policy should I buy?"

The question contained in (a) involves an "insurance" decision and the question contained in (b) requires a "financial" decision. The "insurance" question should always be resolved first. For example, the amount of life insurance that you need may be so large that the only way in which this needed amount of insurance can be afforded is through the purchase of term insurance with its lower premium. If your ability (and willingness) to pay life insurance premiums is such that you can afford the desired amount of life insurance under either type of policy, it is then appropriate to consider the "financial" decision--which type of policy to buy. Important factors affecting the "financial" decision include your income tax bracket, whether the need for life insurance is short-term or long-term (e.g., 20 years or longer), and the rate of return on alternative investments possessing similar risk.

5. Can Your client still get Life Insurance if they have a medical condition?

Usually your client can still get insurance even if they suffer from high blood pressure, heart attack, bypass surgery, diabetes, or another serious ailment. If they are following prescribed treatment, then they should be able to get Life Insurance. The bigger question is the cost, but each case must be considered individually. A consultation with an insurance specialist is critical to find good, affordable coverage ?

6. Is there a maximum age for Life Insurance?

Typically no, but many companies have additional requirements for people over a certain, predetermined age (quite often 85 years old).

For More Information About Life Insurance Call 1-800-683-3077 and ask for the Life Insurance Division

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Annuities

1.What is an Annuity

An annuity is a contract issued by an insurance company and usually referred to as an annuity policy or annuity contract. What makes annuities different is the tax treatment given them by the IRS.Think of an annuity as an umbrella. When money is placed under the umbrella or annuity contract, it is treated differently as far as taxes go.

• The money that you put in an annuity is referred to as a premium, it's your original contribution or principal contribution. Since you already have paid taxes on it, it never again will be subject to taxation. This assumes that you haven't purchased an annuity as part of a qualified retirement program such as an IRA, 401(k), TSA or 457 plan.
• The money that you put into an annuity will earn interest or receive dividend income or capital gain distributions. These "earnings", unlike money in a savings account, mutual fund, certificate of deposit are not taxed in the year in which they are earned. Thus the "earnings" will continue to grow and compound tax free until withdrawn.
• The IRS eventually collects taxes on the "earnings" of your annuity
  • When you withdraw money from your annuity the earnings, according to the IRS, are withdrawn first. The "earnings" are subject to "ordinary income taxes" in they year in which they are withdrawn. Keep in mind that capital gain distributions in a mutual fund are taxed at capital gains rates.
  • The IRS also has what it calls a "Premature Distributions". If you withdraw your earnings and your under the age of 59 1/2. Not only are your earnings tax at ordinary income tax rates, the IRS makes you pay a penalty of an additional 10% on the earnings that are taxed.
• However there are no penalties on distributions
  • Made after your 59 1/2.
  • Made on or after the death of the owner of the annuity.
  • If the taxpayer becomes disabled.
  • A part of a series of substantially equal periodic payments (not less than annually) for the life (or life expectancy) of the taxpayer or joints lives (or joint expectancies) of the taxpayer and his or her designated beneficiary.
  • Made under a single premium immediate annuity with a starting date no later than one year from the annuity purchase date.
  • Made under certain annuities issued in connection with a structured settlement agreements.
• Avoid Probate - If a premature death should occur, the accumulated funds within your annuity may be transferred to your named beneficiaries, avoiding the expense, delay, frustration and publicity of the probate process. Like most assets, the annuity is part of your taxable estate. Your heirs can generally chose to receive a lump sum payment, or a guaranteed monthly income.

2. What is a Fixed Tax-Deferred Annuity?

A Fixed Tax-deferred annuity, also referred to as a tax-deferred annuity, is a contract between you and an insurance company for a guaranteed interest bearing policy with guaranteed income options. The insurance company credits interest, and you don't pay taxes on the earnings until you make a withdrawal or begin receiving an annuity income. Your annuity contract earns a competitive return that is very safe.

3. How do annuities really work?

• Interest Rates

  When an annuity policy is issued the company sets the first year interest rate. This rate is guaranteed for the first policy year and we refer to it as the current rate. The base rate is that interest rate which the company projects it will pay in the second year and thereafter. This base rate is also referred to as the "renewal rate" is not guaranteed. In fact some companies pay a "renewal rates" which are less than the originally projected base rate.

  Note the the difference between the current rate and the base rate is referred to as the bonus rate.

  We use the Current Rate (for the first year) and the Base Rate (for each year thereafter) in our formula to calculate the projected "Account Values."

• Surrender Charges, Withdrawal Charges

  The surrender charges last for a period years and we calculate the projected "Account Value" for the number of years the surrender charges exist. For example; if the surrender charge of the policy lasts seven years, we calculated the projected "Account Value" for only seven year. The reason is the after the surrender charge expires the interest rate is dropped to the contractual guaranteed minimum and the policy values are usually transfer to another annuity. To continue projecting the accumulated value beyond this point is meaningless.

Most annuities allow you to withdrawn interest from your annuity without penalty. Some annuities allow you to withdraw interest with out paying a penalty at the end of the policy year or after 30 days, then as earned.

All most all annuities allow you to withdraw up to 10% of the account value before a surrender charge or withdrawal charge is applied. YOU must know how the Withdrawal or Surrender Charges apply before buying an annuity policy to save yourself unnecessary expenses.

4. When Does My Money Mature ?

An annuity policy does not "mature" like a bond or certificate of deposit. Both your principal and interest will automatically continue to earn interest until withdrawn or you reach age 100. You can let your money continue to grow, make withdrawals, or begin receiving an annuity income at any time.

5. What are some benefits of fixed annuities?

Annuities offer numerous advantages over other investment and retirement vehicles, including:

• Taxed Deferred Growth. In an annuity, your money grows tax-deferred. This allows all your deposits plus the interest earned to grow without being taxed. The compounding effect of this is one of the most powerful financial tools you have at your disposal. Compare the difference in growth between a taxable investment and the same investment in a tax-deferred annuity.
• Tax Reduction. With respect to the recent tax revisions on social security tax, reduction is made possible by realignment of muni bonds and other investments into annuities. With qualified plans, i.e., IRA's, SEP's, Keogh's, you're reducing your pre-taxed income by contributing to the plans in the form of flexible (FPDA) annuities.
• Earn Competitive Interest Rates. Typically your return will be 1%-2% higher than with certificates of deposit (CD's).
• Liquidity. Most annuity products allow you to withdraw 10% of your present balance each year with no penalties or fees attached. You may request to access your money on any given business day, keeping in mind that the funds will take a few days to obtain.
• Safety and Security. Your principal and earnings are always guaranteed in a fixed annuity. There is little risk involved. Insurance consumers are protected from financial loss in most cases due to the insolvency of an insurance company through their state guaranty fund. The majority of state guaranty funds cover 100% of your account up to $300,000.
• Estate Advantages. Annuities avoid probate
• No Loads or Sales Charges. With fixed annuities, 100% of your money is being invested. Only a handful of companies charge an administration fee, if so, usually around $30 per year.

Long Term Care

1. What is Long Term Care ?

By definition Long-Term Care refers to a time when you need help with every day living activities such as bathing, walking, transferring, toileting or doing other tasks. This could be due to an accident, an illness, or simply the onset of old age. LTC covers a broad spectrum of care ranging from medical, personal and social services and can be provided in the comfort of you own home, in an adult day care facility, in an assisted living facility or in a nursing home.

2. Is Long Term Care only available in a nursing home setting?

Definitely not. Many alternatives exist today including Assisted Living Facilities; Alzheimer's care units, Adult day care facilities, your home, or a home of a friend or family member.

The pros and cons of assistance in the comfort of your home! Most of us assume that our spouse or another family member will be able to take care of us should we need assistance with our everyday living activities, and therefore we do not need long term care insurance.But consider this:

• Will your spouse physically be able to lift you out of bed, bathe you, and carry you to the rest room?
• Will your spouse be able to endure the emotional stress of doing "everything" for you; i.e., cleaning, cooking, shopping, handling all the household chores as well as providing ALL of the personal care you require? If they are able to do so, is this what you really want them to do?
• Wouldn't it be better to have someone there to help?
• Wouldn't it be better to have the freedom to choose?

3. Who provides the care if Your client becomes ill?

Typically, 80% is provided at home, with family and friends providing 90% of the care. Nursing homes provide only 20% of long-term care. One in two people over the age of 65 will spend some time in a nursing home.* *UNUM, Planning for the Time of Your Life, 1995

4. Won't the government pay your clients' bills for long term care?

This is a misconception held by many. In actuality, Medicare pays on average 7% of nursing home stays, only covers skilled care, and only pays for a limited time. The average stay in a Nursing Home is less than 3 years; moreover, the average number of home visits is 169. No one likes to think that they will ever need nursing home or even home health care; rather, we all assume and want to believe we will live a healthy life until we die. The fact is, a 65-year-old living today has a fifty percent chance of needing at least one type of care - nursing home or home care. Fifty percent of those who enter a nursing home will stay at least a year. Twenty-one percent will remain five years or longer. Failure to prepare for the cost of long-term care is the primary cause of impoverishment among the elderly.

There is a "good news-bad news" scenario that comes into play regarding government aid. The good news is that the government will assist once you are on Medicaid. The bad news is that to become eligible for Medicaid assistance, you must first spend down your assets to poverty level, losing your independence, your personal freedom and the choices you thought you would have.

5. Doesn't my medical insurance or Medicare pay LTC expenses?

The bottom line is, "Neither Medicare, Medicare supplements insurance nor the health insurance purchased by you or provided by an employer will pay for most long term care expenses." To learn more about Medicare, go to http://www.medicare.gov/.

6. Why do people purchase Long Term Care Insurance?

A 1998 study by the Health Insurance Association of America cited the following major reasons for purchasing long-term-care insurance:

• Not wanting to Burdening Children or Family 25%
• Asset Protection 23%
• To Maintain their Standard of Living 15%
• They can afford the Cost of Care 12%

For More Information About Long Term Care Insurance, Call 1-800-683-3077 and ask for the Long Term Care Department

Variable Products

1. What is a rolling target premium and how does it work?

Rolling target premiums provide first-year compensation up to target even when the premium payment is less than target during a set period of time (usually 24 to 36 months). Here’s how a rolling target works:

Product WITHOUT Rolling Target Premium	Product WITH Rolling Target Premium
Target = $10,000	Target = $10,000
Premium paid in year one = $5000	Premium paid in year one = $5000
Premium paid in year two = $5000	Premium paid in year two = $5000
First year compensation is based on Premium paid in year one ONLY.	First-year compensation is based on target premium Paid during the first 24 – 36 months depending on the contract .

Not all variable products have this feature, but you can begin taking advantage of the ones that do.

2. Why use a Benchmark?

Benchmarks are useful for comparing performance of individual funds with indexes that reflect similar investment categories. However, care should be taken not to compare results with only a single benchmark. For example, to compare a fund’s return with the S&P 500 Index may be appropriate for a large-cap growth fund, or to gauge the performance of the 500 largest U.S. corporations. But to use the S&P 500 to evaluate small-cap stock funds, or international funds, would be incorrect, and of little use.

Fund performance in absolute terms is less significant than how the fund performs relative to an appropriate benchmark. Analyzing a fund’s performance involves comparing it to its “peer” group of similar funds or to an appropriate index. A fund should somewhat underperform is relative index, given that an actively managed fund has management and operating expenses, as well as distribution expenses such as 12b(1) fees, that an index fund does not have. An index fund is a passive investment fund, with limited expenses. It must purchase whatever the index dictates, sometimes creating significant additional risk and over-weightings of certain stocks and sectors.

The indices chosen for inclusion in Portfolio Benchmarks are a combination of those used by the investment manager and widely used indices available and published in the popular press. These indices currently represent the most appropriate measuring sticks, but these resources can change as investment fundamentals and portfolio objectives change.

3. What rate should I run my illustration at, given the recent market correction?

The rate you use depends on your client’s risk tolerance, among other factors. But keep in mind that a short-term market correction after a long bull market is expected – and is not necessarily a reason to significantly change long-term projections. Over 50 years, for example, a drop from 10% to 9% reduces cumulative growth on $100,000 by $4.3 million or 43 times the investment. Keep the long-term performance in mind when considering the effects of the last year’s market performance. Stocks still continue to outperform other investments long-term.

For More Information About Variable Insurance, Call 1-800-683-3077 and ask for the Variable Department

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