adding cash value accumulation life insurance to your ......cash value accumulation life insurance...

A route to new revenue.

Allianz Life Insurance Company of North America

M-5252

Adding cash value accumulation life insurance to your business.

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Cash value accumulation life insurance provides benefits to your clients and your practice

Add new revenue without taking away business from current products.

Cash value accumulation life insurance (specifically, fixed index universal life) provides an additional retirement solution for your clients. It’s an opportunity to increase your profits in one of the most efficient ways – by increasing business from your current clients and from new clients who need life insurance coverage.

Fixed index universal life (FIUL) starts with the death benefit protection your clients need, and then adds the potential of cash value accumulation on a tax-deferred basis.

With an FIUL policy, clients earn indexed interest based on positive changes in an external index with protection against any negative index performance. And the cash value can be accessed income-tax-free through policy loans1 for needs including:

• Supplemental retirement income

• Supplemental college funding

• Emergencies

• Business planning strategies

• Other financial needs

Note that if a policy loan is taken, the loan will be proportionately applied against the policy’s current index and/or interest allocations. Loans will reduce the cash value and death benefit and could affect the death benefit guarantee. Partial surrenders do not incur surrender charges, but they do reduce policy values (including the death benefit). Partial surrenders could also affect the death benefit guarantee.

See how easily it can be incorporated into your business.

In this step-by-step guide, we’ll show you how to find prospects for cash value accumulation life insurance; how to approach them; and how to present concepts that address their needs.

Following this process will help you increase your revenues in the most efficient way – because you’ll focus only on those clients who have a need for life insurance coverage and may also be suitable for cash value accumulation life insurance.

1 Policy loans will reduce available cash values and death benefits and may cause the policy to lapse, or affect guarantees against lapse. Additional premium payments may be required to keep the policy in force. In the event of a lapse, outstanding policy loans in excess of unrecovered cost basis will be subject to ordinary income tax.

Policy loans are not usually subject to income tax unless the policy is classified as a modified endowment contract (MEC) under IRC Section 7702A. However, withdrawals or partial surrenders are subject to income tax to the extent that the cash value in the policy immediately before the distribution exceeds the owner’s tax basis in the policy. If taken prior to age 59½, a 10% federal tax penalty may apply.

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Life insurance with “living benefits”

Targeting the right prospects

You are your own best source of referrals.

Before you begin the process of selling fixed index universal life insurance, you need to identify the right customers to target. Obviously, your prospects must have a need for the death benefit and also have the money to pay for it. But beyond that, you should look for customers with a long-term need for potential cash value accumlation.

Partnering with other financial professionals can yield referrals, but the best place to find qualified prospects is right in your own client list.

By tapping your book of business, you’re not only generating “warm” prospects, you’re also strengthening your relationship with them through more personalized attention.

Personal insuranceMiddle class market, annual income < $100,000

Age bracket Under age 40 Ages 40-60 Over age 60

Concerns 1. Needs life insurance 2. Supplemental college

funding3. Stretching their dollars4. Accumulation for

retirement5. Tax deferral

1. Needs life insurance2. Accumulation for retirement3. Tax deferral4. Stretching their dollars5. Supplemental college

funding6. Long term care protection7. Legacy

1. Needs life insurance 2. Supplemental

retirement income3. Tax deferral4. Long term care

protection5. Legacy6. Stretching their

dollars

Personal insuranceAffluent market, annual income $100,000 +

Age bracket Under age 40 Ages 40-60 Over age 60

Concerns 1. Needs life insurance 2. Accumulation for

retirement3. Tax deferral4. Supplemental college

funding5. Stretching their dollars

1. Needs life insurance2. Tax deferral3. Accumulation for

retirement4. Supplemental college

funding5. Legacy6. Long term care protection7. Stretching their dollars

1. Needs life insurance 2. Supplemental

retirement income3. Tax deferral4. Legacy5. Long term care

protection6. Stretching their

dollars

Use your annual reviews with clients as an opportunity to make your presentation.

To identify prospects who are most suitable for fixed index universal life insurance, look for clients who may fit in the overview provided below. (Keep in mind that FIUL is an underwritten product, and is contingent on the health qualification of the insured, and in some cases financial qualification).

Don’t overlook your small-business clients.

Fixed index universal life insurance isn’t just for personal insurance protection. It also provides solutions for many of the concerns of small-business owners of all ages – key person insurance, funding of buy-sell agreements, nonqualified deferred compensation plans, and executive bonus plans.

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Step 1: Get in front of your clients

Make a connection – then make a sale.

The success of your efforts depends on getting in front of quality prospects.

You can approach them with a short letter or a phone call. But for prospects who are already in your existing book of business, face-to-face meetings often create the best opportunity.

So if you’re not conducting regular policy reviews with your clients, now is the time to start. Annual policy reviews allow you to assess clients’ future needs and their receptiveness to a fixed index universal life insurance policy. It’s also a chance to ask for referrals or recommendations.

You should also consider scheduling group presentations. If you already work with affinity groups (e.g., chambers of commerce, Kiwanis International, a credit union), offer an informal seminar for fellow members. Partner with financial or legal professionals to help them offer their clients your experience with FIUL policies as part of a broader range of financial solutions.

M-3977(Policy Review Kit)

MLIF-1048MLIF-1049

(Client mailers)

2

M-5191(Prospecting brochure)

M-5251-AM-5251-BM-5251-CM-5251-D

(Pre-approach letters)

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Calling an existing client:

Hello, [prospect’s name]. This is [your name] from [name of agency]. Have I reached you at a good time? [If “no,” ask “When is a better time to call?”]

Well, I’m sure you’ve thought about the importance of providing for your family in the event that something should happen to you. But did you know there’s a way to provide an income-tax-free death benefit for your beneficiaries AND build up tax-deferred cash value for your retirement or other needs at the same time? That’s two kinds of financial reassurance in one policy. That’s why I’d like to sit down with you and tell you more about how fixed index universal life insurance may work for you – when can we meet?

Calling a new prospect:

Hello, [prospect’s name]. This is [your name] from [name of agency]. Have I reached you at a good time? [If “no,” ask “When is a better time to call?”] I’ll only take up a few minutes of your time.

I’m sure you’ve thought about the importance of providing for your family in the event that something should happen to you. But did you know there’s a way to provide an income-tax-free death benefit for your beneficiaries AND build up tax-deferred cash value for your retirement or other needs? That’s two kinds of financial reassurance in one policy. That’s why I’m calling to offer you a free consultation to discuss how fixed index universal life insurance may be appropriate for you. It won’t take much time and there’s absolutely no obligation. What’s your schedule look like over the next week or two?

Sample calling scripts

Additional scripts can be found in our Policy Review Kit, Small-Business Life Insurance Kit, and Make a Case for Life Kit.


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Calling a financial professional:


I’m calling because there’s a financial solution that has the potential to expand business with current clients and bring in new ones. It’s life insurance that provides not only an income-tax-free death benefit, but also a way for clients to build up tax-deferred wealth they can access income-tax-free during retirement or for other needs. I’d like to tell you more about how we can partner together on this to determine if fixed index universal life insurance may be appropriate for your clients. Of course, you’re under no obligation just for meeting. What’s your schedule look like over the next week or two?

Calling a small-business owner:


I’m calling because there’s a financial tool for your business that you should know about. It starts by providing an income-tax-free death benefit, which everyone needs. But being a small-business owner, what’s even better is how it can help you build cash value for retirement or other needs and the tax advantages it offers. It’s called fixed index universal life insurance, and I’d like to get together and tell you more about how it may be appropriate for you. Of course, you’re under no obligation just for meeting. What’s your schedule look like over the next week or two?

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Step 2: Start the conversation

Paint a picture based on clients’ goals, needs, and concerns.

The best way to engage your client in a productive conversation is through probing questions like the ones below. Use them in your presentation to help your clients express their needs and to help them visualize the necessity and the benefits of fixed index universal life insurance:

“What would happen if you died tomorrow?” • Will your family be taken care of financially? • Which one of your assets would they have to sell first? • Would they have to sell it at a bargain price?

“What would happen to your small business if you died tomorrow?” • Do you have a succession plan in place? • How are you protecting against the loss of a key employee? • How are you attracting and retaining key employees? • If you sold your business, do you have somewhere to put the money?

“ Do you have concerns about accumulating enough for future needs while providing a death benefit for your loved ones?”

• Do you think taxes will go up or down? • Does your current life insurance provide an extra source of potential cash value

for retirement income or other needs?

“Did you know that life insurance can provide more than a death benefit?”

M-5249(Cash value

accumulation life insurance

consumer brochure)


4

PPT-155 (How cash value accumulation life insurance can increase your revenues presentation)M-3982 (Policy review presentation)M-5148 (Small-business presentation)

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Step 3: Help find the money

Affording an FIUL policy can be easier than clients realize.

One of the most important questions you will often be asked is, “Where do I find the money for the premium?” Don’t let it become a stumbling block. There are actually many ways clients can find additional disposable income. Keep in mind, financial underwriting may apply.

Here are some options you can explore together:

• Automatic savings deposits (having a set dollar amount go into savings each month)

• Funding via yearly bonus

• Funding via additional income (i.e., overtime pay)

• Using interest from other sources

• Generating additional income

• Creating a monthly budget that can identify available funds

M-5121(Business Financial

Inventory)

M-5153(Personal Financial

Inventory)

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Step 4: Present your solution

Let what you’ve learned guide what you recommend.

Once you’ve determined your prospect’s financial needs and goals, and how FIUL can fit in their financial strategy, it’s time to make your recommendation.

M-5135

Allianz Life Insurance Company of North America

Small-Business Life Insurance KitSee how life insurance can be “bigger than life”

M-5135(Small-Business Life

Insurance Kit)

M-5149(Life insurance

policy overview)

M-5212M-5213

(GenDex series consumer-approved

case studies)

M-3959-A(FIUL fl yer)

Allianz offers a variety of FIUL policies that can be customized to meet your clients’ needs. Below are some features and concepts that you can use for evaluating our GenDex series.

• Death benefit protection

• Cash value accumulation potential

• Tax-free income via policy loans1

• Tax advantages

• Business planning solutions

• Supplemental college funding

• Legacy

• Protection (long term care rider2)

• Making efficient use of their dollars (family strategies)


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1 Policy loans will reduce available cash values and death benefits and may cause the policy to lapse, or affect guarantees against lapse. Additional premium payments may be required to keep the policy in force. In the event of a lapse, outstanding policy loans in excess of unrecovered cost basis will be subject to ordinary income tax.


2 Rider is available at an additonal cost at the time of policy issue.

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Example: Augmenting retirement income

Meet Phil, who’d like a policy that provides coverage and the opportunity to accumulate cash value for himself and his children.

Phil1 is a 40-year-old married male with children, who doesn’t currently own any life insurance coverage. He’s fully contributing to a qualified retirement plan, but is looking for life insurance that will allow him to help supplement his retirement income. He’d like to provide a legacy for his children, but would also like to accumulate cash value on a tax-deferred basis to help supplement his income in retirement.

Possible solution: GenDex Momentum. GenDex Momentum can provide Phil with life insurance coverage and tax-free supplemental retirement income from policy loans and withdrawals.3 When he dies, any outstanding loans from the policy will be paid off from a portion of the death benefit proceeds. After that, his beneficiaries will receive the remaining death benefit income-tax-free.

GenDex Momentum also allows Phil to pay additional premium above target into the policy, increasing the cash value accumulation that he can access in the future as a supplement to his retirement income.

Keep in mind, if he takes a policy loan, the loan will be proportionately applied against the policy’s current index and/or interest allocations. Loans will reduce the cash value and death benefit and could affect the death benefit guarantee.

GenDex Momentum® Fixed Index Universal Life Insurance Policy

Assuming a 40-year-old male, Preferred Plus Nontobacco Risk Class, initial death benefit of $500,000

Maximum non-MEC annual premium $19,924

8% illustrated rate2

2% minimum guarantee

Death benefit at age 67 $2,070,400 $1,036,211

Cash value at age 67 $1,570,400 $536,211

Annual income age 68-120 via policy loans

$123,926

Income will last 3 years, then the policy lapses

1 This hypothetical example is provided for illustrative purposes only. Characters are fictional and are not actual Allianz clients. Example assumes no loans have been taken prior to Phil’s age 68.

2 Based on historical performance, the allocation options, had they been available, would have resulted in a wide range of interest rates. Some would have exceeded 8.00% and some would have been less than this. Keep in mind that different time periods and different indexes will produce higher or lower averages. The interest rate credited is based on the caps, participation rates, or spreads in the policy and is subject to change on any policy anniversary based on several external factors including, but not limited to, market volatility, short-term interest rates, and long-term interest yields. See the contract for more details.

3 Policy loans will reduce available cash values and death benefits and may cause the policy to lapse, or affect guarantees against lapse. Additional premium payments may be required to keep the policy in force. In the event of a lapse, outstanding policy loans in excess of unrecovered cost basis will be subject to ordinary income tax. Tax laws are subject to change and your clients should consult a tax professional.

3 Policy loans are not usually subject to income tax unless the policy is classified as a modified endowment contract (MEC) under IRC Section 7702A. However, withdrawals or partial surrenders are subject to income tax to the extent that the cash value in the policy immediately before the distribution exceeds the owner’s tax basis in the policy. If taken prior to age 59½, a 10% federal tax penalty may apply.

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Examples: Supplemental college funding; making life insurance affordable

Meet Patty, a single mother who dreams of sending her daughter to college.

Patty1 is 30 years old and very healthy and does not currently have life insurance coverage. She is contributing to a 529 plan for her two-year-old daughter, Emma, but realizes she needs an additional way to save if she is to provide college funding when Emma turns 18. Her budget allows her to spend $6,000 a year for life insurance coverage and college savings. $5,000 will be paid as life insurance premium and $1,000 will go into the 529 plan. Patty anticipates that Emma will be in college for five years.

Possible solution: GenDex Momentum.GenDex Momentum gives Patty the life insurance protection she needs, with an affordable premium that fits within her budget. The death benefit will provide financial protection for Emma if something should happen to Patty. The death benefit can be used to pay for college expenses. Just as important, the cash value in her policy can accumulate tax-deferred. When Emma goes to college, Patty can take income-tax-free loans to help pay for the costs of college.

Keep in mind, if she takes a policy loan, the loan will be proportionately applied against the policy’s current index and/or interest allocations. Loans will reduce the cash value and death benefit and could affect the death benefit guarantee.


Assuming a 30-year-old female, Preferred Plus Nontobacco Risk Class, $250,000 death benefit.

Annual premium for 15 years

$5,000

8% illustrated rate2 2% minimum guarantee

Cash value at age 45

$116,168 $66,733

Annual income for 5 yearsvia policy loans

$25,0003

Income would last 3 years, then policy lapses


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1 This hypothetical example is provided for illustrative purposes only. Characters are fictional and are not actual Allianz clients. Example assumes Patty has not taken any policy loans prior to her age 45.




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Meet Paul and Elizabeth, who want cash value accumulation life insurance – but need to work within their budget.

Paul, 35, and Elizabeth,1 33, are healthy and parents of two, with a combined annual income of $100,000. They both contribute the maximum to their 401(k) plans and Roth IRAs. They have $100,000 left to pay on their mortgage. After their savings and bills, they have about $250 of extra disposable income per month.

They have a need for affordable life insurance coverage to help protect their family. Currently, Paul and Elizabeth only have group life insurance through their employers. Though they like the cost of the term insurance they get through their employer, they realize it builds no lasting cash value.

They like the idea of stretching their dollars while keeping their strategy simple and are looking to take income down the road to help pay for their children’s college education. They also want flexible premium payment options in case their income or situation changes.

Possible solution: GenDex Survivor.GenDex Survivor gives Paul and Elizabeth coverage that can protect them in case something tragic happens. It also gives them a premium which can fit within their budget and can make efficient use of their dollars by covering both parents on one policy.

Plus it gives them the flexibility to cancel the First-to-Die Rider later on, if their needs change. Finally, this policy can work with their financial strategy by offering tax-deferred cash value accumulation and tax-free income down the road via policy loans, if desired.

The innovative policy split option is included at no additional cost. This option allows two insureds to split their policy down the middle if their marriage dissolves.

Keep in mind, if they take a policy loan, the loan will be proportionately applied against the policy’s current index and/or interest allocations. Loans will reduce the cash value and death benefit and could affect the death benefit guarantee.

GenDex Survivor® Fixed Index Universal Life Insurance Policy

Assuming a 33-year-old female and 35-year-old male, Preferred Plus Nontobacco Risk Class, $500,000 death benefit, First-to-Die Rider

($500,000 for 30 years),2 cash value and income are calculated based on the chosen premium.

Minimum monthly premium $155

Chosen monthly premium $250

Maximum monthly premium $881



Cash value in 30 years $185,778 $0

Income starting in year 31 for 20 years via policy loans $17,9384

No cash value to provide income

1 This hypothetical example is provided for illustrative purposes only. Characters are fictional and are not actual Allianz clients. Example assumes no policy loans have been taken prior to the 31st policy year.

2 Optional riders are available at an additional cost.3 Based on historical performance, the allocation options, had they been available, would have resulted in a wide range of interest rates.

Some would have exceeded 8.00% and some would have been less than this. Keep in mind that different time periods and different indexes will produce higher or lower averages. The interest rate credited is based on the caps, participation rates, or spreads in the policy and is subject to change on any policy anniversary based on several external factors including, but not limited to, market volatility, short-term interest rates, and long-term interest yields. See the contract for more details.




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Examples: Providing business succession solutions; providing long term care protection

Meet Lawrence, a company owner who wants an executive bonus plan.

Lawrence1 owns a small business and decides to give his key employee, John, a bonus. John receives a monthly bonus of $14,286 and uses $4,286 of it to pay taxes. Lawrence would like to reward John with value beyond the remaining $10,000.

Possible solution: GenDex Momentum.By using the remaining $10,000 each month to buy and pay additional premium above target for a GenDex Momentum Fixed Index Universal Life Insurance Policy, John gets valuable life insurance protection he needs. As the policy’s owner, he can also use his policy to help supplement his retirement income at age 66. GenDex Momentum would have a target premium of $40,640 and provide a potential annual income of $386,956 at age 66. If properly structured, John’s annual income could be income-tax-free from policy loans.

Keep in mind, if he takes a policy loan, the loan will be proportionately applied against the policy’s current index and/or interest allocations. Loans will reduce the cash value and death benefit and could affect the death benefit guarantee. Meanwhile, Lawrence’s business can claim a tax deduction for the bonus, because it’s part of John’s compensation.


Assuming a 45-year-old male, Standard Nontobacco Risk Class, $2,529,764 initial death benefit (option B). He pays $120,000 into

his policy each year for 20 years, deliberately over-funding the policy, while avoiding a modified endowment contract.

Target annual premium $40,640

Over-funded annual premium to age 65 $120,000



Cash value at age 65 $4,624,634 $2,269,691

Death benefit at age 65 $8,740,558 $4,289,717

Income at age 66 for 20 yearsvia policy loans

$386,9563

Income will last 6 years, then policy will lapse

Only 4 in 10 businesses with business continuation strategies have life insurance as part of the strategy.

(LIMRA International 2009 Small Business Owners Study)

1 This hypothetical example is provided for illustrative purposes only. Characters are fictional and are not actual Allianz clients. Example assumes no policy loans have been taken prior to age 66.




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Meet Debra, who worries about the cost of long-term care needs.

Debra1 is a single baby boomer who has spent the majority of her working years earning a good income. She has two children who are in their early 20s and live on their own. She is looking for life insurance coverage to protect the nest egg she has built, provide a death benefit for her family, and help pay any outstanding debts when she passes away.

Because she doesn’t own an individual long term care insurance policy, she is looking for extra protection should something happen to her health.

Possible solution : GenDex Foundation.GenDex Foundation offers Debra the flexibility to pay the premium that is affordable for her. Along with a death benefit, GenDex Foundation offers “living benefits,” too. No matter which premium type she chooses, Debra will have tax-deferred cash value accumulation potential that can help make it possible to offer a legacy to her beneficiaries and be protected against the need for long term care. The Long Term Care Accelerated Benefit Rider2 will help protect her lifestyle by paying her $5,000 per month in cash if she triggers this rider.

GenDex Foundation® Fixed Index Universal Life Insurance Policy

Assuming a 60-year-old female, Preferred Plus Non-tobacco Risk Class, $500,000 death benefit, LTC Rider (1%), 100% allocated

to the fixed interest allocation at 5.35%

Minimum annual premium $5130

Premium to 100 $9,729

5.35% interest rate


15-year cash value paying minimum annual premium

$20,291 $0

15-year cash value paying premium to 100 $128,390

No cash value to provide income


1 This hypothetical example is provided for illustrative purposes only. Characters are fictional and are not actual Allianz clients. 2 Optional riders are available at an additional cost.

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Step 5: Overcoming objections

Don’t just give answers – give confidence.

Once you have presented a concept and solution for your client’s needs, you may run into a few objections. Here are a few of the common objections with some suggested responses.

“I don’t need life insurance.”“Life insurance isn’t purchased for yourself, but for your loved ones. The question isn’t whether you need it; rather, you should ask yourself how your family would survive financially if you were to die prematurely. Life insurance is a responsible way of being sure that your family is provided for financially even after your death.Even if you don’t have dependents, you could still benefit from adding life insurance to your overall financial strategy. First, the death benefit can be used to cover your final expenses. Additionally, some types of life insurance can provide the potential for cash value accumulation, which you may be able to access under certain circumstances through loans or withdrawals.1 You can even use it as supplemental income in retirement or other financial needs.”

“Cash value accumulation life insurance sounds too complicated.”“Think of term and cash value life insurance as renting versus buying. Term, while simpler, is temporary by design and amounts to renting coverage. Cash value allows your clients the opportunity for accumulation potential. In addition, it provides greater flexibility than term because the amount of premium and when it’s paid can be adjusted as your clients’ needs change.”

“Cash value accumulation life insurance is too expensive.”“Yes, cash value accumulation (CVA) life insurance can be higher in cost than term life insurance initially. However, once your term coverage ends, it can be very expensive to renew. CVA life insurance avoids that problem by providing an ongoing death benefit while your premium remains level. Meanwhile, your potential cash value accumulation can provide you with additional value because it can be used tax-free for future needs such as retirement income, college funding, and other financial obligations.”

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The sooner you incorporate cash value accumulation life insurance into your business, the sooner you can start increasing your revenues. Call the Life Case Design Team today at 800.950.7372 (press 1 for Sales Support, then 2 for Life).

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A leading provider of annuities and life insurance, Allianz Life Insurance Company of North America (Allianz) bases each decision on a philosophy of being true: True to our strength as an important part of a leading global financial organization. True to our passion for making wise investment decisions. And true to the people we serve, each and every day.

Through a line of innovative products and our network of trusted financial professionals, Allianz helps more than 1.2 million people as they seek to achieve their financial and retirement goals. Founded in 1896, Allianz is now proud to play a vital role in the success of our global parent, Allianz SE, one of the world’s largest fi nancial services companies. While we pride ourselves on our financial strength, we’re made of much more than our balance sheet. We believe in making a difference with our clients by being true to our commitments and keeping our promises. People rely on Allianz today and count on us for tomorrow – when they need us most.

Guarantees are backed solely by the financial strength and claims-paying ability of Allianz Life Insurance Company of North America.

True to our promises … so you can be true to yours.SM

PS52453-01, P52451-01, P52704

(R-10/2010)

www.allianzlife.com

Products are issued by:

Allianz Life Insurance Companyof North America5701 Golden Hills DriveMinneapolis, MN 55416-1297 800.950.7372

For financial professional use only – not for use with the public.Product and feature availability may vary by state.

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