life insurance 101 manulife and the block design are registered service marks and trademarks of the...
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Life Insurance 101
Manulife and the block design are registered service marks and trademarks of The Manufacturers Life Insurance Company and are used by it and it’s affiliates including Manulife Financial Corporation. 2004. The Manufacturers Life Insurance Company of New York Valhalla, NY. All rights reserved. MNY0227043347. Expires 02/2005
The Manufacturers Life Insurance Company of New York100 Summit Lake Drive, 2nd Floor, Valhalla, New York, 10595www.manulifenewyork.com
How much should you have?
What kind of policy should you buy?
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Client Profile
A topic that should be discussed with ALL of your clients!
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The Problem
Any of us can die unexpectedly.
Will our heirs have enough assets to maintain their lifestyle?
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How much do I need?
A simple estimate can be done using a one-page worksheet
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Immediate expenses (cash needs)
Maintaining family standard of living (income needs)
Two Typical Needs
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Cash Needs
6 most common:– Final expenses
– Debt liquidation
– Childcare
– Mortgage
– Education
– Emergency fund
Funds needed within 90 days of death
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Income Needs
Guideline – a family usually needs 75% of prior income upon the death of a spouse
This assumes:– Mortgage has been paid off
– Education funds have been established for the children
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Income Need Questions
How much will your family need?
How long do you want to provide for them?
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A simple approach to a complex situation.
Intended to be thought provoking, not necessarily comprehensive.
The Life insurance Needs Worksheet
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The Smiths
Client Bob & Jane Smith
Ages 45 & 40
Number of Children 3 Ages 12, 8, 2
Bob’s Income $200,000
Jane’s Income $0 as homemaker
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Fund any cash needsProvide income to Jane so she will not HAVE to work or marry unless she choosesIf she marries, do not want the kids to lose their inheritance to a second spouse
Objectives if Bob Dies
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#1: Cash Needs
Final Expenses $ 10,000
Mortgage Fund $ 250,000
Debt Liquidation $ 25,000
Education Fund $ 120,000
Child Care Fund $ 0
Emergency Fund $ 30,000
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#2: Income Needs
75% of $200,000 income is $150,000 per year.
Let’s assume you can earn a gross rate of 9%, but want to offset an inflation rate of 3%. This results in a net rate of 6%.
Divide $150,000 by 6%. Capital of $2,500,000 is needed to provide this income per year if you wish to preserve principal.
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#2: Total Insurance Need
Based upon the calculations on the previous slide, here are the needs:
Cash Needs $ 435,000
Income Needs $2,500,000
Total $2,935,000
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#3: Capital Available
Checking Account $ 5,000
Brokerage Account $100,000
Group Life Insurance $400,000
Personal Life Insurance $250,000
Bank CD $ 10,000
TOTAL $765,000
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The Numbers
Total Need $2,935,000
Capital Available $ 765,000
Capital Shortage $2,170,000
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Do you have enough liquid capital to provide for your family’s cash and income needs if you die?
The BIG Question
If you have a capital shortage, the product available to meet the shortage is life insurance!
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Forms of Life Insurance
Term
Universal Life
Variable Life
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Choosing the Appropriate Insurance Product
What does customer want to achieve with this insurance?
What is the acceptable premium level and how will it be paid?
What is customer’s risk tolerance – what’s more important – guarantees, affordability or optimizing of performance potential?
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Customer Needs Risk Profile
Cost Flexibility InvestmentPerformance
Focus
Term VariableUniversal
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Term Life Insurance
Features/Benefits
Affordable premiums and maximum temporary death benefits
Various term periods available
Coverage needs to be convertible
When to Recommend
When temporary affordable coverage is needed. Examples are:– Income protection
– College tuition protection
– Debt or other financial obligation
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Universal Life
Features/Benefits
Flexible premium
A current interest rate
Flexible death benefit options with emphasis on either cash build-up or protection
Loans or withdrawal availability
When to Recommend
Prospect wants flexible coverage and wants to avoid fixed premium commitment
When competitive cash value accumulation is emphasized
When prospect has the ability and discipline to make flexible premium payments
Has same insurance needs as other permanent policies
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Variable Universal Life
Features/BenefitsPolicyowner controls investment element in the insurance policyPremiums are flexible and can be directed to any of the underlying investment accountsPolicyowner can switch between investment accounts without current taxationLoan or withdrawal availability
When to Recommend
When cash growth potential is emphasized over guarantees
When policyowner is investment oriented and will accept the risk in return for potential reward
Policyowner wants maximum control over policy and will accept risk
Has same insurance needs as other permanent policies
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Preferred available to age 90Affordable no-lapse guaranteesSome of the world’s leading investment managers Suitable for clients with supplemental retirement and estate planning needs using life insurance
Why Venture® Variable Insurance?
These guaranteed product features are dependent upon the claims-paying ability of The Manufacturers LifeInsurance Company New of York.VENTURE ® Variable life insurance products are issued by The Manufacturers Life Insurance Company of New York (Manulife New York) and distributed by Manulife Financial Securities LLC through other broker/dealers appointed by Manulife Financial Securities Please call 1-800-743-5542, to obtain a prospectus containing more complete information including charges and expenses. Please read the prospectus carefully. VENTURE® is a registered trademark of The Manufacturers Life Insurance Company (U.S.A.) and is used under license by The Manufacturers Life Insurance Company of New York.
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Flexible premium allows flexible contributionsDollar cost averaging*Automatic asset allocationSelect from over 60 underlying investment options
Why Venture Variable Insurance?
Dollar Cost Averaging (DCA) does not assure a profit or protect against loss in declining markets. Since DCAinvolves continuous investments in securities regardless of fluctuating price levels of such securities, a purchasershould consider his or her ability to continue such purchases through periods of low price levels.
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Manulife’s New York Investment Portfolio
Some of the world’s leading fund managersWide range of investment options for every preference and risk toleranceLifestyle portfolios available for easy diversification
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Manulife New York Company Strengths
Competitive medical decisions
Jumbo case team
Older age specialist
Informal query team
Aggressive financial underwriting
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For more information, please call your local Manulife New York Representative, or the Advanced Markets Group at(800) 743-5542, option 5
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