GP Access

Group

Have you ever wanted to sell insurance to groups, but couldn’t figure out how? Or maybe you do know how and want some help getting started? We’ve got your back. Our GP Agency platform is designed to appeal to both individual insurance buyers and group buyers so that you can start selling to groups now and expand your reach in this growing market.

Our new website is here!

The new site is much more engaging and user-friendly. We’ve made some changes to the user interface to make it easier to navigate, and we’ve added a number of new features that our customers have been requesting. We’re so excited about this update—we think you will be too!

Marketing

With all the marketing tools you need for your business, it can be hard to keep track of them all, so we make it easy. We offer everything from social media management and lead generation to website design, so you can focus on growing your business with less worry about keeping up with the latest trends.

LIFE Insurance
Disability Income
Long-term Care
Fixed Annuities
Advance Market

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Life Insurance

There Are Two Basic Types of Life Insurance:

Term Life Insurance is the most basic type and is designed to provide coverage for a specified period of time, usually 10 to 30 years, in exchange for a monthly premium (payment). This type of insurance is usually the most affordable option for individuals under the age of 50.

Permanent life Insurance lasts for the insured person’s entire life, as long as premiums are paid. Permanent policies combine a death benefit with a savings account. The cash value that accumulates with this type insurance can later be withdrawn or taken out as a loan against the policy.

Specialty Life Insurance Plans:

Linked (or Combination) Life & Long-Term Care Insurance provides two forms of valuable protection in one policy. Some plans offer recurring premiums while others require a large single premium. Like all life insurance policies, they pay a death benefit to your beneficiaries. However, what sets them apart is the ability to deduct from your death benefit the amount you may need to pay for long-term care costs. Some permanent life insurance plans will allow you to purchase an optional rider for long-term care coverage.

Final Expense Insurance is a small life insurance policy designed to cover the immediate costs associated with a death, such as burial, cremation, casket, funeral service, headstone, burial plot, etc. Funeral costs, on average, range from $7,000 – $10,000. Though most people don’t like to talk about end-of-life issues, they also don’t want to place this financial burden on their loved ones.

Our Final Expense Carriers:

The Life Insurance Carriers We Represent

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Life Consumer Resources

It’s only natural to want to protect those who rely on you financially should you die prematurely.

We have access to more than 50 of the nation’s top insurance companies, enabling our agents to match an insurance plan to meet your needs, objectives, and budget.

And, did you know that many people use the accumulated cash value available through permanent life insurance policies to help fund college tuition, retirement savings, emergency savings, and more?

There Are Two Basic Types of Life Insurance:

There Are Two Main Types of Permanent Insurance:

Whole Life Insurance is designed to insure someone for their “whole” life. With Whole Life, you have a guaranteed premium, interest rate, and death benefit for the life of the policy. The cash value grows tax–deferred and typically allows for withdrawals and loans against the policy. One major advantage to this type of policy is that you can cancel it and receive the accumulated cash value.

Universal Life Insurance is similar to Whole Life as they both have cash value that accumulates in a tax–deferred savings account over time. However, Universal Life policies have a greater degree of flexibility over a traditional Whole Life policy. Universal Life policies give you the ability to adjust the premium and the benefit amounts over the term of the policy. There are several types of Universal Life plans available, including a Variable Universal Life policy, which allows you to invest the cash–value portion in a variety of investments such as mutual funds.

Other Life Insurance Options

Life Insurance Resources

What You Need to Know About:

What is COLI?

Corporate-Owned Life Insurance

COLI Materials (PDF Format):

Lincoln:

Nationwide

TARGET MARKET

Owners of small to medium-sized businesses with business continuation needs
Business owners who want to recruit, retain, and reward key employees
Businesses that may lose key employees if supplemental executive benefits are not offered
Business owners with the desire to increase productivity and profits

SALES STRATEGIES

Deferred Compensation Plan – deferral of current salary or bonuses on a pre-tax basis
Bonus Deferral Match – deferral of bonuses with an employer match
Supplemental Executive Retirement Plan (SERP) – employer agrees to pay select key employees a specified income for a specified time with no employee deferral
Split-Dollar – death benefit Option C gives business recovery of premiums paid, allowing for the employee’s beneficiary to receive the full policy face amount if desired
Section 162 Bonus – bonus made to select executives to buy life insurance
Key Person Indemnity – life insurance owned by and payable to the business to indemnify it upon the death of a key person
Buy-Sell Agreement Funding – life insurance used to fund a buy-sell agreement

FLEXIBLE UNDERWRITING OPTIONS

Life Settlement

What Is the Secondary Market for Life Insurance?

In its infancy the Viatical Life Insurance market place was founded to purchase life policies from persons who had a very short life expectancy and to provide them with the cash needed to pay for medical costs and other needs. The industry has evolved primarily into a market to purchase life insurance policies from seniors, 65 and older, who may be healthy and expect to live a long life or persons not so healthy.

Seniors choose to sell their policies for many reasons, here are some common reasons:

The policy or policies may no longer be needed
The premiums are unaffordable or perceived to be high for the amount of coverage
The policy or policies may be outdated and replacement policies may have lower premiums
The cash that could be received can be used for retirement purposes and planning.

Life Settlements

Selling a life insurance policy is referred to as a ‘Life Settlement’, a ‘Viatical Settlement’, or a ‘Senior Life Settlement’. These terms generally all mean the same thing in North Carolina.

The North Carolina Department of Insurance describes a Viatical Settlement as a contractual agreement to provide the owner of a life insurance policy immediate cash in exchange for the sale and transfer of that right of ownership. The only exception is if an insured has a life expectancy of two years or less.

In a Viatical Settlement, the policy or policies are sold in a ‘secondary’ market (called providers or purchasers) for an amount of money greater than the cash surrender value but less than the benefit amount of the life insurance policy.

GPAgency is a licensed Viatical Settlement broker. We work with insurance brokers and agents, and financial planners and their clients who wish to sell an older life insurance policy or policies. The Viatical Settlement Act in North Carolina requires providers and brokers involved in the senior settlement or life settlement markets to be licensed, which we have been for more than a decade ‒ and are among one of the first to obtain this license.

The process takes some time, but we make it easy.

Factors Taken Into Consideration

Factors considered in the purchase or ‘bidding’ process continuously change and evolve. Though not all-inclusive, here is a list of common factors:

Age and gender of the insured: The minimum age for consideration is 65. The older the insured the better. The life expectancy of the insured. The shorter the insured’s life expectancy, the more valuable the life insurance policy is to a provider.
Approximately 20 percent of all life insurance policies covering persons 65 or older have a value in the secondary market greater than the cash value. The type of insurance policies providers are buying:

Universal life: easiest to sell
Survivorship universal life: can be sold, some providers are not currently purchasing these policies
Term: easy to sell but needs to be convertible
Whole life: difficult to sell
Variable whole life: difficult to sell, subject to FINRA rules
Variable universal life: difficult to sell, subject to FINRA rules

The policy benefit (face) amount: The minimum face amount is $250,000. Obviously, the larger the death benefit, the more desirable the policy will be to the provider/purchaser.
The ratio of death benefits to annual premiums: The lower the ratio of premiums required to policy maturity as a percentage of death benefit, the more valuable the policy is to providers.
The current cash surrender value of the policy and the amount of policy loan, if any. Generally, the lower the cash value, the more valuable the policy is to providers. The larger the current policy loan the less valuable the policy is to providers.
The insurance carrier that underwrites and issues the policy and its financial ratings, and its reputation in the industry. Financial ratings of A++, A+, A, and A- are acceptable.

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Disability Income

Basic DI Concepts Explained

Here we outline the concepts related to disability insurance. The most fundamental idea is that disability insurance replaces lost income in the event of injury or illness that prevents your client from being able to earn a living. If your client’s financial lifestyle would be adversely affected by a disability, he or she probably needs disability insurance. The descriptions here, in alphabetical order, focus primarily, but not solely, on individual policies.

Benefit Amount

How much the client will receive on claim is perhaps the most important issue in any policy. For individual policies, up to about $100K of income, 60% is about what most carriers will replace at the time the policy is issued. At higher incomes, the benefit amount goes up, but the replacement ratio drifts down. The current limit in the domestic market for professionals and executives is $20,000 of monthly benefit (not all carriers will participate to that amount). Higher limits are available through excess carriers. Our general advice is to keep the benefit amount as high as possible. If premium becomes an issue, most often we suggest dropping riders or even reducing the benefit period before lowering the benefit amount. Most people cannot afford a 40% cut in income, having the cut be even greater is a common mistake.

Benefit Period

The benefit period is the amount of time that a policy will pay benefits. In general, for individual policies, we recommend a “to age 65” or “to age 67” benefit period to protect clients in the event of a truly catastrophic event, but we are also firm believers in the idea that some protection is better than no protection. The average claim is about 5 years in length, so if a client cannot afford a benefit period to age 65, you will still do them a service by helping them buy a five or even two-year benefit period.

Buy-Sell or Buyout

A buy-sell policy can be bought by small business owners in addition to an individual policy (and possibly in addition to an overhead expense policy as well). The idea here is similar to the funding a buy-sell agreement between two or more owners with life insurance. In this case, a disability policy can be purchased to fund the buy-sell agreement in the event of disability. The elimination period is one to two years and the pay-out can range from a lump-sum payment to five years of monthly benefits. Buy-sell agreements are a very important part of transition planning for small business owners.

Catastrophic Illness Rider

This rider pays an additional monthly benefit in the event of a catastrophic disability. The language is similar to that of a long-term care policy for most carriers, i.e., in the event of needing help with two out of six activities of daily living or in the event of significant cognitive impairment, the client would qualify for additional monthly benefits. This rider may not be the most important part of an individual disability policy, but it is a way of obtaining more coverage for your clients. Combined with the base policy you can replace up to 100% of current income.

Cost of Living Adjustment (Indexed Cost of Living or COLA)

This benefit is added by a rider to individual policies; it helps the benefit amount keep up with inflation, while on claim. It adjusts the benefit amount at the end of the first year of claim and each year thereafter (with most carriers). Typically, the amount of increase is tied to the consumer price index in some way (e.g. CPI-U) and has a cap (e.g. 3% or 6%).

The increase can be simple or compound depending upon the carrier, and some carriers have a “catch-up” feature for those years in which inflation exceeds the cap. When trying to keep the premium amount down, this is typically one of the first riders to be dropped, but the younger the client, the more one should consider adding this rider.

Definitions of Occupation

How the occupation of the client is defined is one of the most important policy differentiators. In general, if we can get it, we want to the client to be able to receive benefits if he or she is unable to perform his or her occupation, but that does not mean that the strongest (and most expensive) necessarily makes sense for everyone.

In the private insurance market, there are basically four definitions of disability, described here from strongest to weakest:

1.Own Occupation or Regular Occupation (sometimes True Own Occupation): The inability to perform the substantial and material duties of your occupation — this definition would allow the client to work in another occupation and still collect all of his or her benefit, regardless of how much he or she might earn in the new occupation, if disabled from his original occupation. This feature is very popular with physicians, dentists and attorneys. In theory, a surgeon could continue to collect his $20,000 of monthly benefit, for example) and could make a million dollars a year as an insurance agent.
2.Transitional Own Occupation: This definition is similar to the own occupation, and differs only if the client chooses to work in a different occupation. In that circumstance, the carrier will compare the new income of the client in combination with their benefit amount with their pre-disability earnings. If the new income and benefit amount are less than the pre-disability earnings, the client will continue to receive the full benefit (same as the true own occupation definition). However, if the new income and the benefit combined exceed the pre-disability earnings, then the carrier will reduce dollar for dollar the benefit amount (one carrier has a floor of 25% of the benefit in this type of scenario). Since this makes the client whole even if working in another occupation, it is popular with physicians and dentists.
3.Own Occupation and Not Working (or not engaged): The inability to perform the substantial and material duties of your occupation and not working. The “and not working” is what differentiates this from the true own occupation definition. For most occupations, this definition is what we recommend, if we can get it. Most clients who return to work after being disabled return to their same pre-disability profession — this is particularly true for executives and small-business owners. It is rare even for physicians to work in different occupations after being disabled from their own. The key here is that clients are protected in their occupation as long as they do not choose to work in a different occupation—and the carrier cannot force them into a different occupation.
4.Any Occupation: Often this definition comes with language that relates the definition of disability to the client’s level of training and experience. With some occupations or health conditions, however, it is the best that can be offered.

Elimination Period

The elimination period functions as a deductible — it is the period of time that must elapse from the start of the disability until benefits are paid. For individual disability policies, the most common elimination period is 90 days. But this means that the client must self-insure for that time period. Shorter and longer elimination periods are available, but shorter periods are significantly more expensive and longer periods offer only limited savings.

Graded Premium

Some carriers offer the possibility of buying a policy that starts out very inexpensive, but steadily increases in premium over time. Such policies can make sense for clients right out of school or just starting a business, but over the course of the policy, these clients will pay much more than with a level premium. Even more importantly, they will be tempted to drop the policy in their 50’s and 60’s when the policy becomes very expensive. The odds of disability go up with age. In the DI world, it is an exception for us to recommend replacing a policy that is more than two or three years old. Policies that have graded premiums are an exception to that rule of thumb.

Guaranteed Renewable (GR)

Guaranteed renewable means that the carrier can never change or cancel a policy as long as the client keeps paying the premiums, but it does not have a rate guarantee.

Non-cancellable (Non-Can)

This feature is actually a rate guarantee — the carrier can never raise rates on these polices. When included, most carriers build the cost into the product — so you typically don’t see the cost broken out. For blue/gray collar workers and for older clients, we sometimes recommend foregoing this feature to save money. Keeping the premium affordable is key to being a good DI representative. In the event of a disability, the best policy in the world is the one that your client actually owns.

Overhead Expense (OE, DOE, or BOE)

An overhead expense policy can be bought in addition to an DI individual policy by owners of small businesses (i.e. business with up to eight or ten employees). The benefit period is short, one to two years, and is designed to keep the doors open on the business long enough for the owner to recover or to sell the business. While the owner’s salary is not covered, most other deductible expenses usually are, for example rent, utilities, leases, professional licenses, property taxes and employees’ salaries to name a few.

Occupation Class

The occupation class is one of the key ways that insurance carriers assign risk (along with health issues, age, and gender). Typically, the more manual labor involved, the lower the occupation class. A few occupations, such as off-shore drilling, are uninsurable. Determining the occupation class can be a bit of an art. So, when we ask you what feels like a hundred questions about what your client does, how long he or she has been in business, how much they make, etc., it is because we are trying to get the best occupation class we can for you client. The occupation class will affect the premium significantly and sometimes the benefit amount.

Residual

Usually this feature is added by rider. It allows the insured to collect benefits while partially disabled and working. The amount of benefit paid is proportional to the loss of income. For example, a 40% loss of income would result in receiving 40% of the benefit. Strong versions of this benefit potentially pay in the event of recovery from total disability as well in the event of a slowly developing disability, for example Parkinson’s or multiple sclerosis.

The definition usually reads something like: “Due to injury or sickness, the insured is unable to perform one or more of the substantial or material duties of their occupation, is working, and is suffering a loss of income of at least 20%.” If the insured has a loss of income of 75% or 80% depending upon the carrier, the insured is deemed totally disabled and receives full benefit. Residual is one of the most important features of a disability policy since many claims become residual if it is available.

Retirement Savings Disability

This type of policy is in addition to an individual policy and goes by several names in the industry (e.g. Retirement Security). When disabled, the insured typically can no longer afford to fund his or her 401k or qualified plan. This policy replaces savings for retirement in the event of a disability. Higher benefit amounts are offered because on claim the benefits are paid into a trust until the client reaches retirement, comes off of claim, or dies — at which point the trust funds will be distributed to the client or his or her heirs.

Social Security Offset

This rider goes by a wide variety of names in the industry. The basic idea is the risk for a portion of the monthly benefit is shared by the carrier and the Federal and State Governments. The base policy benefit pays regardless of other benefits received, in particular Social Security disability benefits or Workers’ Compensation. However, the benefit amount that is offset is reduced when such benefits are received. The maximum benefit that can be offset varies by carrier, ranging from about $1,200 to $2,000 a month.

The advantage of offsetting is that the premium is lower than for the base policy benefit, and for some occupations, the carriers require an offset to obtain the maximum coverage. We typically do not recommend offsetting for those who can obtain the maximum benefit without the offset. Again, we generally want to get the client as much benefit as possible.

The Companies We Represent

What Is Disability Income Insurance?

DISABILITY INCOME PROTECTION insures your ability to earn a living by replacing a portion of your income (typically 60%) in the event of an illness or injury. If your lifestyle would be adversely affected by the loss of your income due to a disability, you probably need disability income protection.

How long could you go without a paycheck?

Workers’ Compensation only pays if injured on the job (only 5% of disabling illnesses and accidents are work-related).
65% of all Social Security disability claims are denied.
Employer-Paid DI coverage typically covers 60% or less of an employee’s salary; if the employee needs to use this benefit, it will be taxed. Note: This benefit is NOT taxable if coverage is purchased by the individual.
DI coverage provides a bridge until you’re back on your feet by covering a portion of your income in the event of a total disability. You can focus on getting better, not worrying about paying the bills.

Importance of DI

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Things to Consider...

Benefit Period: The length of time that a policy will pay benefits, typically from one to five years.

Occupation: How the policy defines your occupation is extremely important since there are various definitions. Some allow you to receive benefits while working in another type of occupation while others don’t consider you to be disabled if you have the ability to work in another occupation.

Elimination Period: How long you have to wait from the onset of the disability until you are eligible to receive your disability income. This period can vary, but is often 90 days.

Riders: There are typically various “riders” (options) you can purchase with your plan to cover or allow for additional scenarios, such as a Cost of Living Adjustment rider to keep up with inflation while on claim.

Protection Features: Disability policies have two different protection features that are important to understand:

Noncancellable: Policy cannot be cancelled by the insurance company, except for nonpayment of premiums. This gives you the right to renew the policy every year without an increase in the premium or a reduction in benefits.

Guaranteed Renewable: This gives you the right to renew the policy with the same benefits and not have the policy cancelled by the company. However, your insurer has the right to increase your premiums as long as it does so for all other policyholders in the same rating class as you.

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Long-Term Care Coverage

GENERIC & CARRIER BROKER RESOURCES

Simply confirm that you are a financial professional to enter the site; scroll down to the bottom of the page for a tab with webinars and another for resources.

Nationwide’s CareMatters LTC Plan Producer Presentation

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THE INS AND OUTS OF LTCI PROCESSING

One of the biggest challenges in selling Long Term Care insurance (LTCi) is understanding the differences between processing Life insurance and processing LTCi, which is a health insurance policy. The points below should help define the ins and outs of LTCi processing.

Long Term Care insurance is NOT like Life insurance: APS ORDERING: Agents are not permitted to order the Attending Physician Statements (APS) as they are with Life insurance. The carriers will order their own or instruct GPAgency to order the APS. The underwriting process for LTCi may include a telephone interview, face-to-face interview, parameds, and necessary consent forms. If not properly completed with the client’s signature, the carriers will stop the process.

CASE SHOPPING: Long Term Care insurers will not “shop” a case. In other words, we cannot send an informal (trial) request to several carriers to obtain the most favorable underwriting. We are, however, familiar with our carriers’ underwriting criteria, and will suggest who we think may consider your client’s health risk. Few options exist, however, as carrier underwriting is similar.

HEALTH RATINGS: Substandard ratings are limited, with many carriers only issuing policies without any additional ratings. These carriers will not consider flat extras or table ratings to approve an applicant they feel is likely to submit an immediate claim against the company, nor do carriers make table-rated offerings.

INFORMATION TRANSFER: LTC insurance carriers will not transfer information to other carriers upon request (Life insurance carriers will). However, some carriers may notify the Medical Information Bureau of any declines.

POLICY REPLACEMENTS: LTCi replacements in most cases will result in significantly reduced compensation under most circumstances. When replacing coverage please make sure it is in the best interest of the client.

PREMIUM SUBMISSION: Some LTC insurers require premiums to be submitted with applications to bind coverage. Other insurers do not require premiums but the application is not bound. Contact GPAgency for more information.

TRAINING, TAX ADVANTAGES, AND LIABILITY:

The majority of states now require LTCi-specific Continuing Education credit or Long Term Care Partnership Training.
LTCi offers potential tax advantages to the business market and individuals.
A potential liability may exist if an agent fails to offer Long Term Care insurance for protection of a client’s assets and financial plan.

UNDERWRITING TIME: Underwriting LTCi may take longer than Life insurance because the carrier is evaluating morbidity and/or mortality issues. Expect underwriting to take 6 to 8 weeks unless submitted under simplified issue. In addition, some carriers now require parameds and an APS for all applicants.

We hope that these points offer greater clarification around the differences between processing Life and processing Long Term Care insurance.

As underwriting is always evolving, please contact us with any questions.

Marshall’s LTC Screening Questions

When prescreening potential LTC insurance clients to determine what rating they might receive and/or which carrier is best, you should get answers to the following four questions:

1. What prescriptions have you taken in the last 12 months? Request details.

2. What specialists, outside of your primary physician, have you seen in the last 5 years? Request details.

3. Height and weight?

4. Tobacco use?

Additional suggestions:

If the client’s responses reveal any concerns, consult the carrier’s UW guide(s).
Do a prescreen inquiry to the individual carrier via email to get in writing a preliminary indication of the client’s insurability/likely rating. Submit a copy of the carrier’s response with the application.
Include a cover letter with every application. Underwriters state that only one out of 50 applications has a cover letter and it can often tip the scales from a decline to an offer. A good cover letter helps personalize the application and should include any positive lifestyle activities, i.e. “Jane is a business owner, active at her church, likes to garden, travels, plays in the local chess club, works out at the gym, spends time with her grandchildren…”

LTC PARTNERSHIP TRAINING

Every day we receive applications from agents who are out of compliance with their LTC partnership training.

Anyone who sells, solicits, or negotiates Long-Term Care Partnership policies must complete an initial 8-hour LTC Partnership CE course, and then a 4-hour LTC Partnership Review CE every 2 years thereafter.
The requirement for Partnership CE is different from general CE. It does not coordinate with your birthday, rather, once you complete your initial 8 hours, you must complete a 4-hour review within the next 2 years to remain current.
For example, if you completed your initial 8-hour LTC Partnership on August 11, 2017, you will need to complete your 4-hour LTC Partnership review by August 11, 2019, to remain compliant.

Companies We Represent

LONG TERM CARE

LTC HYBRID

LTC Consumer Resources

“In the next two decades, an aging population, fewer family caregivers, increasingly limited personal resources, and growing strains on federal, state, and family budgets will create an unsustainable demand for LTC (long-term care).” Source: Bipartisan Policy Center (2014).

Long-term care is a range of services to assist with the personal tasks of everyday life, sometimes called activities of daily living (assistance with eating, bathing, dressing, toileting, etc.), which can cost up to $50 per hour. In 2020 in Raleigh, NC, a semi-private room in a nursing home averaged $85,776, per year!

“Medicare doesn’t cover long-term care (also called custodial care), if that’s the only care you need. Most nursing home care is custodial care.” (Medicare.gov) Medicare and/or private health insurance typically only cover medical and hospital bills and not the long-term care services.

Long-Term Care Insurance Resources

Companies We Represent

LONG TERM CARE

LTC HYBRID

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Fixed Annuities

What is an Annuity?

An annuity is a long-term, tax-deferred* insurance contract or investment designed for retirement. It allows you to create a fixed or variable stream of income during your retirement through a process called annuitization.

Money invested in an annuity can grow tax-deferred*. When the money is withdrawn, only the investment earnings are taxed, not the amount of money invested (unless the annuity was created with qualified money).

An investor can purchase an annuity with a lump sum or monthly payments. The money is invested for a future date, when the money can be taken by the investor either monthly, quarterly, annually or in a lump sum. That money can also be guaranteed for a specific period or for a lifetime.

There are two basic types of annuities: deferred and immediate.

With a deferred annuity, your money is invested for a period of time until you are ready to begin taking withdrawals, typically in retirement.
If you opt for an immediate annuity, you begin to receive payments soon after you make your initial investment.

ANNUITY TERMS

Accumulation phase: The period of time when the owner builds cash value in an annuity.

Annuitant: The annuitant is the person on whose life Annuity Payments are based. Often, the annuitant is also the person who receives the benefits of the annuity..

Beneficiary: The person having the right to receive the death proceeds payable upon the death of the contract owner during the accumulation phase, and the person having the right to receive benefits upon the death of the annuitant during the annuity phase.

Deferred annuity: This annuity, which can be variable or fixed, delays payments until the owner elects to receive them. All or a portion of the payments are taxed upon withdrawal.

Distribution phase: The period of time when the owner takes money out of an annuity, either through withdrawals from the contracts or through Annuitization, which converts the cash value into a stream of payments

Fixed annuity: An annuity in which the accumulation results from fixed interest credits at declared rates.

Flexible premium annuity: A type of deferred annuity that permits flexible premium payments after the initial payment.

Immediate annuity: This annuity begins making payments to the owner as soon as the contract starts and has no accumulation phase.

Joint and survivor: An annuity with two or more annuitants in which payments continue as long as one of the annuitants is alive.

Life, with period certain: An annuity in which the owner receives a certain number of payments whether the annuitant lives as long as the scheduled payments or not. So if the period of payments is scheduled for 25 years and the annuitant dies after 15 years, a beneficiary will receive the final 10 years of payments.

Period certain: An annuity that provides payments for a predetermined period of time.

Single (straight) life: An annuity that pays the owner as long as annuitant lives.

Variable annuity: A deferred annuity contract that allows the contract owner to select the investment funds and assume the investment risk.

Types of Annuities

There are two main classes of annuities:

FIXED ANNUITY: These annuities have no exposure to market risk. This means money can grow every year, without the fear of market loss. FIXED INDEXED ANNUITY: These annuities are designed for clients seeking growth of their retirement assets plus the protection of guarantees.

VARIABLE ANNUITY: It allows you to control how the money in the annuity is invested, such as mutual funds. But the payout amount will change with the performance of the investments. The U.S. Securities and Exchange Commission regulates variable annuities.

Income for Life

An Annuity is a unique financial product that provides tax deferral of interest and capital gains and the option of a guaranteed monthly income which you cannot outlive.

Accumulation Period

During the accumulation period of an annuity, all premium payments are invested in a fixed account, also known as a guaranteed account. Your principal and the interest rate are guaranteed by the company. Interest rates are usually guaranteed for one year, however some guaranteed annuity rates are available for longer durations.

Distribution Period

During retirement, funds can be withdrawn from the contract and the owner has several options from which to choose. Withdrawals may be made at any time from the contract, prior to retirement as well, usually with a minimum dollar amount at the option of the owner.

Systematic Withdrawal Plan enables the owner to pre-authorized periodic withdrawals. The owners of the contract instruct the company to withdraw a percentage or a level dollar amount from the contract on a monthly, quarterly, semiannual, or annual basis. Checks are sent directly to the owner or can be deposited directly into the owner’s checking account.

Fixed Account

The owner of the contract may transfer all or part of the value of the contract to the fixed account, sometimes called the guaranteed account, and elect to annuitize those funds. In essence, the owner of the contract for a fixed dollar amount purchases a monthly income which will be paid to him/her until death.

For instance, a 68 year old male could receive a monthly income which would be payable to himself as long as he is alive, or to his beneficiary should he die within the first 10 years. This option is known as “Life Annuity with Payments for a Guaranteed Period”, in this case the guaranteed period is ten years.

Contracts, when issued, include a “payout table” stating the minimum payout guaranteed by the company based on age and sex (according to state law). When the contract is annuitized, the payout will be based on the higher value of the guaranteed amount stated in the table or the current values used at that time.

In this example according to the payout table, for every $1,000 which is annuitized under the “Life Annuity with Payments Guaranteed for 10 Years Option,” the monthly payout would be $5.68. This is what was guaranteed at the time the contract was issued, however the current payout rate which the company is using is $7.93. All payout rates are expressed as dollars per period (monthly, quarterly, semi-annually, annually) per $1,000 dollars.

Therefore if this individual elected to annuitize $30,000 under this option his monthly payout would be $237.90 per month. This dollar amount is guaranteed to be paid to him as long as he is alive. Should death occur in the first ten years, his beneficiary would receive the difference between 10 years of monthly income and the amount he actually received.

Glossary of Terms

Accumulation Phase: The period of time when the owner builds cash value in an annuity.

Annuitant: The annuitant is the person on whose life Annuity Payments are based. Often, the annuitant is also the person who receives the benefits of the annuity.

Base Interest Rate: The Base Rate is the Current Rate less the Bonus Rate, if any. In many cases, the Base Rate and the Current Rate are the same.

Cap: The Maximum interest rate that can be credited to your equity index annuity policy in a policy year or over the term of the policy.

Compounding of Gains: Interest that is credited to your policy is added to your principal as well as interest credited in prior policy years. Some companies do not compound the gains credited to equity index policies from prior years. This dramatically reduces the overall rate of return earned by your money.

Current Interest Rate: This is the interest rate that an annuity is paying, the sum of the base rate, if any, and the bonus rate, if any. The current rate is set by the insurance company at the time of issue and is guaranteed for specific length of time.

Deferred Annuity: This annuity, which can be variable or fixed, delays payments until the owner elects to receive them. All or a portion of the payments are taxed upon withdrawal.

Distribution Phase: The period of time when the owner takes money out of an annuity, either through withdrawals from the contracts or through Annuitization, which converts the cash value into a stream of payments

Fixed Annuity: An annuity in which the accumulation results from fixed interest credits at declared rates.

Flexible Premium Annuity: A type of deferred annuity that permits flexible premium payments after the initial payment.

Floor: The minimum interest rate that can be credited to your policy equity index annuity in a year or over the term of your contract.

Immediate Annuity: This annuity begins making payments to the owner as soon as the contract starts and has no accumulation phase.

Joint and Survivor: An annuity with two or more annuitants in which payments continue as long as one of the annuitants is alive.

Life, with Period Certain: An annuity in which the owner receives a certain number of payments whether the annuitant lives as long as the scheduled payments or not. So if the period of payments is scheduled for 25 years and the annuitant dies after 15 years, a beneficiary will receive the final 10 years of payments.

Old Money Rates or Renewal Rates: The Old Money Rate is the rate declared by the company after the initial rate guarantee.

After the initial interest rate guarantee, the company decides what the interest rate will be for the following policy year. This rate is based on the company’s original investment portfolio and how the company designed the product.

For example, if the annuity policy at the time of issue paid a “current rate” of 7.50%, which was guaranteed for one year, and had a “base rate” of 6.50%, the company could declare a new interest rate for the second policy year of 6.0%. Each policy year thereafter the company would declare a new interest rate for that policy year.

Participation Index Rate: The amount of the percentage change (which is set by the company) used to determine the amount to be credited to your policy for that year. If the Participation Index Rate was 90% and the percentage change of the S&P 500 Index was 10%, then the 10% change would be multiplied by the Participation Index Rate of 90%, resulting in an Interest Rate of 9.0% being credited to your policy for that term.

Percentage Change: The change in the S&P 500 Index from the beginning of the term to the end of the term expressed as a percentage. The term could be one policy year, 5 policy years or 7 policy years, etc. If the S&P 500 was 500 at the beginning of the policy year and closed at 550 at the end of the policy year, there would have been a 10% increase in the S&P 500 Index. In years where the S&P 500 Index is negative, the percentage credited to your policy is (0). In this case, there would be no change in your policy value.

Premium Bonus: Additional money that is credited to the accumulation account of an annuity policy under certain conditions. First, the amount of money credited to the policy is calculated as a percentage of your initial premium. Secondly, the money credited to your accumulation account “vests” in your policy after a certain number of years.

For example, if your initial premium is $10,000 and the policy pays a 4.0% premium bonus and vest in years 6 through 9, your policy is credited with $400. The $400 earns interest as if it were your original premium, however if you surrender your policy during the first 5 years, you DO NOT receive the Premium Bonus and the interest it earns. During year 6, 7, 8, and 9, you “vest into” 25% of the Premium Bonus and its earned interest each year.

Rollover: The transferring of funds accumulated within an employer-sponsor retirement plan to another employer-sponsored retirement plan or IRA.

Section 1035(a) Exchange: The tax-free exchange of one nonqualified annuity contract or life insurance policy for another with a different company. For example, the transfer of a life to life; life to annuity; annuity to annuity policy. Partial transfers are also permitted.

Serial Issue: A number of annuity contracts, issued by the same company within a twelve month period to the same owner.

Settlement Options: The methods by which the insurer may pay annuity or life insurance policy proceeds to the annuitant, contract owner, policy owner or beneficiary.

Single (straight) Life: An annuity that pays the owner as long as annuitant lives.

Transfer: The direct transfer of funds from one financial institution to another financial institution for the benefit an individual. For example, the transfer of IRA funds from a bank to an insurance company. The check issued to the insurance company is for “the benefit of James Jones.” The direct transfer avoids the 20% withholding since the check is issued to an institution “for the benefit of James Jones” and is not paid directly to James Jones.

Variable Annuity: A deferred annuity contract that allows the contract owner to select the investment funds and assume the investment risk.

Annuity Training

Many carriers require their own annuity training. Additionally, many states require continuing education (CE) annuity certification training to comply with the NAIC Model or the Revised NAIC Model. The states that have adopted the 2010 NAIC Suitability in Annuity Transactions Model Regulation require producers to complete an approved four-hour annuity training course (CE) as part of the licensing requirement for the state. Beginning January 1st, 2020, states have started to adopt the NAIC “Revised Model” which will require agents to complete an additional one or four-hour annuity training course (CE). New producers getting licensed after the effective date will be required to complete an approved four-hour annuity training course (CE) as part of the licensing requirement for the state.

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ANNUITY CONSUMER RESOURCES

With an annuity, look forward to your future knowing that you can put aside and protect your retirement savings, and earn interest on it until you need it. An annuity enables you to convert your savings, such as a 401(k), into a steady stream of income over the long term. Typically used for retirement income, the annuity can also be useful tool for those who have come into a lot of money and need a way to manage it and make it last. An annuity is sometimes referred to a “self-made pension.”

What Is a Fixed Annuity?

A fixed annuity is an insurance contract that guarantees retirement income payments. With a fixed annuity contract, you make one or several payments to an insurance company, which in turn promises to provide you with a fixed stream of income during your retirement through a process called annuitization, regardless as to how the markets are performing.

Accumulation phase: the period during which you make contributions to a fixed annuity (or simply earn interest if you deposited a lump sum).

Distribution phase: the period during which you receive guaranteed payments from your annuity for a set period of years or for the rest of your life, depending on your policy.

There are two basic types of annuities: deferred and immediate.

With a deferred annuity, your money is invested for a period of time until you are ready to begin taking withdrawals, typically in retirement.

If you opt for an immediate annuity, you begin to receive payments soon after you make your initial investment.

The deferred annuity accumulates money while the immediate annuity pays out. Deferred annuities can also be converted into immediate annuities when the owner wants to start receiving payments.

What Are the Benefits of a Fixed Annuity?

Fixed annuities can provide protected lifetime income and security to your overall retirement plan, including:

With an annuity, you’re effectively creating your own pension plan for retirement!

Accumulation Phase: The period of time when the owner builds cash value in an annuity.

Annuitant: The annuitant is the person on whose life Annuity Payments are based. Often, the annuitant is also the person who receives the benefits of the annuity.

Base Interest Rate: The Base Rate is the Current Rate less the Bonus Rate, if any. In many cases, the Base Rate and the Current Rate are the same.

Beneficiary: The person having the right to receive the death proceeds payable upon the death of the contract owner during the accumulation phase, and the person having the right to receive benefits upon the death of the annuitant during the annuity phase.

Cap: The Maximum interest rate that can be credited to your equity index annuity policy in a policy year or over the term of the policy.

Compounding of Gains: Interest that is credited to your policy is added to your principal as well as interest credited in prior policy years. Some companies do not compound the gains credited to equity index policies from prior years. This dramatically reduces the overall rate of return earned by your money.

Current Interest Rate: This is the interest rate that an annuity is paying, the sum of the base rate, if any, and the bonus rate, if any. The current rate is set by the insurance company at the time of issue and is guaranteed for specific length of time.

Deferred Annuity: This annuity, which can be variable or fixed, delays payments until the owner elects to receive them. All or a portion of the payments are taxed upon withdrawal.

Distribution Phase: The period of time when the owner takes money out of an annuity, either through withdrawals from the contracts or through Annuitization, which converts the cash value into a stream of payments

Fixed Annuity: An annuity in which the accumulation results from fixed interest credits at declared rates.

Flexible Premium Annuity: A type of deferred annuity that permits flexible premium payments after the initial payment.

Floor: The minimum interest rate that can be credited to your policy equity index annuity in a year or over the term of your contract.

Immediate Annuity: This annuity begins making payments to the owner as soon as the contract starts and has no accumulation phase.

Joint and Survivor: An annuity with two or more annuitants in which payments continue as long as one of the annuitants is alive.

Life, with Period Certain: An annuity in which the owner receives a certain number of payments whether the annuitant lives as long as the scheduled payments or not. So if the period of payments is scheduled for 25 years and the annuitant dies after 15 years, a beneficiary will receive the final 10 years of payments.

Old Money Rates or Renewal Rates: The Old Money Rate is the rate declared by the company after the initial rate guarantee.

Participation Index Rate: The amount of the percentage change (which is set by the company) used to determine the amount to be credited to your policy for that year. If the Participation Index Rate was 90% and the percentage change of the S&P 500 Index was 10%, then the 10% change would be multiplied by the Participation Index Rate of 90%, resulting in an Interest Rate of 9.0% being credited to your policy for that term.

Percentage Change: The change in the S&P 500 Index from the beginning of the term to the end of the term expressed as a percentage. The term could be one policy year, 5 policy years or 7 policy years, etc. If the S&P 500 was 500 at the beginning of the policy year and closed at 550 at the end of the policy year, there would have been a 10% increase in the S&P 500 Index. In years where the S&P 500 Index is negative, the percentage credited to your policy is (0). In this case, there would be no change in your policy value.

Premium Bonus: Additional money that is credited to the accumulation account of an annuity policy under certain conditions. First, the amount of money credited to the policy is calculated as a percentage of your initial premium. Secondly, the money credited to your accumulation account “vests” in your policy after a certain number of years.

Rollover: The transferring of funds accumulated within an employer-sponsor retirement plan to another employer-sponsored retirement plan or IRA.

Section 1035(a) Exchange: The tax-free exchange of one nonqualified annuity contract or life insurance policy for another with a different company. For example, the transfer of a life to life; life to annuity; annuity to annuity policy. Partial transfers are also permitted.

Serial Issue: A number of annuity contracts, issued by the same company within a twelve month period to the same owner.

Settlement Options: The methods by which the insurer may pay annuity or life insurance policy proceeds to the annuitant, contract owner, policy owner or beneficiary.

Single (straight) Life: An annuity that pays the owner as long as annuitant lives.

Transfer: The direct transfer of funds from one financial institution to another financial institution for the benefit an individual. For example, the transfer of IRA funds from a bank to an insurance company. The check issued to the insurance company is for “the benefit of James Jones.” The direct transfer avoids the 20% withholding since the check is issued to an institution “for the benefit of James Jones” and is not paid directly to James Jones.

Variable Annuity: A deferred annuity contract that allows the contract owner to select the investment funds and assume the investment risk.

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Why do people buy annuities?

People typically buy annuities to help manage their income in retirement. Annuities provide three things:

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We understand that each case is unique and that you may need a creative solution to address complex situations. We’re here to help guide you through the maze of financial, legal, tax and estate planning concepts. We will help you analyze your client’s financial position, assess their objectives, and offer the best possible solutions.

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Deferred Compensation Plan – deferral of current salary or bonuses on a pre-tax basis
Bonus Deferral Match – deferral of bonuses with an employer match
Supplemental Executive Retirement Plan (SERP) – employer agrees to pay select key employees a specified income for a specified time with no employee deferral
Split-Dollar – death benefit Option C gives business recovery of premiums paid, allowing for the employee’s beneficiary to receive the full policy face amount if desired
Section 162 Bonus – bonus made to select executives to buy life insurance
Key Person Indemnity – life insurance owned by and payable to the business to indemnify it upon the death of a key person
Buy-Sell Agreement Funding – life insurance used to fund a buy-sell agreement

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People typically buy annuities to help manage their income in retirement. Annuities provide three things:

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