Life Module - VI

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Life Module - VI
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Module Objectives

• Review Homework Assignment
• Farmers Annuity Plans
• Proactive Policy Conservation

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Review Homework Assignment
1. What is the difference between whole life and
term insurance? Whole Life Term
Life Protection Benefits
Premiums Initial Cost Long run cost
Renewability

• Permanent Temporary
• Death and living Death only
• Fixed Increase with age
• Higher than term Lower than whole
• Usually lower than term Usually higher than
  whole
• Renewable Usually have to provide evidence
• of insurability at re-entry.

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Review Homework Assignment

• 2. Briefly describe Farmers Flexible Universal
  Life?
• Universal life is a flexible premium product
  providing adjustable, low cost protection and
  cash values which earn interest at current rates
  (interest sensitive). Renewable term insurance,
  coupled with a cash value account which has the
  potential to earn higher earnings.

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Review Homework Assignment
3. Give a few examples of living
benefits? 4. What is an excess credit? 5. What
is a paid-up addition? 6. What is the difference
between 10 Year Level and Level 10?
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Review Homework Assignment
7. Explain the Corridor. 8. What does the
Guaranteed Insurability Rider do when added to a
life policy? 9. What is the 10 day free look
provision? 10. Discuss you needs analysis
presentation.
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Farmers Annuity Plans

More time than money? A Farmers annuity may be
right for you!
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Farmers Annuity Plans
An annuity is a legal binding contract that
encourages individuals to save a portion of
income or compensation for retirement. It
guarantees to pay an income for a specified
period of time or for a persons entire life. An
annuity is one of the last remaining
tax-advantaged vehicles available to accumulate
money for the future. It can be used to
supplement your pension or Social Security or to
fund your I.R.A.
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Farmers Annuity Plans
A deferred annuity is very similar to a bank CD.
Like a CD, the consumers principle is safe and a
return on the money is guaranteed. The life of
an annuity has two phases, accumulation and
payout. Annuities offer advantages in both
phases.
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Farmers Annuity Plans

• In the accumulation phase
• Principle grows and compounds inside an annuity
  free from federal income tax. As a result, funds
  accumulate faster and larger than a CD where
  interest compounded is taxed as ordinary income
  every year.
• Both CDs and annuities carry penalties for early
  withdrawals, however the surrender charge for an
  annuity decreases to zero after a few years.
  Every time a CD funds are rolled over, a new
  penalty period begins.

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Farmers Annuity Plans

• In the payout (or Annuitization) phase
• Annuities guarantee a payout stream and offer a
  variety of payout options, including lifetime
  income.
• Although deferred annuities accumulate money
  free from current income tax, they do not
  eliminate the tax liability on interest earnings.
  They do, however allow the annuity owner to pay
  the taxes at a later date when tax costs could be
  minimized. Annuitization permits the annuitant
  to spread the tax liability over the number of
  years the income is to be received.

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Farmers Annuity Plans

• In the payout (or Annuitization) phase...
• Unlike an IRA or other retirement accounts, there
  is no requirement to begin distributions at age
  70 1/2.
• For Estate planning purposes, an annuity by
  passes probate when left to a designated
  beneficiary. A spousal beneficiary can maintain
  the tax-deferred status for up to the lifetime of
  the beneficiary.

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Comparing a Farmers Annuity to a CD

• A Farmers Annuity can provide you with
• An optional, flexible retirement program
• A secure cash accumulation plan
• Competitive interest earnings
• Tax savings
• A death benefit for your beneficiary.
• Certificates of Deposits can be easily rolled
  into a Farmers Annuity at maturity.

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Comparing a Farmers Annuity to a CD

• For Retirement
• A Farmers Annuity can be used to establish a
  retirement plan if you wish.. including an IRA
  option.
• It will enjoy competitive, tax-deferred interest
  earnings.
• You can select guaranteed retirement income
  optionsor a lump sum payment.
• Your beneficiary will receive the entire annuity
  fund if you die before retirement.
• You decide when and how much to pay into and
  withdraw from your annuity.
• If you choose an IRA, your contributions may be
  income tax deductible.

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Comparing a Farmers Annuity to a CD

• For Cash Accumulation
• At your option, a Farmers Annuity can be used as
  a secure cash accumulation plan.
• Payments and withdrawals are flexible.
• Interest earnings are competitive, and tax
  deferred.
• There is a guaranteed minimum interest rate.
• Your cash accumulation plan can readily be
  converted to a retirement program, at your option.

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Comparing a Farmers Annuity to a CD
Lets compare with a CD. Assume a 10,000
deposit earning 8 interest and youre in a 28
tax bracket CD ANNUITY DEPOSIT 10
,000 10,000 INTEREST 800
800 INCOME TAX -224
-0 NET YEAR-END BALANCE 10,576 10,800 In
effect, your 8 certificate has been reduced to a
net of 5.76. In 10 years, your original 10K CD
would be worth 18,344 and your Annuity would
have a balance of 21,589.
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Flex-Pay Annuity (FPA)
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Flex-Pay Annuity (FPA)
Issue Ages 0 - 80 Minimum Initial Deposit
50.00 Interest Rate Guaranteed at
3. Current 4.35 Expense Charges There
are NO annual policy admin. fees or set-up
charges! The FPA is an annuity to which varying
payment amounts can be made at any time. (50.00
minimum)
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Flex-Pay Annuity (FPA)
Withdrawals During any contract year, up to
10 of the fund balance as of the start of the
contract year may be withdrawn without a
surrender charge. The minimum withdrawal amount
is 500 and the remaining balance after the
withdrawal must be at least 500. Withdrawals in
excess of 10 during any policy year will be
subject to the following surrender
charges Policy Year Surrender
Charge 1 7 2 6 3 5 4 4 5 3
6 2 7 1 8 0
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Flex-Pay Annuity (FPA)
Conversion to Farmers Annuity Plus When at
least 5,000 has been accumulated in the FPA, it
may be transferred to the Annuity Plus. A new
application is needed. Commissions are not paid
on the amount transferred. Surrender charges
will be waived. The issue date will start over
(surrender charge time schedule). Retirement
Annuity Options Annuity payments for life with
120 monthly payments guaranteed (10 years
certain) is the automatic option. Other options
can be selected and will be discussed later in
this Module. Death Benefit All surrender
charges will be waived and the entire fund
balance will be paid to the named beneficiary if
the annuitant or owner dies before the annuity
start date.
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Farmers Annuity Plus (FAP)
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Farmers Annuity Plus (FAP)
Issue Ages 0 - 80 Min Initial Dep
5,000.00 (2K for IRA/SEP) Interest
Rate Guaranteed at 3. Current
6.00 Expense Charges There are NO annual
policy admin. fees or set-up charges! The
FAP is an annuity to which varying payment
amounts can be made at any time. (50.00
minimum) Blue Indicates different from FPA.
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Farmers Annuity Plus (FAP)
Withdrawals During any contract year, up to
10 of the fund balance as of the start of the
contract year may be withdrawn without a
surrender charge. The minimum withdrawal amount
is 500 and the remaining balance after the
withdrawal must be at least 500. Withdrawals in
excess of 10 during any policy year will be
subject to the following surrender
charges Policy Year Surrender
Charge 1 9 2 9 3 8 4 8 5 7
6 7 7 5 8 0
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Single Premium Deferred Annuity (SPDA)
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Single Premium Deferred Annuity (SPDA)
Issue Ages 0 - 80 Min Initial Dep
50,000 - 99,000 Plan 394 100,000 -
250,000 Plan 395 Interest Rate Guaranteed at
3. Current 6.70 Plan 394 7.00
Plan 395 Expense Charges There are NO annual
policy admin. fees or set-up charges! Blue
Indicates different from FPA and FAP.
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Single Premium Deferred Annuity (SPDA)
Payment (Deposit) Add-on can be made with the
minimum of 5,000 per deposit after 3 months of
issue. Features Skilled Nursing Facility
Benefit - Prior to age 75 and after 6 months of
issue, the annuitant may make a full surrender or
partial withdrawal without surrender charge while
confined to a skilled nursing facility. Partial
Surrenders Subject to a 2,500 minimum and
limited to one per calendar quarter. Subject to
same charges as FAP. Partial withdrawals are
not allowed if the remaining balance would be
less than 50,000 for Plan 394 and 100,000 for
Plan 395. There is a 25 processing fee for full
and partial withdrawals.
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Single Premium Immediate Annuity (SPIA)
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Single Premium Immediate Annuity (SPIA)
Issue Ages 0 - 80 This is a single premium
annuity that can be used as a funding vehicle for
both qualified and non-qualified deposits. The
plan is designed to provide monthly income
payments following the deposit of a single
premium. Income payments can commence within 30
days or be deferred for up to 1 year. Premium
Limits Depending on age and sex, the minimum
deposit is the amount necessary to provide a
monthly income of 100.
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Single Premium Immediate Annuity (SPIA)

• Payout Options Subject to Company approval,
  these payout options are generally available
• 10 to 30 year Period Certain and Life
• Joint and Survivor
• 10 to 30 year Period Certain.
• Partial Withdrawals Not allowed.

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Farmers Equity Indexed Annuity
(FEIA)
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Equity Indexed Annuity
Are you looking for ways to maximize your clients
retirement income while protecting their
principle? To accomplish this , many people
diversify their retirement portfolios. Such
portfolios typically include not only stocks and
bonds, but also safer instruments such as CDs,
Treasury Bills and fixed annuities, which provide
a stable return. Farmers Equity Indexed Annuity
(FEIA) can be a part of a plan to help your
client take control of their financial future.
You can provide them with a potential for higher
long-term growth and protect their principle from
undue risk.
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Equity Indexed Annuity

• This annuity links interest earnings to increases
  in a leading U.S. stock market indicator, the
  Standard Poors 500 Composite Stock Price Index
  while providing the safety of a traditional
  guaranteed minimum return.
• SAFETY Guaranteed return of at least 110 of
  your original principal when held with no
  withdrawals for a full seven-year term.
• TAX ADVANTAGE Interest earnings not taxed until
  withdrawn, which allows for faster accumulation.
  If held until retirement, you may be in a more
  favorable tax bracket.

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Equity Indexed Annuity
When you purchase a FEIA, you receive interest
linked to the change in the SP 500. The
beginning Index value is set at the start of a
seven-year term. The ending index value is based
on the average of SP Index values at the end of
four quarterly intervals preceding the end of the
term. The percentage change in the SP Index
value is then multiplied by a participation rate
to determine the amount of interest to be
credited to your annuity. You must hold the
annuity for a full 7 years to realize this
increase in your policy value.
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Equity Indexed Annuity

• Why use the SP 500?
• It is a widely recognized performance benchmark
  for U.S. stock market activity.
• It is a U.S. Dept of Commerce leading economic
  indicator.
• The SP 500 does not contain the 500 largest
  stocks, but the stocks considered are generally
  leaders within their industry group.
• Important industry groups are identified and
  allocated a representative sample of stock. The
  four major groups are industrials, utilities,
  financial and transportation.
• It includes stocks from the NYSE, the American
  Stock Exchange and the NASDAQ.

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Equity Indexed Annuity
Policy Specifications Minimum Premium 5,000
(No additional deposits) Maximum
Premium 1,000,000 without Company
approval Issue Ages 0-75 at issue (annuitant
and owner) Partial Withdrawals Limit one per
policy year (500 minimum) starting second
policy year. Surrender May be surrendered
before annuity start date for policy
value. Commissions 4 (all deposits) Internal
Rollovers Penalty free transfers of 5,000
minimum from FNWL annuities are allowed (no
commissions) Transfers from SPDA require a 25
processing fee.
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Equity Indexed Annuity
PARTICIPATION RATE This rate is set at the
time of issue (70 to over 100). Without
exception, the issue date will be the first
business day of the month following receipt of
the application and funds. This rate is
guaranteed not to change during the term. No
matter what happens to the SP Index, your
annuity has a guaranteed minimum value. The value
at any time is 90 percent of your initial premium
(less withdrawals) accumulated at 3 percent
annual interest. WITHDRAWALS You may make
partial withdrawals after the first policy year
(minimum 500, limited to one per year with
balance not below 5,000). You may surrender the
policy for its guaranteed minimum value however,
a IRS penalty of 10 will apply for withdrawals
prior to age 59 1/2.
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Equity Indexed Annuity
How the Interest Earnings are Calculated A x B
x C A Premium less withdrawals B The
percentage change in Index Value Avg. Index
Value ( last 4 quarters of term) - Issue Date
Index Value
Issue Date Index Value C The Participation
Rate Or, if the SP 500 declines, Farmers
protects your principle if held for the full 7
year term. If less than 7 years, (premium x .90)
3 interest
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Equity Indexed Annuity
Lets look at an example 100,000 in premium
0 withdrawals Initial Index Value 278.15 (Last
4 quarters end value/4 - Issue Date Value)/Issue
Date Value (430.15591.75603.05620.85)2245.8 /
4 561.45-278.15 283.30/278.15101.85 Participat
ion Rate 80 (100,000) x (101.85) x (80)
81,480 index increase Initial Premium (100,000)
Index Increase (81,480) Value at end of term
181,480
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Equity Indexed Annuity
Hypothetical Accumulation of Equity Indexed
Annuity (Based on 80 participation rate)
12/31/80 - 12/31/87 1981 - 1988 1982
- 1989 1983 - 1990 1984 -
1991 1985 - 1992 1986 -
1993 1987 - 1994 1988 -
1995 AVERAGE
91.57 96.58 107.06 81.79 105.52 77.64 70.93
66.67 81.73 86.61
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Equity Indexed Annuity

• Where do you begin looking for clients?
• Start with some general characteristics such as a
  commitment to long-term obligations and a
  financial objective of growth and safety rather
  than liquidity. A Farmers Annuity may be perfect
  for
• Non-risk takers
• Inflation Fighters
• Profit Takers
• Conservative Prospects
• Retirees or Job Changers
• Retirement Planners
• Indecisive Individuals

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Equity Indexed Annuity

• Who can sell a FEIA?
• First of all, you must qualify to sit for the
  Advanced Life and Financial Services (ALFS) exam.
  To qualify, you must
• Have 900 life production count or 15 IP
  qualified policies in the most recent 12 month
  period.
• Have a LLR equal or better than 8.5.
• Complete the ALFS exam with a grade of 75 or
  better.
• Pass the product specific exam.

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Variable Annuity
Farmers offers a variable annuity through Farmers
Financial Solutions. The agent must hold a
series 6 63 license in order to sell this
product. The customer has several investment
options during the accumulation phase. All other
basic annuity rules apply.
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Annuity Basics
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Annuity Basics
TRANSFERS A transfer is one method of moving
funds from one IRA or SEP to another without
recognizing a taxable event. Transfers can be
made within one company or between a different
financial institution. The transfer is handled
directly by the company(s) involved and the
contract owner does not personally handle any of
the funds. Non-qualified annuities cannot use a
transfer.
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Annuity Basics
ROLLOVERS A rollover is a means of moving funds
from one qualified account (IRA, SEP) to another
without recognizing a taxable event. The
advantages of a rollover as opposed to a transfer
is the timeliness of the transaction. Since the
individual personally terminates the old account
and takes receipt of the funds, it is possible to
complete the transaction more quickly. However,
funds must be rolled over within 60 days.
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Annuity Basics

• 1035 EXCHANGES
• This is an exchange-in-kind for certain insurance
  policies and non-qualified annuity contracts as
  permitted under Section 1035 of the IRS Code. A
  1035 is not allowed from an IRA, SEP or TSA.
• A 1035 can be processed for
• A non-qualified annuity exchanged for
  non-qualified annuity
• A life insurance policy exchanged for a FFUL.
• An endowment contract exchanged for a
  non-qualified annuity contract.

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Annuity Distribution
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Annuity Distribution
LIFE ONLY Provides for an income during the
lifetime of the annuitant only. The contract
terminates with the last regular payment prior to
the death of the annuitant. This option provides
the largest income payable (if the ann.
lives). LIFE INCOME WITH PERIOD CERTAIN
Provides guaranteed monthly payments for the
lifetime of the annuitant. Should annuitant die
prior to the end of the guaranteed period,
payments to the beneficiary will be made 1. Any
guaranteed annuity payments remaining will be
continued to the end of the guaranteed
period. 2. If the beneficiary dies while
receiving such payments, the remaining payments
will be payable to the beneficiarys estate.
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Annuity Distribution
JOINT AND SURVIVOR Provides for an income
during the lifetime of two persons. If this
option is desired, an additional election must be
made prior to the annuity commencement date to
determine the amount of the annuity that will
continue during the lifetime of the
survivor. JOINT AND FULL The annuitants will
receive a lifetime income. Upon the death of
either, the surviving annuitant will continue to
receive a lifetime income with no reduction in
the amount. JOINT AND HALF Same as Joint and
Full however, the survivor will only receive
half of the amount which was being received after
death. Although an annuity option may be changed
prior to commencement date, it cannot be changed
after the annuity payments start.
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Annuity Submission
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Annuity Submission

• For all annuities
• Use short form application.
• Always make notes in Remark section if annuity
  replaces existing FNWL policy or annuity.
• Refer to page 13 in the Agent Marketing Guide -
  Farmers Annuity Plans for specific submission
  instructions to ensure accuracy in completing the
  application.

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Proactive Policy Conservation
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Proactive Policy Conservation
The efforts of our Agents during the past few
years have helped us achieve a steady improvement
in our Company Life Lapse Ratio (explain LLR). A
good LLR can mean many positive things for
agents, DMs and the Company. For agents, a good
LLR means additional income through renewals,
improved Contract Value, Achievement Clubs, Life
and Profitability bonus. Conservation must start
before a policy is actually written and continue
through the annual policy review. This program
must be pro-active and you must keep in constant
contact with all Clients.
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Proactive Policy Conservation
Six Steps to an Effective Conservation
Program 1. Qualify the Prospect. Does the
prospect have a need for the coverage. Will the
prospect do business with you on a long term
basis. Does the prospect have the resources to
pay the required premium. 2. Deliver the Policy.
This is your chance to solidify the account.
This is also a great opportunity to ask for
referrals. 3. Resell the benefits of the policy
for the client. 4. Secure a Signed Delivery
Receipt. This form has an area to explain the
need the policy is intended to cover.
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Proactive Policy Conservation
Six Steps to an Effective Conservation
Program 5. Set the stage for future Client
recontacts. Make the client aware of a planned
recontact program as part of the regular service
routine. 6. Establish a proactive recontact
program. On-going recontact programs go a long
way toward protective a Life PIF book of
business. Birthday greetings, seasonal greeting
cards, congratulatory notes and thank you notes
are all positive ways to develop a good
Agent-Client relationship. A personal phone
call for no other reason but to see how they are
doing is also an effective tool in the
relationship building process.
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Proactive Policy Conservation
Conclusion By using the information provided in
the Proactive Policy Conservation program found
in the Agents Marketing Guide, you can solidify
Client loyalty, turn the table on replacers and
even pick up some new business in the process.
There is absolutely nothing bad that can come of
doing the right thing.
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Quote of the Day..

• Success is the sum of small efforts -
• repeated day in and day out.
• Robert Collier