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Longevity Insurance Opportunities and Concept

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Slide 2 Longevity Insurance Opportunities and Concept Slide 3 Longevity Insurance Presentation Menu Click on links to view: What is Longevity Insurance? Is Longevity Insurance Valuable? Details of the full longevity benefit sales story: Retirees Bob & Janet try to self-insure What does longevity insurance (LI) do for Bob and Janet? What if Bob and Janet cant afford to retire? Bob Jr. needs life insurance. Why buy LI at the same time? Summary of distribution opportunities Slide 4 The Basic Concept of Longevity Insurance What is it? Click to Return to Presentation Menu Or click to continue Slide 5 $31,488 per year guaranteed for life 95908580757065100Age Traditional Life Income Annuity (SPIA)* (*) Assume a couple both age 65 in excellent health who have saved $500K typical rates $500K $400K $300K $200K $100K Single Premium No moving parts! Just a fully guaranteed life income No fund, no interest, no death benefit But NO CASH LEFT IN BANK! Slide 6 95908580757065100Age Add a 20 year Certain Period * (*) Assume a couple both age 65 in excellent health who have saved $500K typical rates $500K $400K $300K $200K $100K Single Premium Adds a death benefit Loans can add some liquidity BUT $$$ COST INCREASES. More complex $31,488 per year guaranteed for life 20 years certain Slide 7 95908580757065100Age Longevity Insurance * (*) Assume a couple both age 65 in excellent health who have saved $500K typical rates $500K $400K $300K $200K $100K Get rid of unnecessary expensive benefits. Just cover risk of outliving assets. Premium $ goes way down. Manage your own normal retirement $31,488 per year for life Single Premium Use savings for income Slide 8 Standard Nonforfeiture Law for Annuities Does Not Require Cash Values (1) (b) If a contract provides for a lump sum settlement at maturity, or at any other time, that upon surrender of the contract at or prior to the commencement of any annuity payments, the company will pay in lieu of any paid-up annuity benefit a cash surrender benefit of such amount as is specified in subsections (3), (4), (6) and (8) Slide 9 But Nothing if I Die Before 85? How is Longevity Insurance Valuable? Click to Return to Presentation Menu Or click to continue Slide 10 Whole Life Insurance Premiums 100% Chance of Receiving Benefits (**) But Expensive Consider Popularity of Term Life Insurance Mortality Costs Per $1000 (*) 50% of 75-80 Mortality A run of the mill life insurance mortality assumption (**) Ignoring any lapses Slide 11 Consider Popularity of Term Life Insurance Mortality Costs Per $1000 (*) 50% of 75-80 Mortality A run of the mill life insurance mortality assumption (**) Ignoring any lapses 20 Year Term Life Only 8% Chance of Receiving a Benefit (**) But Covers Most Important Need At very low cost Slide 12 Compared to Longevity Income Benefit Income Costs Per $1000 (*) Assume a couple both age 65 in excellent health who have saved $500K typical rates 85% chance of receiving benefits (*) Longevity Benefits Slide 13 Compare Probability of Insurable Events? Collecting on 20 year term insurance ~ 8.0% Your home being destroyed by a fire during your life ~ 0.2% Your car being stolen over a 40 year period ~ 20% At least one of healthy age 65 couple living beyond age 85 ~ 85% Slide 14 Benefits of Combining Longevity and Life Insurance Comparison of Present Value of Claims $48K Longevity Income 27.0K (136%)19.9K 11.4K (57%) 6.8K (34%) $100K 20 yr term DB 16.0K (75%)21.2K 31.3K (148%) 41.0K (193%) Sum of Present Values 43.0K (5%)41.1K 42.7K (4%) 47.8K (16%) Mortality Experience 75%100% 150% 200% Assume a male age 45 who purchases $48K annual longevity insurance that starts at age 85 and a 20 year term policy that ends at age 65. 100% represents a typical longevity benefit mortality assumption Slide 15 Click to Return to Presentation Menu The Longevity Sales Story Slide 16 Bob and Janets Self Insurance Options Click to Return to Presentation Menu Or click to continue Slide 17 Retirement Meet Retirees Bob and Janet Bob and Janet are both 65 years old They are married and in excellent health They have saved $500,000 for retirement They would like to retire now How much do they have to live on? Slide 18 Option 1: They could try to live off interest. What if they try to self-insure? (*) Annual income assuming 5% interest and not spending $500K principle. All annual incomes in this presentation are assumed to be paid monthly. $24,400 per year(*) $500K Interest Slide 19 did earn about 8% The S&P 500 did earn about 8% interest over the last 10 years. Cant Bob and Janet earn more than 5%? half Drawing 8% over those 2 years would have cut their savings in half! big risk Thats a big risk! Financial experts recommend not drawing more than 4 to 5% LOST 37.8% But the S&P also LOST 37.8% between Aug 00 and Aug 02 Slide 20 Option 2: Draw money from savings plus interest Bob and Janet could dip into their savings BUT. age 85 (*) Savings would last until age 85, assuming 5% annual interest. $500K Interest and Principle $39,000 per year(*) Slide 21 Self-Insurance What happens 20 years later? Slide 22 Self-Insurance Can they afford to take that risk? There is an 85% probability that one of them will live to age 85 AND THEY ARE BROKE! What happens 20 years later? Slide 23 Self-Insurance $34,500age 90 What if they draw $34,500 per year which will last to age 90 ? What happens 25 years later? Slide 24 Self-Insurance Can they afford to take that risk? There is a 69% probability that one of them will live to age 90 AND THEY ARE BROKE! Slide 25 Self-Insurance $31,700age 95 What if they draw $31,700 per year which will last to age 95 ? What happens 30 years later? Slide 26 Self-Insurance Can they afford even to take that risk? STILL 45% STILL a 45% probability that one of them will live to age 95 BROKE! AND THEY ARE BROKE! Slide 27 Annual IncomeConsequences $24,400 per yearLasts for life. Keep your $500K $39,000 per year85% chance of going broke at age 85 $34,500 per year69% chance of going broke at age 90 $31,700 per year45% chance of going broke at age 95 Summarizing Bob and Janets Self-Insured Options Longevity Insurance can eliminate these risks Slide 28 Bob and Janets Longevity Insurance Options Click to Return to Presentation Menu Or click to continue Slide 29 Option 1: Single Premium Immediate Annuities Longevity Insurance Options $33,800 per year of guaranteed income as long as Bob or Janet live! The Downside? Slide 30 $33,800 per year guaranteed for life The Downside? $0.00 Bank Bob and Janet fork over the entire $500K They have zero left in the bank! 95908580757065100Age Single Premium Immediate Annuity $500,000 Longevity Insurance Options Slide 31 Option 2: Longevity Insurance Can correct that downside! $33,000 per year Guaranteed as long as Bob or Janet live! Longevity Insurance Options Heres the kickerIt only costs $80K How does that work? Slide 32 $33,000 per year for life$33,000 per year till 85 Bob and Janet have $420K in the bank to provide $33,000 to age 85! Then only $80K buys $33,000 for life starting at age 85! 95908580757065100Age Longevity Insurance Options Longevity Insurance $500,000 $80,000$420,000 $420K Bank Slide 33 Option 3: Maximize Longevity Insurance Income $34,500 of yearly income Guaranteed as long as either lives! Longevity Insurance Options Lets see how that works Slide 34 $34,500 per year guaranteed for life $34,500 Longevity Insurance 1008565Age7590958070 Bob and Janet have $180K in the bank to provide $34,500 to age 71! $34,500 for life kicks in at age 71! Longevity Insurance $180K Bank $500,000 $320,000$180,000 Slide 35 Self insurance:Consequences: $24,400 per yearLasts for life. Keep your $500K $39,000 per yearGo broke at 85 (85% chance) $34,500 per year Go broke at 90 (69% chance) $31,700 per yearGo broke at 95 (45% chance) Longevity Insurance:Consequences: $33,800 per yearLasts for life, but spend entire $500K $33,000 per yearLasts for life. Keep $420K to manage to 85 $34,500 per year Lasts for life. Keep $180K to manage to 71 Comparing Bob and Janets Options How do these compare over a life time? Slide 36 Lets compare Bob and Janets options over a lifetime Self-Insured AlternativesLongevity Insurance Alternatives Cash in the bank at 65 After paying a premium for longevity insurance Slide 37 Lets compare Bob and Janets options over a lifetime Self-Insured AlternativesLongevity Insurance Alternatives Life income thru age 85 Best income choice if Bob and Janet knew they were going to die at 85 Slide 38 Lets compare Bob and Janets options over a lifetime Self-Insured AlternativesLongevity Insurance Alternatives Life income thru age 90 By age 90, longevity insurance provides BOTH the best income AND the security they cannot outlive! Slide 39 Lets compare Bob and Janets options over a lifetime Self-Insured AlternativesLongevity Insurance Alternatives Life income thru age 95 $1 million of lifetime income by 95 Slide 40 Lets compare Bob and Janets options over a lifetime Self-Insured AlternativesLongevity Insurance Alternatives Life income thru age 100 Guaranteed to keep going! No matter how long they live! Slide 41 What if Bob and Janet Need More Income? Deferred Retirement Options What if Bob and Janet Need More Income? Deferred Retirement Options Click to Return to Presentation Menu Or click to continue Slide 42 Some of Bob and Janets options: Lower standard of living? Reverse mortgage? Live off kids? Life of crime? Retire Later? What if $34,000 a Year Is Not Enough? Longevity Insurance Lets look at how Longevity Insurance can help Bob and Janet achieve their goals! Slide 43 Lets say Bob and Janet decide they need $50K per year to retire They know that $500K is not enough at age 65. Deferred Retirement Options But with an Longevity Insurance they can Retire sooner and Guarantee a future retirement date! Slide 44 Planning a Later Retirement $50,000 per year guaranteed for life 1008565Age7590958070 Flex Income Annuity $500,000 $463,000$37,000 $37K Bank $463K will buy $50K guaranteed income starting at age 70 Leaving $37K in the bank With the long term taken care of, now Bob and Janet just need to save enough to pay to age 70! Slide 45 Planning a Later Retirement $50,000 per year guaranteed for life 1008565Age7590958070 $37K Bank So Bob and Janet now know exactly when they can retire based on how much they can save! Add savings Save nothing Retire just before age 70 Save $74 per month to retire at age 69 Save $1,355 per month to retire at age 68 $50,000 per year from savings Slide 46 Planning a Later Retirement $50,000 per year guaranteed for life 1008565Age7590958070 $392K Bank retain more$108K $50K of incomeage 85 Or maybe they want to retain more of their assets. $108K will lock in $50K of income starting at age 85. Then Add savings Save nothing Retire just before age 71 Save $492 per month to retire at age 70 Save $1,522 per month to retire at age 69 $50,000 per year from savings Sounds like a (retirement) plan! Slide 47 Protecting Against Two of Lifes Risks Dying Too Soon Or Living Too Long! Click to Return to Presentation Menu Or click to continue Slide 48 Why Buy Life Insurance and Longevity Insurance at the Same Time? 1057535Age5585956545 Risk of Dying Too Soon Term Life Insurance Term Life Insurance protects your family only if you die too soon. Risk of Living Too Long Longevity Insurance Longevity Insurance pays off only if you live a long life By protecting against both risks at the same time you can save money! Term Life Insurance with Longevity Insurance Rider Slide 49 Lets Meet 45 year old Bob Jr. needs to save for retirement Bob and Janets son needs to save for retirement too. He also needs life insurance He also needs life insurance to protect his family! Lets see how Bob can benefit from Longevity Insurance Slide 50 Say Bob Jr. buys a 20 year term life insurance policy. A $1,000 per year Longevity Insurance rider could buy: $2,300 per year 65 $2,300 per year income(*) starting at age 65 - or - $12,000 per year 85 $12,000 per year income(*) starting at age 85 (*) So long as Bob Jr. or his spouse (also 45) live Bob Jr.s Benefits Lets see how the Longevity Insurance enhances Bob Jrs life insurance benefits if he lives a long time! Slide 51 $1,000 20 YEAR Longevity Rider at Age 45 - 35,000 70,000 105,000 140,000 175,000 210,000 245,000 280,000 315,000 350,000 LI Rider Premium Return of Premium Life Income Starting at 65 Life Income Starting at 85 At age 65 Bob Jr pays $20K LI premium over 20 years A typical Return of Premium Rider might pay $40K in benefits Slide 52 $1,000 20 YEAR Longevity Rider at Age 45 - 35,000 70,000 105,000 140,000 175,000 210,000 245,000 280,000 315,000 350,000 LI Rider Premium Return of Premium Life Income Starting at 65 Life Income Starting at 85 Lifetime benefits paid thru age 85 By age 85, income starting at age 65 would total $46K! Guaranteed Income No Matter How Long They Live! Slide 53 - 35,000 70,000 105,000 140,000 175,000 210,000 245,000 280,000 315,000 350,000 LI Rider Premium Return of Premium Life Income Starting at 65 Life Income Starting at 85 $1,000 20 YEAR Longevity Rider at Age 45 Lifetime benefits paid thru age 90 Guaranteed Income No Matter How Long They Live! If he chooses to start at 85, he has $60K of life- time income by 90 Slide 54 - 35,000 70,000 105,000 140,000 175,000 210,000 245,000 280,000 315,000 350,000 LI Rider Premium Return of Premium Life Income Starting at 65 Life Income Starting at 85 Lifetime benefits paid thru age 95 Guaranteed Income No Matter How Long They Live! By age 95, Bob Jr has received a life income 6 times his LI rider premium ($120K)! $1,000 20 YEAR Longevity Rider at Age 45 Slide 55 Guaranteed Income No Matter How Long They Live! - 35,000 70,000 105,000 140,000 175,000 210,000 245,000 280,000 315,000 350,000 LI Rider Premium Return of Premium Life Income Starting at 65 Life Income Starting at 85 $1,000 20 YEAR Longevity Rider at Age 45 Lifetime benefits paid thru age 100 And his lifetime annuity payments continue to grow no matter how long they live! Slide 56 Unique New Sales Opportunities For All Distribution Outlets Click to Return to Presentation Menu Or click to continue Slide 57 The Opportunity 75 million baby boomers Over 75 million baby boomers are nearing retirement $ trillions While they have $ trillions in assets, most no guaranteed pension Have no guaranteed pension Distrust Distrust social security no concept of their long life Have no concept of their long life expectancy no clue Have no clue how to manage their income plan for retirement Need a plan for retirement Slide 58 Other Potential Opportunities LTCLTC Wrap around For Life Longevity Income Costs for life, health, or CI Longevity Costs Impaired risk combo sales save money Equity Index inflation protection Slide 59 Traditional Face - Face Sales Retirement/distribution planning Income/accumulation combo sales Income/Life ROP alternative Income/LTC combo sales Income/CI combo sales Substandard market Executive comp Charitable gift planning Other advance sales Slide 60 Worksite Sales 401K Retirement/distribution planning Executive Comp Employer/union paid retirement benefits Income/Life combo sales Income/LTC combo sales Income/CI combo sales More liberal underwriting due to offsetting risks Slide 61 Direct Sales Income/Life ROP alternative Income/LTC combo sales Income/CI combo sales Lead co-operative with face-to-face distribution system for retirement planning/other advanced sales. Slide 62 Alternative Distribution Financial planners Banks Investment Advisors Personal Actuaries Internet-based sales Slide 63 Click to Return to Presentation Menu