The Kai-Zen Financed162 Plan & TrustAn economically efficient plan to buypermanent death benefits

What Does Kai-Zen Stand For?

Translation fromJapanese:

The reality is that every business changes, every market changes and every industry changes. But there is one fundamental truism in business that always remains - “CASH is KING!”

Kai-Zen allow companies to reward executives AND preserve their cash flow versus other 162 programs on the market

Literal:“ significant improvement

at little to no incrementalcost”

Zen = goodKai = change

So, What is theKai-Zen Plan? A 162 strategy for business owners,

partners and key executives

Where financing is used to matchthe contributions made by theemployer or employee to improvethe outcome

With matching contributionswhat do you get?

– The same benefits for less money - or -– The same money for more benefits

What DoesKai-Zen Provide?

Permanent life insurance Supplemental retirement income Long term care Money in the event of chronic illness Money in the event of terminal illness Peace of mind

A way of using someone else’smoney to augment your abilityto obtain:

Why Do a 162 Plan? Very little oversight and filing issues e.g

no 409a or ERISA issues

Bonuses may be deductible to the employer

Employer can pick who gets the benefit

The employer may change the bonus amount each year

Flexibility

What Does The Employer Want? To recruit, retain and reward key

personnel to grow their business

Offer something more meaningfulthan health care and 6% matching401K contributions

Offer very attractive benefitsthat are different from all theircompetitors

Stop the cost spiral/sustainability

Flexibility to adjust with the business needs

What Does the Employee Want? A comprehensive benefits

package that covers theirkey needs:― Permanent life insurance― Supplemental retirement income― Disability― Long Term Care― Access to the cash if needed early ― Keep your cash if you don’t use the benefits― Peace of mind

What Does the Employee Want? An answer to the question:

“How do I pay for all these benefits?”

A method to fend off Murphy’s law (everything that can go wrong, will) – they won’t have the right type of insurance when they need it.

(e.g. They bought term insurance instead of disability – and then became disabled)

How Much Do They All Cost?

Example Executive – earning $250,000 per year Take home pay after tax, etc. – $165,559 Costs for benefits:

LifeSupplemental retirementDisabilityLong term careTOTAL

Sample: 50, male, standard health

This excludes every day costs like car, mortgage, electricity, etc.

Most people contribute only enough to get the minimum benefitse.g term insurance or minimum disability – no long term care, etc.

Failure to cover these benefits adequately wipes out most executives retirement funds (which they believe is underfunded inthe first place)

$16,000 (GUL)$48,000$4,800$3,600

$72,400 per year

Ask Yourself These Questions: Did you buy a permanent policy or term?

Less than 1% of term policies pay out a death benefit.(wikipedia)

Have you saved enough for retirement?Americans 10 years from retirement have, on average, $78K even though they need $900k to maintain the same life style.(Employment Benefit Research Institute)

What happens if you become disabled?1/3 of all Americans between 35 to 65 will become disabled for 90 days or more, 1 in 7 over 65 will become disabled for more than 5 years.(American Council of Life Insurance)

Will I need Long Term Care?41% of Americans will need LTC before age 65, 70% after age 65 will need LTC with an average stay of 2.4 years and an average annual cost of $75K. (US Dept. of Heath and Human Services)

How Does Leveraging Help?

= Bonus Portion = Additional Leverage premium

Leveraging allows more cash to be put into a policy for a longer period resulting in higher benefits - even taking loan repayment into account. You can now use savings to purchase other benefits or significantly increase your current benefits.

Employee/employer liability is limited to the funding pattern (shown in blue).The recourse on the loan is not to employer or employee but to the Trust.

More cash to buy more benefits

6 7 8 9 101 2 3 4 5Year

How Does It Work? Very Simply! This is a partial fund - partial finance transaction.

The Contribution And Policy Are The Sole Collateral For The Transaction.

The employer pays the executive a bonus. The employee then makes a contribution (the bonus amount or more) to the Trust (the contribution is considerably less than would normally be required due to the additional contribution towards the policy by the lender)

The Master Trust bundles multiple policies to obtain a loan facility at optimal loan pricing. However, individual policies are segregated within the sub trust, so benefits are not comingled.

How Does It Work? The cash growth along, with future contributions (depending on

plan) within the policy, sustains the security of the loan and eventually pays off the loan in full leaving the death benefit intact.

Once the loan is paid off, there is a potential for excess income distributions from the policy which can be used to purchase additional benefits (e.g. supplemental income for retirement, health care, etc)

How Does It Work?

Benefits paid to participantsand/or their beneficiaries

Executive paysContributions

ExecutiveA

ExecutiveB

ExecutiveC

ExecutiveD

IndividualTrust

IndividualTrust

IndividualTrust

IndividualTrust

MasterTrust

Each policy issegregated withindividual annual

statement

Re-insures Risk

Leverages toIncrease Benefits

InsuranceCompany

PremiumFinanceLender

Contribution Funding Options 1 pay 2 pay 3 pay 4 pay 5 pay

Once your contributions stop the freed up cash can be used to fund / supplement benefits you could not previously afford

J O I N T L Y A D M I N I S T E R E D B Y

So Lets Look At A Proposal

Sample: Male 50 Standard Health

Sample: Male 50 Standard Health

Sample: Male 50 Standard Health (Continued)

Sample: Male 50 Standard Health (Final)

Note totalincome stream

J O I N T L Y A D M I N I S T E R E D B Y

Lets Talk Risk.

How Believable is the Policy Return?First you need to understand how the product works!

Difference Between Regular UL (Fixed) Policy and Index UL Policy

NOTE: Policy expenses have been ignored to help understanding. Note the option budget is from the bond yield and so goes up or down based on underlying interest rates/ bond yields.

Principal Protected

Return Risk 0-13%

General Account Yield 5%$100

$105

$100General Account

OptionReturn0% - 13%

$100

$113

$100General Account

IUL swaps GA fixed return for an option

Example IUL Over Time= market returns

MarketGrows20%

Principle is Reset

IUL a/c value$100

IUL a/c value$113

IUL a/c value$126

MarketGrows25%

IUL a/c value$113

MarketLoses40%

IUL does not lose in market drop

$100 $120 $72 $96

Alternative: Invested directly in S&P

S&P As an Example During the period 1930 – 2011:

The S&P 500 Index averaged an annual return of 5.92%

Same time period, remove all negative years andinsert 0% (like an IUL) for those years. Average return = 11.46%

Good IUL’s will capture approx. 80% - 90% of their market - in this example your return wouldbe around 9.16%.

S&P As an Example Average Cost of loan was 6.35%

(average 1 year LIBOR +1.75%)approx. = risk spread between IULproduct and loan cost of 2.8%

Note: In NIW designs absolute returnis less important than the difference between policy return and cost of money (the spread)

While history does not repeat itself exactly, trend patterns do and the risk spread typically remains on averagethe same

Designed Using Current Assumption Shows the Current 20 year look back average (without

adjusting caps to historical actual caps which would show higher performance)

Loan assumptions are using bank 15 year (increasing) forecasts of 1 year LIBOR +1.75%

But…

…Also Designed UsingStress Tests

Stress tested as if we were in the Great Depression environment (7 of the first 10 years are min. return)

Technically the design can withstand 13-15 years of minimum return (0%) in a row, depending on product, before policy collapse

AND stress tested as if we were in the 1980’s environment where LIBOR reaches almost 17%+ spread

Cannot handle prolonged stagflation (10 plus years) without hedging (an option we are reviewing)

What Happens To My Contribution If I LeaveMy Current Employer Before Year 5? This benefit is portable, you can take the policy with you

to your new employer and continue the planned contributions

Pay off the loan early and keep the cash in the policy providing death benefit until it runs out

Pay off the loan and 1035 to another policy

Pay off loan and keep policy in force to using the supplemental cash, if any, or to take advantage of the other benefits

What if You Want to Exit Early?

Financial Impact Of Early Termination

If you terminated the plan in year 4 and paid off the loan, the remaining cash value would keep the policy in force until age 76. If you had self funded it would have cost you $431,541 out of pocket

30 Year Old Athlete Example

Client Age 30

Client Age 30 (Continued)

Client Age 30 (Final)

Client 40 Year Old Example

Client Age 40 (Sample)

Client Age 40 (continued)

Client Age 40 (Final)

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Additional Benefits CreatedBy Riders

The “New” Approach

Die Too Soon

Live Too Long

BecomeTerminally Ill

Rider PortfolioAccelerated Benefits* Terminal Illness

Chronic Illness

Critical Illness

Riders are optional, may require an additional premium and may not be available in all states. *Use of Accelerated Benefits riders reduce the policy’s cash value and death benefit and may result in a taxable event.

Accelerated Benefits RidersABR 1 – Terminal Illness(100% of DB up to $1million)Resulting in death withintwo years*

Lump-sum distribution(discounted from death benefit)

Funds can be used for anything

No additional cost

Form series 8052(0798)*One year in PA, CT or VT. Please see the ABR disclosure forms for more information.

Accelerated Benefits Riders ABR 2 – Chronic Illness(2% of DB monthly up to $20K)2 of 6 Activities of Daily Living

– Bathing – Eating– Continence – Toileting– Dressing – Transferring

Cognitive Impairment– Short-term or long-term memory impairment– Loss of orientation to people, places or time– Deductive or abstract reasoning impairment

Form series 8095(0399)

Accelerated Benefits RidersABR 2 – Chronic Illness(continued)90-day waiting periodMust be in force for twoyears before benefitsbecome availableFunds can be used for anythingNo additional cost

Form series 8095(0399)

Accelerated Benefits RidersABR 3 – Critical Illness(100% of DB up to $1mill)Covered Illnesses

– Heart Attack– Stroke– Cancer*– End stage renal failure*– Major organ transplant– ALS (Lou Gehrig’s disease)*– Blindness

Form series 8165(0703)*Upon diagnosis. Please see the ABR disclosure forms for more information.

Accelerated Benefits RidersABR 3 – Critical Illness(continued)Available 30 days afterpolicy issue

Lump-sum distribution(discounted from death benefit)

Funds can be used for anything

No additional cost

Form series 8165(0703)

Summary of Benefits forMale 50 Standard Health

BUY Conventional GULPay 100% of premiums for

guaranteed death benefit to life expectancy costs:

Buy IUL using your moneyPay 100% of premiums forDeath Benefit and potential

supplemental retirement costs:

Contribution to Kai-Zen Plan costs:

$219,351Death benefit, potential supplemental retirement incomeLump sum distribution for chronic illness, terminal illness,

and critical illness

$575,388 $628,265

J O I N T L Y A D M I N I S T E R E D B Y

Client andApplication Profile

Who Qualifies? The client must need a permanent death benefit

of $1M or more Must be 65 or younger for Death Benefit Must be 55 or younger for revenue flow Standard or better health Earn at least $100,000 per year but ideally

$250,000 Must be an executive of the employer,

partner or business owner

Target Markets Privately held companies –

Small/Medium Business Owner(s) Partnerships – partner

buyout/benefits– Law Firms– CPA Firms– Doctors– Dentist– Consulting firms

Athletes Family Businesses – succession planning/ benefits

Company Bonus Can Be DesignedTo Fit Their Current Needs! The company can bonus all of the Kai-Zen

contribution They can bonus a portion of the Kai-Zen

contribution They can they can bonus nothing but make it

available They may be able to set up a vesting schedule of

the employer contributions The employer may be able to set up a vesting

schedule if the executive leaves early(consult with client attorney for this feature)

J O I N T L Y A D M I N I S T E R E D B Y

Processing Cases

Sales Process For Agent Complete and sign an NIW/IBG

separate selling agreement Get log-in for Kai-Zen website Obtain the processing guide from

Kai-Zen plan website. Obtain sample illustration for client

from the Kai-Zen website Complete FULL carrier application,

obtain the Kai-Zen cover letter from the website and submit to carrier for medicaland financial underwriting. Have insured complete medical underwriting requirements.

kaizenplan.com

kaizenplan.com

Sales Process For Agent (continued) Once you have obtained final

underwriting offer, get final carrier illustration from Paul Walder pwalder@niwcorp.com for carrier submission

Complete trust adoption documents available on website

Submit carrier illustration with all applicable trust and risk forms along with checks to Becca at IBG becca@ibgadmin.com(see case processing guide for address and who to make checks payable to.)

Login Using Username/Password

To Request A Username:Please e-mail Becca at becca@ibgadmin.com

or Judy Lane at lstamm@niwcorp.com

Trust Company Trustee

www.trustprovident.com

Frequently Asked QuestionsQ. Is there a Tax Deduction?

No – This program does not qualify for tax-deductions

Q. What Insurance underwriting is needed?Normal full insurance underwriting is required

Q. Is There a minimum death benefit?Yes $1M

R. Does the Insured or Employer have to qualify for the loan? No, there is no loan underwriting of the insured their risk is the contribution put into the plan. Financial underwriting is on the master trust

Q. Is there ERISA oversight?Only if employer controlled not if it is an employee sponsored program

Frequently Asked QuestionsQ. Are there benefits over and above the death benefit?

Potentially, yes. If you are below age 55, in or around year 15, there may be additional income flow from the plan to you, based on age, the size of policy and policy performance.

(Example: A 45 year old could generate an income flow of $30,000 per year, per $1M of Death Benefit).

Q. What age qualifies for this plan?Below Age 65

R. Are their health restrictions?Yes, Standard non-smoker or better (preferred smoker allowed)

Frequently Asked QuestionsQ. How many in the plan?

Each Plan is aggregated to approximately $120M of death benefit to allow the plan to achieve the most competitive loan pricing. The group can be made up of 1 policy of $120M or 60 policies of $2M, (can also be more.)

Q. If I have sufficient participants can we have our own plan?Yes! Absolutely.

R. Is there a maximum number of participants?Not in principle, but any group above 200 lives will be treated as a case that needs pre-qualifying from supplier?

Q. Is Guaranteed Issue Available?Potentially with some life carriers it depends on the group size, average salary and type of work activity (This is a white collar program so some reinsurance carriershave applicable programs.)

Frequently Asked QuestionsQ. Is it the life carrier or the plan that provides

the death benefit?The Carrier

Q. What happens if company terminates the 162 plan?The termination distribution is the cash value of the policy minus administrative and loan exit costs. Remaining will be paid to the covered participant.

Q. What fraud and long term oversight protection is thereon the trust?The Master Trustee is a professional trustee who is independent of the plan providers (references on trustee will be provided). The trustee receives no compensation from the plan providers outside of the plan fee income. With regard to the plan participants full due diligence and business case substantiation

Frequently Asked QuestionsQ. Can insured exit the plan early?

Not in the first two years, after that yes

Q. If insured exits the plan early, will they get theircontribution(s) back?The insured will receive any portion of the contribution remaining after loan repayment and trust fees are deducted.

Q. Who makes the contributions?In most cases the employee, but can be the employer if they

prefer

Q. Are the insured benefits portable?The insured can take the policy with them to their new employer and continue the planned contributions

Legal DisclaimerPlan projections are based oninformation supplied by lendersand insurance carriers andcannot be guaranteed.Details are provided in thecarrier illustration and theNIW collateral analysis.

Agent Case Splits Case 70% to agent and

30% IBG/NIW– IBG/NIW services include:

• Plan access• Design and proposal• Lending support• Technical support (phone/ email)

with client advisors• Life time servicing

Direct contact with Client insales assist role 50/50% split

A Proprietary Joint Venture Provided By

NIW Companies, Inc.6210 Campbell Road,Suite 128Dallas, TX 75248

Toll Free: (800) 294-9940Fax: (972) 755-1585Email: lstamm@niwcorp.comWebsite: www.NIWcorp.com

Insight Benefits Group, LLC501 S Towanda Barnes Road,Suite 3Bloomington, IL 61705

Toll Free: (877) 424-2366Fax: (480) 718-7648Email: info@insightbenefits.comWebsite: www.InsightBenefits.com

J O I N T L Y A D M I N I S T E R E D B Y

Thank You!