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  1. 90%

  2. Lifeline

  3. ‘Lifeline’is an exciting new product from ALICO designed to be the market leader in the field of protection

  4. Agenda • Why Lifeline? • Basic Parameters • Premiums • Premium Payment Bonus • Investment Options • Charges • Death Benefits • Non payment of premiums • Reinstatement • Ages of Eligibility • Terms & Maturity Dates • Minimum and Maximum Death Benefits • Riders available • UND Guidelines • Competitive Advantage • ALICO/AIG-Company Strength • UND flowchart • Checklist • Basic Medical UND • Features, Explanations, Benefits

  5. Why ‘Lifeline’ @ NBD • Designed to be win-win-win • Protects family in times of need • Complements your client’s investment objectives • Is part of a needs based financial solution • Most successful ALICO product with other banks

  6. Basic Parameters • Minimum Initial monthly Premium - $ 100 • Payment Term - 10 years and above upto Age 95 • Minimum excess Premium - $ 200 • Payment modes - Monthly, Quarterly, Semi- Annual, Annual • Maximum Life Coverage - Maximum upto $10Mn • Minimum Life Coverage - $35,000 or coverage bought by $100 monthly • Average Annual Premium size (from other bank’s experience)- $1800 • Target segment – Prospects with total family income of AED 4000 & above

  7. Premiums:For any given Face Amount there is a range of premiums that the client can pay

  8. Minimum Premium • The Minimum Premium is the smallest premium that the company will accept for any given Face Amount • The lowest amount of premium that the company will accept to start the policy

  9. Target Premium • Target Premium is the ‘normal’ premium for any given Face Amount to achieve • Life cover upto a target age selected by the client • Desired Cash surrender value at a future date • Target Premium is higher than the Minimum Premium for any given Face Amount • Any premium over & above target premium is excess/dump-ins

  10. Target Premium Excess Premium Minimum Premium Target Premium Premium on which 3% revenue is earned Calculated for any given Face Amount and Age Premium on which full revenue is earned

  11. Question • What is the advantage to the policy owner of paying upto Target Premium? a) The Face Amount will be higher b) The Life cover will be longer c) The underwriting requirements will be relaxed d) The monthly deduction for the Cost of Insurance will be lower Write down your answer before turning to the next screen

  12. Answer The correct answer is b) • Paying the Target Premium has no effect on Face Amounts, underwriting requirements or the costs of insurance • Paying the Target Premium increases • Cash surrender value • No of years of life cover

  13. Premium Payment Bonus • The Premium Payment Bonus is a Loyalty Bonus, paid at the end of the 5th and 10th policy years  • The Bonus is 25% of the lowest premium paid during the preceding 5 year period • The Bonus Is not applicable on excess premiums • If the policy owner misses a premium in any year then the Premium Persistency Bonus will be lost  • If a policy owner misses the Premium Persistency Bonus at the end of year 5, he /she can still qualify for the bonus paid at the end of year 10 

  14. Premium Payment Bonus • Using the earlier example of the individual aged 30 with the face amount of US$150,000  • If the individual paid the Target premium of US$4,524 for 4 years but in one year paid the Minimum Premium of US$4470 his Premium Persistency Bonus would be: US$4,470 x 25% = US$1117.5

  15. Growing Cash Values Year 5 Year 10 Premium Payment Bonus • The Premium Payment Bonus will increase the cash values available to the policy owner Increased Cash Values when the Bonus is paid

  16. Question • A client pays a Premium of US$3,000 for the first 5 years of his policy. This includes an Excess Premium of US$800 • What is the Premium Payment Bonus? a) US$ 500 b) US$ 550 c) US$ 600 d) US$ 750 Write down your answer before turning to the next page

  17. Answer The correct answer is b) • The Premium Payment Bonus is only paid on amounts up to the Target Premium • US$3,000 - US$800 (Excess) = US$2,200 • The Premium Payment Bonus is paid at a rate of 25% of the lowest Premium • US$2,200 x 25% = US$ 550

  18. Investment options • The policy owner can choose from 2 investment funds depending on his attitude to risk • The Guaranteed Return Account • Vanguard Global Stock Index fund • The policy owner can spread his investment across two funds • The proportion of his premium invested in any one fund must be 0% or a multiple of 10% of the premium • 4 transfers in a year free of $25 processing fee • 2% spread apply • Transfers out of GRA limited to a maximum of 25% in any policy year

  19. Guaranteed Return Account • Guarantees that the crediting rate will not fall below 3% over the lifetime of the plan • Current year 4%

  20. Vanguard – Global Stock Index Fund INVESTMENT OBJECTIVE This index fund seeks investment results and risk characteristics that track those of the Morgan Stanley Capital International (MSCI) World Free Index—an unhedged, diversified, capitalisation-weighted benchmark consisting of common stocks of companies located in 23 developed countries across North America, Europe and the Asia/Pacific region. INVESTMENT STRATEGY The fund attempts to track its index by holding a portfolio of all, or a representative sample, of the securities in the MSCI World Free Index in roughly the same proportions as represented in the index itself. INVESTMENT RISK – Medium to High Risk • Similar to investing in the broader world market • Regarded lowest risk due to wide diversification in the aggressive strategy

  21. Charges • When an application is submitted and a policy is issued, ALICO incurs a series of costs • Commissions • Underwriting costs • Policy and Fund Administration costs • And the general cost of running the organisation • ALICO applies charges to the policy to recoup those costs • Some charges can be taken from the premium • Some charges can be taken from the funds

  22. Premium Load / Front end load • Per Unit Charges • Management Charges • Administrative Charges • Surrender/ Withdrawal Charges Charges

  23. Premium Load / Front end load • Once the premiums are received; Load is deducted • Once the deduction has been made the remaining amount is the ‘Net Premium’ is ‘allocated’ to the policy owner’s Account Value

  24. Per unit Charges • The Per Unit Charge is charged in years 2-15 • This charge will be deducted monthly based on initial annualized premium excluding rider and excess premium

  25. Management Charges • The Management Charge is used to pay the costs of managing the Investment Strategies • The annual Management Charge is 1% of the Client’s Account Value each year • The Management Charge is, however, reduced by a Fund Persistency Bonus. The annual management charge after the deduction of the Fund Persistency Bonus is

  26. Administration Charges • Admin charge is deducted monthly and is based on the account value.

  27. Surrender Charges • Surrender Charge applied on full surrenders is calculated as a percentage of Annual Target Premium • Surrender Charge is applied only if the policy owner surrenders his policy in the first 10 years • The charge is used to recoup the costs of setting up the policy and paying commissions

  28. Surrender Charges For Example • A policy owner is paying a Target Premium of US$2,000 and surrenders his policy in the 6th policy year. The policy has an Account Value of US$9,000 • The surrender charge in year 6 is 90% of the Target Premium • US$2,000 x 90% = US$1,800

  29. Surrender Charges • A policy owner is paying a Target Premium of US$2,000 and surrenders his policy in the 6th policy year. The policy has an Account Value of US$9,000 • The policy owner would therefore receive a Surrender Value of • US$9,000 - US$ 1,800 - $25 = US$7,175 • Partial Surrender amt - $5000 • P. SC = ($5000/$7200) X ($1800) = $1250 • Net Cash S Value = $5000 - $1250 - $25 = $3725

  30. Surrender Charges - Partial • Some policy owners may wish to keep their policy in force and surrender only a proportion of their Account Value • The Partial Surrender Charge is applied to the amount withdrawn from the Account Value • Calculations – Partial surrender/ Cash surrender value X Target Premium X % surrender charge • $25 processing fee with every partial withdrawal • Partial surrender charges reduces face amount but not less than $35,000 or if NCSV falls below $500 • Partial Surrenders are not permitted in the first policy year • From the second policy year the policy owner will be allowed 2 partial surrenders per year

  31. Account Value Mortality Charges • The cost of providing the policy owner’s life cover is deducted from his Account Value each month • The company will encash enough units from the Account Value to pay for the current month’s life cover Each month the cost of the one month’s life cover is deducted from the Account Value to pay for the life cover for the following month

  32. Death Benefits • Lifeline gives the policy owner; life cover – The amount payable on death under the plan is the greater of the Face Amount or the Account Value • The monthly deductions to provide for the costs of insurance buys an amount of cover that is equal to the difference between the Face Amount and the Account Value

  33. Face Amount - Option A Account Value Death Benefits The Face Amount is higher - the Face Amount would be payable on death

  34. Face Amount Option A Account Value Death Benefits When the Account Value is higher - the Account Value would be payable on death

  35. Death Benefits Life Insurance of US$80,000 for which COI is deducted monthly Face Amount US$95,000 US$15,000 • In this example the client had a Face Amount of US$95,000 and an Account Value of US$15,000 • On his death ALICO would pay the US$15,000 from his Account Value and Life insurance of US$80,000 to make up the Face Amount

  36. Death Benefits Face Amount US$95,000 Face Amount US$90,000 US$15,000 US$10,000 • If a policy owner makes a Partial Surrender from a policy the Account Value and the Face Amount will be reduced by the amount surrendered • Partial withdrawals will only be allowed until the Face Amount is at least US$35,000 after the partial withdrawal Partial Surrender of S$5,000

  37. Death Benefits For example, the maximum partial withdrawal from a policy with a Face amount of US$50,000 would be: US$50,000 - US$35,000 = US$15,000

  38. Question • Apolicy has a Face Amount of US$40,000 and an Account Value of US$20,000. • What is the maximum partial withdrawal that can be made from the policy a) US$ 5,000 b) US$10,000 c) US$15,000 d) US$20,000 Write down your answer before turning to the next page

  39. Answer The correct answer is a) • The Face Amount of the policy can not be reduced by partial withdrawals to less than US$35,000 • The maximum partial withdrawal is therefore • US$40,000 - US$35,000 = US$5,000

  40. Increasing Death Benefits • The Face Amount can be varied to meet a client’s changing circumstances • The Face Amount can be increased at any time after the 2nd policy anniversary • ALICO may require medical evidence before the increase is allowed

  41. Increased Face Amount Increased Premium Target Premium Increasing Death Benefits An increase in Face Amount will increase the Minimum Premium and Target Premium

  42. Decreasing Death Benefits • The Face Amount can be decreased at any time after the 5th policy anniversary • The reduction in the Face Amount will not decrease the premiums • But the monthly deductions from the Fund will reduce, and the Account Value will grow more quickly • The minimum allowable decrease in the Face Amount is US$10,000 • The Face Amount cannot be decreased below US$35,000

  43. Face Amount Reduced Face Amount Increasing Account Value Account Value Cost of Insurance Reduced Cost of Insurance Decreasing Death Benefits

  44. Pension/ Annuity Option Choice of using the lump sum account value at the chosen pension age to provide an annuity/pension guaranteed for the next 20 years or for life thereafter if the insured is alive Benefits Helps to plan for good retired life at the desired time in life and to financially secure the beneficiary with a regular income upto 20 years

  45. Policy Loans • Policy loan is available once the policy has been in force for 3 years • Maximum loan is 80% of the Cash Surrender Value • Net Cash Surrender Value is the Account Value minus any Surrender Charge in the first 10 years of the policy • No loan shall be made during the first 12 Policy months immediately following an increase in the Basic Face Amount • No more than one loan during a Policy Year be allowed

  46. Question • A client has been contributing to Lifeline for 12 years and has an Account Value of US$10,000 • What is the maximum loan that he could take from the policy a) US$7,500 b) US$8,000 c) US$9,000 d) US$10,000 Write down your answer before turning to the next page

  47. Answer The correct answer is b) • The maximum loan is 80% of the Net Surrender Value (the Account Value minus any Surrender Charge and existing loans). • As the policy is more than 10 years old there is no Surrender Penalty • The maximum loan is US$10,000 x 80% = US$8,000

  48. Policy Loans • Interest on the loan will be charged at a rate which will be determined by ALICO • The interest is currently 8% • Policy loans can only be taken against funds held in the Guaranteed Return Account • If the amount of the loan is higher than the value of the Guaranteed Return Account a transfer must be made into the Account from another Strategy

  49. Account Value Non Payment of Premiums • If a policy owner fails to pay his premiums, the monthly deductions to maintain the policy will be deducted from the Account Value Monthly Deductions

  50. Lapse Cash Value Non Payment of Premiums • If the Net Cash Surrender Value (Account Value Minus the Surrender Charge) is not large enough to support the deductions the policy owner will have a grace period of 31 days to pay the missed premium • If the premium is not paid during the Grace Period, plan will lapse Monthly Deductions