Ohio National recently launched an innovative indexed whole life policy called Prestige Indexed 10 Pay. Karl Kreunen, vice president, life product marketing, explains what makes it stand out in the industry.
INN: What is Prestige Indexed 10 Pay?
KK: Prestige Indexed 10 Pay is a marriage between a traditional whole life policy and an indexed universal life policy. It’s the only 10-Pay contract of its type on the market.
INN: What needs does it fill that were unmet before?
KK: Like any whole life policy, the Prestige Indexed 10 Pay provides a guaranteed death benefit, a guaranteed premium rate and a guaranteed cash value. But unlike other whole life policies, the cash account is not tied to a dividend scale. Instead, like an IUL, the non-guaranteed growth in cash value is linked to an equity index. We believe that this can provide more upside growth potential than other whole life policies, which is especially valuable in this low-interest-rate environment.
INN: So the policy provides the protection of a whole life contract and the growth potential of an index-based cash account. Who is the target market?
KK: For those who have a need for life insurance, there are several. First, it’s for people who are approaching retirement and looking to take some risk out of their portfolio. In lieu of more aggressive equity accounts, an indexed-linked product — one with a floor and a cap — offers an opportunity to protect assets without giving up all of the growth potential.
Second, it’s for anybody who could use tax-deferred cash for any purpose down the road — for instance, to help fund a child or grandchild’s college education. Or the cash value could be used to supplement retirement income when equity assets are in a down year, allowing those assets more time to regrow.
It’s also ideal for anyone who doesn’t want to pay the premium upfront or for too long. With just 10 years of payments at a fixed rate that cannot change, it’s an attractive option for anyone who wants a guarantee on how long the payment will last.
INN: Is there a choice for how premiums are invested or allocated?
KK: Yes. Clients can select among four different indexed accounts and one fixed account. Three of the indexed accounts are capped. They are the S&P 500, the Russell 2000 and the EURO STOXX 50, all capped. The fourth indexed option is an uncapped S&P 500 account that comes with an index spread or “hurdle” rate, meaning in any year that the account surpasses the hurdle, the policyholder keeps everything.
For all of these options, there is a floor. So even if the index loses value, the policy’s value will never post negative index-linked returns. There is no risk of losing cash value because the market went down significantly, but keep in mind that the cash value can still be reduced through policy charges.
The fixed account option earns a steadier, more predictable interest rate that can’t go below the percentage specified in the policy contract.
INN: Is there flexibility in how clients can access the cash value?
KK: Yes. You can take a simple withdrawal, which is tax-free up to the amount of the premiums paid into the policy, or you can take a loan. We offer two kinds of loans. The standard loan has a 1 percent net cost on the basis in the first 10 years of the policy and 0 percent after that.
Alternatively, our indexed loan allows the policy owner to leave the loan amount in the index, with a variable interest rate charged on the loan amount.
INN: What about riders and other options?
KK: There are several. Perhaps the most important one is the Accelerated Benefit Rider. It can accelerate part of the death benefit to get cash out when a policyholder needs help with a chronic illness or terminal illness. There is no charge for this rider, just a one-time fee if and when it’s exercised.
We also offer a Children’s Term Rider, so you can easily cover any children in your household; a Guaranteed Purchase option that allows you to buy additional coverage at a fixed price; and a Single Premium Rider for transfers from another life insurance policy via a tax-free 1035 exchange.
INN: That’s great. But what else should readers know?
KK: This is a new evolution in the insurance industry that’s going to be very attractive for clients who want both the guarantees of whole life and higher growth potential in their cash account.
INN: Finally, for those who aren’t familiar with Ohio National, what might make it the right choice?
KK: For more than a century, we’ve consistently focused on low-cost, high-quality products that are designed with our customers in mind. The Prestige Indexed 10 Pay is an exciting and truly innovative addition to our product lineup.
To learn more about how the brand-new Prestige Indexed 10 Pay can benefit your clients, CLICK HERE.