Allianz Life Insurance Company of North America

For financial professional use only – not for public distribution.

An introduction to small-business ownersKey Person Life Insurance

BUSINESS CONTINUATION STRATEGIES using life insurance

PPT-261 1/2014

DISCLOSURE OPTIONS (Copy + Paste into disclosure text box)Internal: For internal use only – not for public distribution.Client facing: Delete text.Fixed and Life products: For financial professional use only – not for public distribution.Variable products: For broker dealer use only – not for public distribution.

1. Life insurance death benefit protection2. Why business continuation planning?3. Key person life insurance

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Agenda

This presentation is designed to provide general information on the subjects covered. Pursuant to IRS Circular 230, it is not, however, intended to provide specific legal or tax advice and cannot be used to avoid tax penalties or to promote, market, or recommend any tax plan or arrangement. Please note that Allianz Life Insurance Company of North America, its affiliated companies, and their representatives and employees do not give legal or tax advice. Encourage your clients to consult their tax advisor or attorney.

Before we begin:

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Why business continuation planning?

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Attributed to Andrew Carnegie

“Take away all my factories and my equipment.

Take away my wealth.

But leave me with my key people and in a short time I’ll have it all back again.” Andrew Carnegie

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DISCLOSURE OPTIONS (Copy + Paste into disclosure text box)Internal: For internal use only – not for public distribution.Client facing: Delete text.Fixed and Life products: For financial professional use only – not for public distribution.Variable products: For broker dealer use only – not for public distribution.

Why business continuation planning?

Try answering the following questions:

What will happen to your business when you retire?Do you have a business successor lined up and ready to take over?Will your entire business or a share of your business need to be sold?Do you already have buyer and what is the price?What if you died today?What would be the consequences to your business partners, employees, customers, debtors, creditors, and most importantly, your family and beneficiaries?

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The LOSS OF A VITAL EMPLOYEE

can have a much more

CATASTROPHIC IMPACT on the

survival of a small company than a

large one.1

1”Small World, Trends in the U.S. Small Business Market,” LIMRA, 2013.

DISCLOSURE OPTIONS (Copy + Paste into disclosure text box)Internal: For internal use only – not for public distribution.Client facing: Delete text.Fixed and Life products: For financial professional use only – not for public distribution.Variable products: For broker dealer use only – not for public distribution.

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Potential pitfalls survivors may face after the death of a business owner

DISCLOSURE OPTIONS (Copy + Paste into disclosure text box)Internal: For internal use only – not for public distribution.Client facing: Delete text.Fixed and Life products: For financial professional use only – not for public distribution.Variable products: For broker dealer use only – not for public distribution.

How can life insurance fit into business succession planning?

A death benefit provided by life insurance can be a vital part of your business succession planning and employee retention.

Fixed indexed universal life (FIUL) insurance can also help while providing potential tax advantages.

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Some common uses of life insurance in business succession planning

DISCLOSURE OPTIONS (Copy + Paste into disclosure text box)Internal: For internal use only – not for public distribution.Client facing: Delete text.Fixed and Life products: For financial professional use only – not for public distribution.Variable products: For broker dealer use only – not for public distribution.

The death benefit is the main reason for purchasing life insurance

It passes income-tax-free to the beneficiaries and can be used for: Income replacement for primary

wage earners Business succession Mortgage and other debts Estate tax coverage

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Source: 1“Small World: Trends in the U.S. Small Business Market, LIMRA, 2013.

Small businesses REQUIRE MULTIPLE

TYPES OF FINANCIAL PROTECTION including:

Personal coverage for the business owner

Financial safeguards for the business

Insurance and retirement benefits for

the employees1

For financial professional use only – not for use with the public.

HOW FIUL WORKS

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Policy loans and withdrawals will reduce the available cash value and death benefit and may cause the policy to lapse, or affect guarantees against lapse. Additional premium payments may be required to keep the policy in force. In the event of a lapse, outstanding policy loans in excess of unrecovered cost basis will be subject to ordinary income tax. Tax laws are subject to change and your clients should consult a tax professional.

POLICYHOLDER

Pays POLICYPREMIUMS

POLICY FEES & CHARGES Fees & charges used to fund

DEATH BENEFIT TO BENEFICIARIESAND OTHER VARIOUS EXPENSES

MAXIMUM PREMIUM

Minimum premium

Any available

CASH VALUE

Has the potential to

GROW

as more premium is p

aid

Cash value may be accessed via POLICY LOANS

AND WITHDRAWALS1

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Key person life insurance

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DISCLOSURE OPTIONS (Copy + Paste into disclosure text box)Internal: For internal use only – not for public distribution.Client facing: Delete text.Fixed and Life products: For financial professional use only – not for public distribution.Variable products: For broker dealer use only – not for public distribution.

Key person life insurance

Can be a straight forward way to help ensure business continuityA death benefit can help protect a small-business owner from the loss of a key employeeDisability of a key employee - Fixed index universal life insurance (FIUL) cash value accumulation potential could be accessed through policy loans and withdrawals¹

For EMPLOYER OWNED LIFE INSURANCE (EOLI), the

OWNER AND INSURED MUST SIGN aNOTICE AND

CONSENT FORM. Work with your attorney to

ensure you have all required documents.

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¹Policy loans and withdrawals will reduce available cash values and death benefits, and may cause the policy to lapse or affect any guarantees against lapse. Additional premium payments may be required to keep the policy in force. In the event of a lapse, outstanding policy loans in excess of unrecovered cost basis will be subject to ordinary income tax. Tax laws are subject to change and you should consult your tax professional.Keep in mind most life insurance policies require health and in some cases, financial underwriting.

DISCLOSURE OPTIONS (Copy + Paste into disclosure text box)Internal: For internal use only – not for public distribution.Client facing: Delete text.Fixed and Life products: For financial professional use only – not for public distribution.Variable products: For broker dealer use only – not for public distribution.

How does key person life insurance work?

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This hypothetical example is provided for illustrative purposes only. ¹Policy loans and withdrawals will reduce available cash values and death benefits, and may cause the policy to lapse or affect any guarantees against lapse. Additional premium payments may be required to keep the policy in force. In the event of a lapse, outstanding policy loans in excess of unrecovered cost basis will be subject to ordinary income tax. Tax laws are subject to change and you should consult your tax professional.

PaysDEATH

BENEFIT ORACCESS TO

ANY AVAILABLE CASH VALUE¹

Key person = Insured

BUSINESS =POLICY OWNER & BENEFICIARY

INSURANCE COMPANY

DISCLOSURE OPTIONS (Copy + Paste into disclosure text box)Internal: For internal use only – not for public distribution.Client facing: Delete text.Fixed and Life products: For financial professional use only – not for public distribution.Variable products: For broker dealer use only – not for public distribution.

Key person life insuranceWhat happens if a key employee leaves or retires? Business can continue to own the policy, pay the insurance

premium, and receive the death benefit upon the death of your former key employee.

If your key employee is retiring, you can offer the policy as a bonus, at its present value. Retiring employee would become the owner of the policy. Such compensation would be considered taxable income for the retiring

employee for income tax purposes. Business can surrender the policy to the life insurance company

and obtain the available cash surrender value.¹

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¹Policy loans and withdrawals will reduce available cash values and death benefits, and may cause the policy to lapse or affect any guarantees against lapse. Additional premium payments may be required to keep the policy in force. In the event of a lapse, outstanding policy loans in excess of unrecovered cost basis will be subject to ordinary income tax. Tax laws are subject to change and you should consult your tax professional.

Summary 1. Life insurance death benefit protection2. Why business continuation planning?3. Key person life insurance4. Next step

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Work with your team of professionals to see if fixed index universal life insurance can help with your business-planning strategies.

The next step

DISCLOSURE OPTIONS (Copy + Paste into disclosure text box)Internal: For internal use only – not for public distribution.Client facing: Delete text.Fixed and Life products: For financial professional use only – not for public distribution.Variable products: For broker dealer use only – not for public distribution.

Guarantees are backed by the financial strength and claims-paying ability of Allianz Life Insurance Company of North America.

The Employee Retirement Income Security Act (ERISA) may apply. Be sure to consult your tax advisor or attorney regarding your own situation.

Products are issued by Allianz Life Insurance Company of North America, 5701 Golden Hills Drive, Minneapolis, MN 55416-1297. 800.950.1962 www.allianzlife.comProduct and feature availability may vary by state.

DisclosuresAllianz Life Insurance Company of North America

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DISCLOSURE OPTIONS (Copy + Paste into disclosure text box)Internal: For internal use only – not for public distribution.Client facing: Delete text.Fixed and Life products: For financial professional use only – not for public distribution.Variable products: For broker dealer use only – not for public distribution.

OUR MISSION:Allianz Life Insurance Company of North America is the trusted authority in insured retirement solutions for consumers working with a financial professional.

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