di ret sec_ seminar handouts

For producer information only. Not for use in sales situations.

DI Retirement Security

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Help Clients Achieve Their Retirement Dreams



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Agenda

• The effect of disability on retirement savings

• How the solution works

• Program guidelines

• Getting started selling DI Retirement Security

“DI Retirement Security is an easy sell and it covers theimportant need of continuing retirement contributions even

whenone can’t work. DI Retirement Security is a great fit and

economical solution in many situations.” – Bob G., Colorado



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Protecting Retirement Dreams

Workers rank their ability to earn a living and their retirement savings as their number 1 and 2 most valuable

financial resources1

More than 35% of workers with 401(k) or IRA planshave not thought about or don’t know what would happen to

their contributions if they were unable to earn an income2

Almost 3 in 10 workers entering the workforce today will become disabled before retirement3

1 Council for Disability Awareness 2010 Consumer Disability Awareness Survey2 Council for Disability Awareness 2007 Disability Survey3Social Security Administration, Fact Sheet, Jan. 31, 2007

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A disability impacts more than just a paycheck

DI Retirement Security helps clients continue saving for retirement if they become too sick or hurt to work.

If your clients could no longer work and earn an income due to a disability, they might not be able to:

• Contribute to their qualified retirement plans

• Receive an employer match on those contributions (if available)

• Contribute to Social Security



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Assumptions: $2,000/month contributions beginning at age 30, 5% rate of return and age 65 retirement. Consequences of disability at age 40, without DI Retirement Security.

The impact on retirement savings



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How it works

INSURED PRINCIPAL LIFE

IRREVOCABLE TRUST

Before a disability, DI insurance premiums are paid to Principal Life.

The trust invest the benefits (after a risk assessment is conducted)

At the end of the benefit period, trust

assets are distributed

Disability occurs, benefits are paid to an Irrevocable Trust



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About the investment options

• Six asset allocation models (based on risk tolerance) are available:

– Income Allocation, Income and Growth Allocation, Balanced Allocation, Growth and Income Allocation, Aggressive Growth Allocation

– Models managed by Forward Funds; made up of Class C funds

• Additional investment options are available through Banker’s Trust:

– Annuity

– Mutual Funds

View models: https://bankerstrust.com/btportfolios/new_home_html



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Program guidelines

• Available on the HH 750 individual disability income policy

• Minimum annual income to qualify: $76,000

• Maximum benefit amount:1

– $4,225/month individual pay2

– $5,425/month employer-pay2

• Minimum benefit amount: $1,000/month

• Investment management fees are assessed on the mutual funds in which the trust invests

• Available for single-life or multi-life cases

1– Maximum amount subject to change based on annual IRS defined contribution guidelines – as of 2012.2 – Includes a $50 monthly trust administration fee.



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Program guidelines

• Issue ages: 18-60 (all occupation classes)

• Elimination Periods: 180 or 365 days

• Benefit Periods: To Age 65 and To Age 67

• Your Occupation Periods: 2 year, 5 year, To Age 65, To Age 67

• Available Riders: Future Benefit Increase, Cost of Living Adjustment, and Mental/Nervous Substance Abuse Disorder Limitation (MNSA)1

• Available Discounts:2 Select Occupation – 10%, Multi-Life – 20% to 30%, Association – 10%, MNSA – 10%1

1– Required on all single-life Individual Disability Income insurance policies in FL, LA and NV; required on all cases in California; optional in all other states for multi-life cases. Not available in Vermont. Discount applies; 10% in all states except TX – 5%. 2 – Not all discounts can be stacked together.



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Underwriting guidelines

Stand-alone DI Retirement Security saleUnderwriting decision based on the TeleApp and application; no other medical underwriting requirements requested

Combination Disability Income and DI Retirement Security saleUnderwriting decision based on full medical and financial underwriting guidelines



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Underwriting guidelines

• DI Retirement Security is not available for:

– Government employees

– Individuals who are over-insured based on Principal Life’s current Issue and Participation guidelines.

• If there is existing individual disability insurance coverage with lifetime benefits, certain occupations are subject to a combined benefit maximum



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Three ways to access to trust assets

1. At the end of the benefit period (To Age 65 or To Age 67)

2. In the event of certain financial hardships1, such as:• Extraordinary medical or health care expenses not

covered by insurance• Payment of post-secondary education and related

fees• Inability to make payments on principal residence

3. If the client has not been eligible to receive benefits for 12 consecutive months

1Upon Banker’s Trust approval



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Trust tax information

• On an annual basis, clients receive a 1099 form from Banker’s Trust Company.

• The client also receives quarterly statements of principal and income transactions within the trust.

• At age 65 or 67, the trust begins distributing accumulated assets to the client per the trust agreement. Clients do not need to pay additional taxes on distributed funds that have already been taxed.



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Forms needed at application time

• State-specific individual disability insurance application

• DI Retirement Security supplemental form

• Signed Trust Agreement

• Financial and underwriting requirements, as requested by Underwriting



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Getting started — target market

• Earn at least $76,000 annually

• Already have (or planning to purchase) group long-term disability or individual disability income (DI) insurance

• Currently saving for retirement (no documentation required)

• Majority of policies sold to 3A and above occupations

• Often sold to corporate executives, accountants/CPAs, attorneys, business owners, engineers and medical professionals



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Prospecting tips

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Sell DI insurance and DI Retirement Security togetherPresent the solutions together to showcase the need and affordability—the client only undergoes underwriting once.

Recently sold a fully underwritten Principal Life DI policy without a rating?

If there’s been no change in insurability, simply submit a DI Retirement Security Supplemental Application form and signed Trust Agreement

to apply for DI Retirement Security.

*Must be within 90 days of TeleApp interview being taken and DI application signed. Must include completed blood testing and urinalysis; if the case was written with exclusions, those exclusions will also be included in a DI Retirement Security policy.



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Prospecting tips

Receives DI Retirement Security

Benefits

DI Retirement Security Benefits Paid to Trust

Disability occurs

To age 65 or 67 Benefit Period

Trust assets diminish

Receives Individual Disability Income

Benefits

Sell DI insurance and DI Retirement Security together

A solution for ongoing benefits



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Prospecting tips

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Enhance employee benefit packagesAlong with a 401(k) plan, employers can offer DI Retirement Security to provide a comprehensive retirement solution. It’s affordable too, especially when the 20% Multi-Life discount based on unisex rates is applied (available when three or more employees are covered).

3Approach clients who are maxing out their 401(k)sThese clients most likely highly value their ability to save for retirement and make excellent prospects.



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Prospecting tips

4Talk to clients who have met Individual DI issue limitsThese clients may be looking for options to obtain additional coverage-and understand the need/importance of coverage.

5Follow up during investment reviewsAs you help clients review their retirement goals, discuss the importance of disability protection.



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Case Study

Overview• Client had just established a $12 million

employer-sponsored 401(k) plan

Sales approach• Emphasized the importance of being able to

save for retirement even in the event of a disability

• Recommended DI Retirement Security

Solution• Voluntary DI Retirement Security program

Compensation1

• $7,510 annual premiums

• $3,755 FYCs• $1,502 renewals

1Series 700 compensation – 50% FYCs, no annual coverage increases, 100% persistency, renewals based on 5 year projection.

• Offered on a guaranteed standard issue basis—up to 30% in discounts



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Sample monthly rates

Age Male FemaleMulti-Life Discount1

30 $42.12 $65.75 $37.09

35 $47.57 $71.07 $41.83

40 $61.86 $86.52 $53.44

45 $75.13 $99.63 $64.02

Assumptions: Colorado resident, $2,000/month benefit, 180-day elimination period, benefits to age 65, 4A occupation class.

1 –Multi-Life discount based on unisex rates; available when three or more individuals with a common employer purchase Principal Life Individual Disability Insurance coverage



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Key Marketing MaterialsFOR YOU

• Producer Kit (KIT1992)

• Case studies flier (JJ1175)

• FAQ (DI2111)

FOR CLIENTS

• Keep Your Retirement on Course Mailer (JJ1171)

• Pre-approach letter (DI2115)

• Protect Your Income and Retirement Dreams flier (JJ1210)

• Video and emails

Find these tools and more at principal.com/financialprofessional



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Questions?

FOR MORE INFORMATION

Contact your regional Disability Wholesaling team or the National Sales Desk at 800-654-4278



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While this communication may be used to promote or market a transaction or an idea that is discussed in the publication, it is intended to provide general information about the subject matter

covered and is provided with the understanding that none of the member companies of The Principal Financial Group® are not rendering legal, accounting, or tax advice. It is not a marketed opinion and may not be used to avoid penalties under the Internal Revenue Code. You should

consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, or accounting obligations and requirements.

DI Retirement Security is issued as a non-cancelable, guaranteed renewable, individual disability income insurance policy. It is not a pension or retirement program or a substitute for such a

program. DI Retirement Security is not available for government employees, individuals with Group LTD coverage that includes a “retirement supplement,” or anyone who is over insured based on Principal Life’s current Issue and Participation guidelines. It may not be available or the benefit

amount may be reduced for certain occupations if there is existing DI coverage with lifetime benefits. Additional underwriting guidelines may apply.

Disability income insurance has certain limitations and exclusions. For costs and complete details of coverage, contact your Principal Life financial representative.

This is a general summary only; additional guidelines and state variations apply. Principal Life Insurance Company is a member of the Principal Financial Group®, Des Moines, IA, 50392.

t110901046s | DI 2167-1

di ret sec_ seminar handouts

Documents

retirement savings

qualified retirement

sales situations

producer information

disability survey

effect of disability

distributed disability

disability impacts