Business 2 Benefits Key person life insurance Allianz

Business 2 Benefits: Key person life insurance Allianz Life Insurance Company of North America PPT-423 (2902548. 1)

Agenda 01 02 03 What is FIUL? What is key person life insurance? How it works

Fixed Index Universal Life Insurance Generally income-tax-free death benefit protection • • • 1 Policy Income replacement Final expenses Mortgage and other debt Supplemental college funding Other financial emergencies and needs Living advantages • Potential to build accumulation value • Tax advantages • Access to any available cash value 1 through 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. Withdrawals in excess of premiums paid will be subject to ordinary income tax. 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. If a policy is a Modified Endowment Contract (MEC), policy loans and withdrawals will be taxable as ordinary income to the extent there are earnings in the policy. If any of these features are exercised prior to age 59½ on a MEC, a 10% federal additional tax may be imposed. Tax laws are subject to change and you should consult a tax professional. 3

FIUL offers a combination of THREE TAX ADVANTAGES 1 INCOME-TAX-FREE Death benefit¹ 2 TAX-DEFERRED Cash value accumulation potential 3 INCOME-TAX-FREE Loans and withdrawals 2 1 The death benefit is generally income-tax-free to beneficiaries. 2 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. Withdrawals in excess of premiums paid will be subject to ordinary income tax. 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. If a policy is a modified endowment contract (MEC), policy loans and withdrawals will be taxable as ordinary income to the extent there are earnings in the policy. If any of these features are exercised prior to age 59½ on a MEC, a 10% federal additional tax may be imposed. Tax laws are subject to change and you should consult a tax professional.

What is key person life insurance? A key person life insurance policy covers this essential employee, for the primary purpose of protecting the value and ongoing operations of your business.

Who is a key person? An employee whose ABSENCE would have an ADVERSE ECONOMIC effect on your business.

How key person life insurance works 1 7 • Business purchases and owns life policy¹ • Key person is the insured • Business is named as beneficiary ¹An employer-owned life insurance policy is subject to the requirements of Internal Revenue Code 101(j) in order to obtain an income-tax-free death benefit. In general, those rules require that before the policy is issued, the employer must provide the insured with a written notice of the life insurance, obtain a written consent from the insured, and provide the IRS with ongoing annual reporting regarding policy ownership. Consult with an attorney for application of those rules to a specific situation.

How key person life insurance works 2 Business pays policy premium 8

How key person life insurance works 3 Access to available cash value 9

How key person life insurance works 4 10 • Key employee’s death • Death benefit to offset incurred costs

Benefits to the company Protection if a key employee passes away Potential to build accumulation value Can continue policy even if employee leaves company 11 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. Withdrawals in excess of premiums paid will be subject to ordinary income tax. 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. If a policy is a modified endowment contract (MEC), policy loans and withdrawals will be taxable as ordinary income to the extent there are earnings in the policy. If any of these features are exercised prior to age 59½ on a MEC, a 10% federal additional tax may be imposed. Tax laws are subject to change and you should consult a tax professional.

How much coverage do I need? Replacement value = salary for the new employee – key employee’s compensation x number of years for new hire to be trained + applicable training costs 12 = loss of annual earnings x number of years until retirement Discount earning stream to present value Business life value

CONSIDERATIONS • • Life insurance policies require health and financial underwriting Premium not tax-deductible Generally, death benefit income-tax-free Subject to Internal Revenue Code 101(j): As the employer, you must provide the insured with a written notice of the life insurance and obtain written consent from the key employee before the policy is issued. You should consult your tax advisor and/or attorney to discuss your specific situation. 13

WHAT CLIENTS DO QUESTIONS? YOU HAVE THAT COULD BENEFIT FROM THIS STRATEGY? THANK YOU. QUESTIONS? 14

This content is for general educational purposes only. It is not intended to provide fiduciary, tax, or legal advice and cannot be used to avoid tax penalties; nor is it intended to market, promote, or recommend any tax plan or arrangement. Allianz Life Insurance Company of North America, its affiliates, and their employees and representatives do not give legal or tax advice. Customers are encouraged to consult with their own legal, tax, and financial professionals for specific advice or product recommendations. Product and feature availability may vary by state and broker/dealer. Guarantees are backed solely by the financial strength and claims-paying ability of Allianz Life Insurance Company of North America. www. allianzlife. com Products are issued by Allianz Life Insurance Company of North America, 5701 Golden Hills Drive, Minneapolis, MN 55416 -1297. 800. 950. 1962. 15