Soon after leaving my staff job in the communications department of an insurance company, I wrote a consumer brochure and an agent recruiting booklet for The Investment Life Insurance Company of America and their annuity products. The company was based in Winston-Salem, North Carolina.
Innovative Annuities from The Investment Life Insurance Company of America
How Annuities Work
Often described as “life insurance in reverse,” annuities are designed to provide a lifetime income in exchange for premiums paid.
With life insurance, the policy owner pays premiums to the insurance companies and the beneficiaries collect after the insured person dies.
With an annuity, the policy owner pays premiums in a lump sum or over a period of time and, at some future date, receives payment in a lump sum or in installments.
Choosing an Annuity Contract
Deciding whether an annuity contract offers the best means by which to meet a particular financial goal depends on individual needs and resources, the likelihood that the annuitant or dependents will outlive their income, and the tax situation of the investor.
If an annuitant is interested primarily in a savings vehicle, or if the annuitant may want to cash in the policy before the payout period begins the cash surrender terms and value are most important. If the annuitant wants to create a pension, the key factors to consider are the total accumulation and the monthly annuity payments.
If safety is the primary concern, annuitants should consider the financial status of the insurance company. Each year, the A.M. Best Company publishes ratings of hundreds of insurers, reflecting Best’s current opinion of the insurers’ financial position and operating performance. Investment Life Insurance Company of America has earned Best’s highest rating, A+ (Superior). Only 18 percent of companies nationwide are currently rated A+.
How Annuity Contracts Benefit the Investor
Tax-deferred accumulation. Because income on an annuity is not taxable until it is withdrawn, investors can realize a substantially higher accumulation than they would with other types of investments.
Compound interest. As money accumulates tax-deferred, the annuity contract value grows quickly and substantially because interest applies to both principal and accumulated interest.
Guaranteed safety. Annuity contract owners are free from worry about loss of principal.
Payments that last a lifetime. Annuitants can secure guaranteed monthly payments for life at retirement or maturity regardless of how long they live, or money can be left on deposit to accumulate interest tax-deferred, usually to age 90. Annuitants are free from worry about outliving their income.
Tax-favored payout. Because annuity payments represent a combination of interest and principal, only the interest portion is taxable as income.
Competitive interest rates. Investors are assured of a competitive return on principal, compared to other investments, both now and in the future.
Predictability. Annuity contract owners are free from fear of “Black Mondays” since annuities are not subject to stock market fluctuations.
No sales charge. Since there is no load or initial fee, interest applies immediately to the total premium.
Flexibility. A variety of payout options makes annuity contracts suitable for a broad range of purposes.
Withdrawal privileges. The annuitant has ready access to the annuity contract value, subject to applicable charges and fees.
No probate. Since proceeds payable to beneficiaries when the insured dies are not subject to probate, beneficiaries receive fast payment, avoid paying probate fees on annuity proceeds and preserve privacy.
20-day right to examine the contract. Purchasers of annuity contracts may return them to Investment Life of America or its representatives for a full refund within 20 days after receiving it, giving time to be sure the annuity they have chosen is right for them.
Tax Treatment of Annuities
As a general rule, tax on annuity interest income is deferred until withdrawal. After payments begin, annuitants pay income tax on the interest portion of the payment. A fixed percentage of the payment, based on the “exclusion ratio,” represents a return of principal and is not taxable as income.
When policy proceeds are paid in a lump sum at maturity, the excess of the proceeds received over the cost of the annuity is taxed as ordinary income.
Surrenders, Loans and Partial Distributions. If an annuitant surrenders an annuity contract for cash, any gain is taxable. A 10 percent penalty applies to early withdrawals unless the owner has reached age 59 1/2, died or become disabled. However, the early withdrawal penalty does not apply if the payments are part of a series of substantially equal periodic payments over the life of the owner or the lives of the owner and a beneficiary.
Withdrawals and Surrenders
Because annuities are designed to meet long-term financial goals, companies discourage annuitants from early withdrawals by charging surrender and withdrawal fees. However, purchasers of single-premium deferred annuities from Investment Life of America may withdraw up to ten percent of the current contract value per year without paying a surrender charge.
For partial withdrawals from most Investment Life of America annuities, the amount must be at least $500 and the remaining contract value must be at least $2,500. A $25 withdrawal fee applies toward administrative costs.
Surrender charges are stated as a percent of the amount of the contract value withdrawn in excess of the 10% free withdrawal. The percentage decreases over a specified time period to zero. In some states, a premium tax may be applied to money withdrawn from an annuity contract.
How Tax-Deferral Enhances Accumulation
If an anuitant purchases a $10,000 single-premium annuity and makes no withdrawals over the life of the contract, he or she can realize substantially better returns from a tax-deferred annuity than would be possible with an investment that is not tax-deferred.
The Payout Phase
When the annuitant is ready for payments to begin, Investment Life of America will offer the payment option chosen at the most favorable rate at which the company is then issuing contracts providing the chosen option. In no case will the rate be less than the guaranteed rate stated in the Investment Life of America contract.
Payments of a fixed amount. Equal payments in the amount chosen will be made periodically until the contract value is exhausted. The term over which the payments are made may not end before the 10th contract anniversary. Interest will be credited for each contract year at a rate of at least the minimum guaranteed interest rate shown on the schedule page for that year.
Payments for a fixed period. Equal payments will be made periodically for the term chosen, regardless of whether the annuitant lives or dies. As with the fixed amount option, interest will be credited for each contract year at a rate of at least the minimum guaranteed interest rate shown on the schedule page for that year.
Life annuity. Payments will be made as long as the annuitant lives.
Life annuity with payments guaranteed for 10 or 20 years. Payments will be made for at least 10 or 20 years, depending on the guaranteed period chosen, and as long afterwards as the annuitant lives.
Life annuity with guaranteed return of contract value. As with the life annuity, payments will be made as long as the annuitant lives, with an additional guarantee that, should the annuitant die before receiving the full value of the contract, payments to a beneficiary will continue until the sum of the annuity payments equals the contract value at the time the payout period began.
Joint and survivor life annuity. Payments will be made during the lifetimes of the annuitant and a designated second person—usually a husband and wife—for as long as either of the two lives. Upon the death of one of the annuitants, the surviving annuitant will continue to receive monthly payments for life. Payments may continue at the same rate as when both annuitants were living, or they may be reduced by one-third, depending on the option chosen.
Joint and survivor life annuity with 10-year guarantee. Under this payout option, if both annuitants covered by a joint and survivor life annuity die before having received payments for at least ten years, a beneficiary will receive payments for the remainder of the ten-year period.
Comparing Annuity Contracts to Other Investments
Because of their safety, favorable tax treatment, competitive return and other features, annuity contracts can be a better choice than other investments, particularly when used to meet a long-term financial goal.
The Investment Life Insurance Company of America
- Founded as Investment Life & Trust Company in 1956
- Rated A+ (Superior) by A.M. Best Company
- Innovative products backed by stable, high-quality investments
- Fast, friendly, competent service
This brochure represents The Investment Life Insurance Company of America’s interpretation of current tax law and regulations applicable to annuity contracts. Neither Investment Life of America nor its representatives can give legal or tax advice. To determine annuity taxation as it applies in specific situations, please consult an attorney, accountant or other qualified tax advisor. This brochure is for agent use only.
Agent Recruiting Booklet
The Insurance Innovators
The Investment Life Insurance Company of America
At The Investment Life Insurance Company of America, we combine innovative management with sound investment practices to offer our representatives and their clients the best possible balance of security and value. We are strongly committed to conserving our company’s financial strength and stability. At the same time, we are equally determined to apply fresh ideas and advanced technology to achieve maximum competitiveness, effectiveness and efficiency throughout our organization.
An Innovative Company
Investment Life of America was established in South Carolina in 1956 as The Investment Life & Trust Company.
Our company earned its A+ (Superior) rating from A.M. Best Company after only five years of operation and has maintained it ever since. The A+ rating is the highest Best gives and is currently held by fewer than one in five life insurance companies.
In late 1986, a group of investors acquired Investment Life of America and began developing a plan for rapidly accelerating growth and expansion throughout the continental United States. In late 1989, the company acquired a North Carolina-based life company, expanding its state licensing authority from six to 35 states.
With a new name—The Investment Life Insurance Company of America—and a new home office in Winston-Salem, North Carolina, our company is prepared to assume a leadership role among the life industry’s finest companies.
Our formula for success is simple:
- Maintain our Best’s A+ rating as we experience accelerating growth, using co-insurance to conserve surplus.
- Preserve a high-quality, stable investment environment by maintaining an average portfolio quality of “AAA.”
- Recruit outstanding, experienced field representatives and provide them with competitive commissions.
- Reward representatives who write high-quality business with innovative compensation plans designed to allow them to participate in the company’s success.
- Offer sound, competitive life and annuity products.
- Provide representatives with the sales tools and training they need to be increasingly successful.
- Continue to earn our representatives’ business by providing outstanding, responsive service.
- Use mini- and micro-computers to get new products on the street quickly.
- Through experienced independent service agencies, adopt a variable-cost approach to underwriting, policy administration and other home office activities.
An Innovative Investment Philosophy
At Investment Life of America, we believe the 1980s will long be remembered in the financial services industry as the decade of excess—excess debt and excess risk recklessly incurred in the pursuit of unreasonably high yields. The results of these imprudent investment strategies are already evidenced by problems in the savings and loan industry, as well as the bankruptcies of several insurance holding companies.
We believe the 1990s will be a time of renewed interest among aging baby boomers in savings and retirement income, with safety of principal a top priority. We will capture our share of this market segment’s investment capital by offering high-quality products and backing them with sound, stable investments.
Under the direction of our three-member Investment Committee, Investment Life of America maintains a credit-worthy, liquid, diversified fixed-income portfolio. By emphasizing United States Treasury and Government Agency investments and “AAA” rated corporate bonds, and by minimizing private placements and lower-rated or unrated “junk” bonds, we provide a fair and reasonable long-term return to our policy owners while preserving safety of principal at all times.
In designing the Investment Life of America product portfolio, we are targeting a large, relatively affluent demographic group whose members have reached their maximum earnings years while having completed their maximum spending years. For this group, the 1990s will be a decade of savings.
With their attractive savings elements, tax-deferred incentives, wealth accumulation and estate conservation, Investment Life of America’s products will be particularly appealing to this market. Our complete product portfolio includes:
- Universal Life
- Last to Die
- Single Premium Deferred Annuity
- Single Premium Immediate Annuity
- Flexible Premium Deferred Annuity
As we develop additional products, we will maximize our flexibility and minimize development time by using mini- and micro-computers. Only after a product has proved itself will it be transferred to a mainframe, allowing Investment Life of America representatives to be first in the marketplace with the best in competitive new products.
At Investment Life of America, our goal is to position ourselves among the top 25 percent of companies in terms of representatives’ compensation and, in addition to paying generous commissions, to reward persistency with innovative compensation plans designed to allow them to participate in the company’s success.
We also offer our representatives:
- Annualization of commissions.
- Rapid delivery of commissions on annuities.
- Motivation and a spirit of competition through sales contests.
- Recognition of outstanding performance through awards.
- Conventions at exciting destinations.
- A field force hierarchy that rewards outstanding sales management, as well as personal production.
Nowhere is Investment Life of America’s commitment to our representatives more apparent than in our service to the field. While many of our industry counterparts are becoming increasingly indifferent to their representatives, we recognize our field force as the lifeblood of our organization, and we work with them accordingly.
Our staff is trained to provide fast, friendly, competent service and to go the extra mile in helping our representatives put business on the books and keep it there. We have pledged to earn our representatives’ continuing loyalty by:
- Providing high-quality training materials and sales tools, including advanced product illustration software.
- Accepting applications, issuing selected policies, and providing reports instantly using facsimile machines.
- Providing a toll-free number for agents to use when calling the home office.
- Bringing the home office to the field through our Better Way Program. The Better Way involves periodically having our medical director and underwriters visit Investment Life of America agencies to evaluate applicants on-location.
- Recognizing our best producers of high-quality business with higher medical limits and greater decision-making responsibility in the field.
An Innovative Field Force
The Investment Life Insurance Company of America is now recruiting field representatives and managing general agents throughout the continental United States.
If you are an experienced producer of high-quality business, or an outstanding agency manager, we invite you to consider the exceptional opportunities offered by Investment Life of America, The Insurance Innovators—
- An innovative company
- An innovative investment philosophy
- Innovative products
- Innovative compensation
- Innovative service
For More Information
Contact your Investment Life of America agency vice president or Edward R. Shugart, III, President. We look forward to heaving from you soon.