Sales Idea: Legacy Planning With FIAs

Recent research shows that nearly 30% of annuity buyers rank Death Benefits or Legacy among their top three reasons for buying an annuity.¹ For many retirees, the idea of leaving behind something meaningful to their spouse can be one of life’s greatest joys. It offers peace, pride and a sense of purpose. This is a valuable feature for couples looking to ensure that their financial plan continues seamlessly.

Legacy planning was top of mind in creating the Legacy Max enhanced death benefit rider. We designed it to guarantee growth in declining markets and to show performance-based growth in positive markets. Enhanced Choice Index Plus with Legacy Max Enhanced Death Benefit Rider may guarantee a spousal beneficiary 6% annualized ROI at a minimum — while investing conservatively with no downside risk. If interest credited to the annuity happens to be greater than 3% in a contract year, we’ll double it and use that as the growth percentage of the death benefit. 

Let’s review a fixed index annuity case study. 

Meet Henry, male age 72. He wants to invest conservatively while maximizing the amount he leaves to his wife.

Using non-qualified funds, he purchases a $300,000 Enhanced Choice Index Plus 5 with Legacy Max Enhanced Death Benefit Rider added to the policy.

Henry conservatively allocates 85% of funds into the fixed account and 15% into the S&P 500 Daily Risk Control 5% ER Index with a 165% participation rate. ² This index offers 5% managed volatility with real return history going back to 2009. One main selling point was that the index participation rate is guaranteed for the entire 5 years.

Henry passes away after six years. He named his wife as the spousal beneficiary. She chooses the option to continue the contract and use her $486,101 death benefit base as her new account value.³ The Legacy Max rider discontinues, so she’s no longer paying the rider fee. The annualized ROI realized by the spousal beneficiary under this example is 8.38% over six years while investing conservatively with no downside risk.⁴ The investment gain is $186,101. 

For comparison, the minimum guaranteed value of the death benefit base under this same case study is $425,556, which is an annualized ROI realized by the spousal beneficiary of 6%. That’s a $60,545 difference!

Offering the ECI Plus with Legacy Max solved the owner’s legacy wish and offered an annualized return on investment to the spouse beneficiary of 8% and a 6% guarantee. 

Keep in mind, if the client allocated funds more aggressively, and index performance was successful, the annualized ROI of the plan could be significantly higher. The real product returns of the Enhanced Choice Index Plus 5 from Oct. 15, 2023 – Oct. 15, 2024, if 100% allocated to the S&P 500 Daily Risk Control 5% ER Index, was 19.18%.⁵ This growth in annuity account value will significantly grow the death benefit base under the performance enhanced value.