Is Variable Life Your Best Option? What is Variable Universal Life? To understand variable universal life insurance and its unique features and benefits, you need to understand term life, traditional whole life, universal life as well as variable life insurance. Term Insurance Term insurance is the most economical form of coverage and is used primarily if the need for life insurance is for a limited period of time. It provides pure life insurance protection with no associated cash value savings element. Varieties of term insurance include (but are not limited to) Annual Renewable Term, Level Premium Term for a specific number of years and Decreasing Death Benefit Term. Some term policies have a conversion rider that allows the insured to convert the policy to a permanent policy without evidence of insurability. If your need for life insurance is temporary, term insurance is generally a cost-effective way to protect your loved ones. It only pays a death benefit if you die within a specified period of time, and can usually be renewed when you reach the end of this time frame, which can be between one and 20 years. Traditional Whole Life: Traditional whole life insurance, unlike term insurance, combines a death benefit with an accumulation, or savings element, commonly referred to as the policy's cash value. This savings element increases each year the policy stays in force. The death benefit payable is the face amount of the policy, which remains constant throughout the policy's life. The premium is set at the time of the policy's issue and also remains level for the life of the policy. The owner has no control over how the savings element is invested. Universal Life: Universal life is a variation of whole life insurance with some added flexibility. Universal Life Insurance (ULI) allows a policy owner to determine the amount and frequency of the premium payments and to adjust the death benefit up or down to reflect individual needs. A simple way to describe ULI is as a term insurance policy with a policy value fund. Again, the owner has no control over how the savings element is invested. As premiums are paid and cash values accumulate, interest is credited to the policy's cash value account. As long as the cash value account is sufficient to pay the monthly mortality and expense cost, the policy will stay in force, whether or not the owner pays the premium. If, however, the cash value account is not sufficient to support the monthly deductions, the policy will lapse. The owner can increase or decrease the face amount and can elect to pay more into the policy increasing the cash value account. Variable Life: Variable Life Insurance (VLI) has a lot of the same characteristics as whole life insurance. The primary difference is the way in which the cash reserves are invested. In whole life insurance, the reserves are invested by the insurance company in low risk conservative investments such as bonds, real estate, and mortgage loans. Low risk equates to security and generally lower returns on your investment. These cash reserves are held in the insurance company's general account. With variable life insurance, the policy owner chooses how the reserves will be invested. This allows the policy owner to pick and choose investment options to help meet their investment objectives. Since these reserves are held by the insurer in special separate accounts, cash reserves can be invested in potentially higher yielding investments than can general account reserves. Variable Universal Life: Variable Universal Life (VUL) combines the characteristics of the variable life policy, such as cash value and death benefits that vary according to the performance of the separate account, and certain characteristics of universal life, such as allowing the owner to adjust premium payments and death benefits according to changing needs. Simply stated, VUL is basically term life insurance coupled with a group of separate accounts similar to a family of mutual funds that are available within the contract. This type of product is designed to give policy owners ultimate flexibility as to premium payments, investment objectives and death benefits by allowing: the right to vary the frequency and amount of the premium payment the right to allocate net premiums among one or more of the separate accounts or the general account the right to increase or decrease the policy's face amount the right to change the death benefit option Why Variable Life May Be the Best Option With Variable Life, investment performance risk is shifted away from the life insurance company. This gives policy owners the opportunity to select the appropriate asset allocation mix to meet their financial situation. A reallocation among investment options inside the variable insurance contract is not a taxable event for capital gains purposes. These tax savings over the life of the policy could very well exceed the expected lifetime cost within the policy. Although past performance is not an indicator of future results, the equity marketplace has historically produced a greater rate of return than the fixed income marketplace. This may enable the client to stay ahead of inflation, reduce premiums and costs or increase policy cash values and death benefits. Because a prospectus is required, the policy owner receives complete disclosure of fees and expenses. Tax-deferred compounding: Dividends and realized capital gains are not taxed currently and continue to grow tax-deferred, compounding the return on the investment. Tax-free access to money: A variable life policy gives policy owners tax-free access to their cash value at any time without any penalties associated with annuities and qualified plan distributions.* Creditor Protection: Life insurance policies enjoy protection from a policy owner's creditors, based upon the state in which the policy owner lives. This is an important aspect of the policy since the policy owner has an asset that may contain substantial investment capital that has been funneled into the policy in the form of premium payments.** The cash values in the separate accounts may be protected from an insurance company's insolvency.*** Why We Are a Variable Leader More Product Choices: Our variable life insurance policies cover a broad range of client needs. Our impressive product line includes variable life, variable universal life and survivorship variable life. We also offer a complementary line of variable annuity products. More Investment Choices: Our investment choices cover more asset classes than the vast majority of variable life companies. We are constantly evaluating new investment choices. More Investment Advisors: We offer an impressive array of managers, including industry leaders such as: Alger, Sentinel, The Boston Company, Fidelity, Neuberger & Berman. Many variable companies offer only in-house or proprietary investment advisors. Asset Allocation: Only a few other companies have made this state-of-the-art investment methodology available to their variable life clients. Our asset allocation system is easy to use and it has the experience and expertise of Ibbotson Associates behind it. Nationwide Financial Network has made our asset allocation system even better by computerizing it. Competitive Products: In terms of internal rate of return over 10, 20, or 30 years, the competitive range for variable life policies is quite narrow. Moreover, no company can be best at all ages, classes and face amounts. However, since all of our products are competitively priced, our Competition Unit welcomes head-to-head comparisons for the full range of variable life policies that we offer. Years of Variable Life Experience: Nationwide Financial NetworkSM has years of experience in marketing and servicing variable life business pays off in terms of fewer mistakes and speedier solutions when questions or problems do arise. Investment Performance Reporting: For certain products, the policy owner receives a monthly or quarterly report to keep informed about investment performance, minimizing the chance of surprises and/or disappointments. * Under current tax law, tax-free access is accomplished through a series of withdrawals up to the cost basis shifting to loans thereafter. ** State laws vary on the protection of life insurance from creditors. *** This protection does not apply to the investment performance or safety of the underlying funds in a variable life policy. Nationwide Life Insurance Company has a reputation for strength, stability, and sound management. Nationwide Financial Network has roots that can be traced back for over two centuries, giving it the distinction of serving America's life insurance needs longer than any other company. Licensed in all states and the District of Columbia, Nationwide Financial Network offers individual life insurance to protect families, estates and businesses and to fund individual qualified plans. The company also offers group annuity contracts and related services to fund qualified pension plans. Nationwide Financial Network financial condition is rated A (Excellent) by A.M. Best Company. Fitch has given the company a claims paying rating of AA, while Standard & Poor' s rates our claims paying ability as AA-. Moody's gives Nationwide Financial Network is financially stability with an A2 rating. All four companies consider these ratings to be reserved for very high quality companies. Nationwide Life and Annuity Company of America is a wholly owned subsidiary of Nationwide Life Insurance Company. Based on its latest analysis of the company' s financial position and operating performance, A.M. Best gives Nationwide Life and Annuity Company an A (Excellent) rating. Fitch has given the company a claims paying rating of AA, while Standard & Poor' s has assigned Nationwide Life and Annuity an AA- rating. Moody's gives Nationwide Life and Annuity Company of America's financial stability an A2 rating. Nationwide Financial Network and its affiliated companies have more than $37.2 billion of life insurance in force and consolidated GAAP assets totaling over $7.9 billion. Nationwide Life Insurance Company and Nationwide Life and Annuity Company of America are charter members of the Insurance Marketplace Standards Association (IMSA). IMSA members have adopted policies and procedures that demonstrate a commitment to honesty, fairness and integrity in all customer contacts involving sales and service of individual life insurance and annuity products. Variable products issued by Nationwide Life Insurance Company and Nationwide Life and Annuity Company of America, 1000 Chesterbrook Blvd, Berwyn, PA 19312-2419, are distributed by 1717 Capital Management Company, P.O. Box 15626, Wilmington, DE 19850, a Registered Broker-Dealer, (302) 453-3800. The ratings Nationwide Life Insurance Company and Nationwide Life and Annuity Company of America have received from the above rating agencies do not apply to the performance of the various separate accounts. This information must be preceded or accompanied by current prospectuses for the policy or contract and the associated insurance product funds. The prospectuses contain more complete information, including charges and expenses, which should be read carefully before investing or sending money. We Are Well ahead of the Market and Committed to Staying There: We are in the forefront of the variable life market by virtue of: Our extensive and competitive product line Our asset allocation system Our range of investment choices and investment managers Our considerable experience.