For producer information only. Not for use in sales situations. INDIVIDUAL DISABILITY INSURANCE (IDI) COMPLIMENTARY BUSINESS PLANNING SERVICES

For producer information only. Not for use in sales situations. Why work with business owners? SMALL BUSINESS OWNERS NEED YOUR HELP They play a vital role in the economy They don’t always take the time to plan They have multiple planning and protection needs

For producer information only. Not for use in sales situations. Market potential Source: Financial Solutions for Business Owners, research conducted by Harris Interactive for the Principal Financial Group. April HOW DO BUSINESS OWNERS USE FINANCIAL PROFESSIONALS? 48% Do not use 6% 20% Personal Needs 7% 19% Personal and business needs Business needs Unsure

For producer information only. Not for use in sales situations. Your expertise makes a difference Business owners who work with a financial professional tend to have: More stable businesses Greater peace of mind

For producer information only. Not for use in sales situations. Business Owner Priorities #1 Priority: Business Protection #3 Priority: Income Protection Source: 2012 Business Owner Study, Conducted by Harris Interactive ® for The Principal ®, retrieved Nov. 2014

For producer information only. Not for use in sales situations. Disabilities do happen Chance a 3-owner firm has one owner out for 3+ months 79 % Commissioner’s Disability Insurance Table A; assume owners are age 37 and disability occurs before age 65.

For producer information only. Not for use in sales situations. How to approach business owners LEAD WITH VALUE Complimentary Business Planning Services Informal Business Valuation Buy-Sell Agreement Review

For producer information only. Not for use in sales situations. About our complimentary business planning services INFORMAL BUSINESS VALUATION Customized report Five methods used to value the business First step to exit planning conversations BUY-SELL AGREEMENT REVIEW Customized report Helps identify potential gaps and provide recommendations Summarizes current funding provisions and options to address additional needs RESULTS Principal Life helped over 1,200 business owners in 2013.

For producer information only. Not for use in sales situations. Key concerns addressed BUY-SELL REVIEWS Does the agreement address both the death and disability of an owner? Is there a clear buy-out price? Is the agreement properly funded? Do funding methods coincide with the agreement terms and are they sufficient? Are all owners comfortable with agreement terms? BUSINESS VALUATION Have recent economic issues affected the value of the business? How would the loss of a key employee affect earnings and the resulting value of the business? Who could potentially buy the business and for how much? Will the business contribute to retirement income?

For producer information only. Not for use in sales situations. Results What does your buy-sell say the value is? Will this hold if your key person leaves? Do you have a buyer? Will you be taxed on this, or this? Does your buyer have insurance? INFORMAL BUSINESS VALUATION 1 1 Book Value Straight Capitalization Earnings Capitalization Years’ Purchase Discounted Future Earnings

For producer information only. Not for use in sales situations. Results Identifies the structure of the agreement Identifies the buy-sell triggers – Mandatory and optional Identifies how the parties determine the sale price Identifies the terms of the purchase transaction Identifies how the funding is structured BUY-SELL REVIEW 2 2

For producer information only. Not for use in sales situations. IDI Solutions NEEDSOLUTIONS Income Protection Individual Disability Income (DI) Core Value Income Protection SM Multi-Life DI / Employer Offerings PERSONAL NEEDS Retirement Savings DI Retirement Security (DIRS) Business Protection Overhead Expense (OE) Business Loan Protection rider 1 Key Person Replacement (KPR) 1 BUSINESS NEEDS Exit Planning Disability Buy-Out (DBO)

For producer information only. Not for use in sales situations. Get started Completed Fact Finder 3 most recent years financials (Income Statement/Balance Sheets or Business Tax Returns) 5 business-day turnaround Informal Business Valuation Completed Fact Finder Business Continuation Plan Document with amendments Information on any existing insurance funding agreement 15 business-day turnaround Buy-Sell Review Fact Finder BB10847IDI COMPLIMENTARY BUSINESS PLANNING SERVICES

For producer information only. Not for use in sales situations. Quick tips for ideal prospects Note: Some occupations within these organizations may not be ideal prospects for IDI solutions. IDI SOLUTIONS 2 to 10 owners; ages 30 to 55 Owner is key to the success of the business Rely on key employees BUY-SELL REVIEWS Buy-sell agreement hasn’t been reviewed in two years Operating or partnership agreement in place, but no buy- sell agreement INFORMAL BUSINESS VALUATIONS Professional companies like law, dental, engineering, accounting and technology firms Manufacturing and construction companies Profitable businesses with gross annual revenues of $500,000+

For producer information only. Not for use in sales situations. Success Story The case Owners of a consulting firm Producer met the owner of the firm on a snowboarding trip Clients wanted to expand employee benefits package and fund a buy-sell agreement The approach Producer offered clients no-cost buy- sell review and business valuation The customized reports helped identify the right solutions for the firm 1 Series 700 compensation – 50% FYCs, no annual coverage increases, 100% persistency, renewals based on 5 year projection. 2 Assumes Principal Life Term life insurance compensation. Solutions Individual DI (voluntary) DBO and Term Life Key Person Replacement (KPR) Life insurance 401(k) plan DBO: $5,655 KPR: $1,855 DI: $1,772 Life: 2 $4,272 Individual Compensation 1

For producer information only. Not for use in sales situations. 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 The Principal is 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. No part of this presentation may be reproduced or used in any form or by any means, electronic or mechanical, including photocopying or recording, or by any information storage and retrieval system, without prior written permission from the Principal Financial Group ®. Please remember to abide by the company's policy on disclosure of compensation. You can obtain more information, as well as a sample disclosure form, at Insurance issued by Principal Life Insurance Company a member of the Principal Financial Group ®, Des Moines, IA 50392, DI | 11/2014 | © 2014 Principal Financial Services, Inc. Questions?