1. Solutions for Business Owners & Key Employees
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For financial professional use only. Not for use with consumers or the public.

2. DI Retirement Security is issued as a non-cancelable, guaranteed renewable, individual disability income insurance policy. It is not a pension or retirement program or a substitute for such a program. DI Retirement Security is not available for anyone who is over insured based on Principal Life’s current Issue and participation guidelines. It may not be available or the benefit amount may be reduced for certain occupations if there is existing DI coverage with lifetime benefits. Additional underwriting guidelines may apply.
This information is provided with the understanding that Principal® is not rendering legal, accounting, or tax advice You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, or accounting obligations and requirements.
Disability insurance from Principal® is issued by Principal Life Insurance Company a member of the Principal Financial Group®, Des Moines, IA 50392,
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®.
Principal, Principal and symbol design and Principal Financial Group are trademarks and service marks of Principal Financial Services, Inc., a member of the Principal Financial Group.
Not a Deposit | Not FDIC or NCUA Insured | No Bank or Credit Union Guarantee | May Lose Value | Not Insured by any Federal Government Agency

3. Why target the business market?
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
They play a vital role in the economy
They don’t always take the time to plan
They have multiple planning an protection needs
Business owners can also be a great referral generator for you.
They tend to be a close-knit group who want to work with people with whom they have a positive experience and good relationship. And they recommend those people to their peers.
For financial professional use only. Not for use with consumers or the public.

4. Your expertise makes a difference
Business owners who work with a financial professional tend to have
More stable businesses
Greater peace of mind
When business owners use a financial professional, the decision affects how they run their businesses, how they prepare for the future and their attitudes about their financial future.
The research suggests, for instance, that business owners who work with financial professionals tend to have more stable businesses and greater peace of mind.
When business owners do not use a financial professional, for example, more than half (51 percent) are significantly more likely to cite “to achieve business stability” as one of their goals, compared to 34 percent of business owners who use a financial professional.
Business owners who use financial professionals may not be as worried about protecting their businesses because they have already taken the necessary steps. For example, 32 percent of business owners who use a financial professional indicated they have key person life insurance, compared to 11 percent of business owners who do not.
Source: Financial Solutions for Business Owners, research conducted by Harris Interactive for the
Principal Financial Group. April 2013.
For financial professional use only. Not for use with consumers or the public.

5. Help determine the right approach to their priorities
They need your guidance and expertise
Ranked Priority 1
Business protection 2
Income protection 3
Health and wellness solutions 4
Qualified Retirement Plans 5
Group benefits
A Harris Interactive survey found that business owners’ stated priorities often don’t match the benefits they actually possess for the business or themselves, or those they offer to their employees.
As shown in this chart, business owners’ top three priorities address business needs, employee benefit needs and personal needs.
Business Owner Research, Harris Interactive, 2015.
For financial professional use only. Not for use with consumers or the public.

6. The Risk of Disability What is the likelihood that one or more owners
becomes disabled for 3 months or longer?1
Age
1 Owner
2 Owners
3 Owners 27
45%
70%
84% 37
40%
65%
79% 47
32%
55% 57
20%
35%
48%
1Before age 65. Based on Commissioner’s Individual Disability Table B – Equally Weighted, All Occupation Classes, Unisex.
For financial professional use only. Not for use with consumers or the public. 6

7. Cover 4 key protection needs
Solutions
Income Protection
Individual Disability Income (DI)
Core Value Income ProtectionSM
Multi-Life DI / Employer Offerings
Retirement Savings
DI Retirement Security (DIRS)
Business Protection
Overhead Expense (OE)
Business Loan Protection1
Key Person Protection1
Exit Planning
Disability Buy-Out (DBO) 1 2 3 4
When you look at our Individual Disability Insurance solutions, we help with four critical aspects of their financial situation(s):
Income protection
Retirement savings
Business protection
Exit planning
1 – Not available in all states. For state approvals, go to:
For financial professional use only. Not for use with consumers or the public.

8. Income protection
For financial professional use only. Not for use with consumers or the public.

9. Individual DI insurance
Objective:
Helps replace a portion of lost income in the event of a disability.
Affordable + Flexible
Discounts available
Fully portable
Optional riders
Tax-free benefits1
Client advantages:
Maintains current lifestyle without draining savings or business profits
Provide for their family
Continue saving for future dreams/retirement
DISCUSSION POINTS
If you became too sick or hurt to work, you may not be able to meet personal financial obligations without draining savings or business profits.
Protecting your income helps ensure you can keep a roof over your head during a difficult time.
Product features:
Benefit Update rider allows an increase in benefits every three years without evidence of medical insurability
Up to $20,000/month issue limit and $30,000/month participation limit available
“Your occupation” definition of disability
Twenty percent multi-life discount is great referral generator and incentive to refer. Provides cost savings for all.
1 – When premiums are paid with after-tax dollars
For financial professional use only. Not for use with consumers or the public.

10. Employer offerings Objective:
Provide employers with solutions to reward and retain employees
TIP:
Multi-life advantages
Case assistance
Discounts available
Flexible programs
Client advantages:
Dozens of ways to structure design
Solutions available for key employee and executive perks
Employer-paid, employee-paid or combination
Employer pay
Voluntary EE pay
GSI
Supplemental Buy-Up
GSI Fall back
Simplified issue
GTI
Exec Bonus
Blends
DIRS
Combo variations
Qualified Sick Pay
For financial professional use only. Not for use with consumers or the public.

11. Employer offerings
Replace more Income with supplemental group disability programs
Chart based on $6,250 gross monthly income ($75,000 annual), with 60% group long-term disability program, assuming a 30% tax bracket for federal, state and FICA.
For financial professional use only. Not for use with consumers or the public.

12. Retirement savings
For financial professional use only. Not for use with consumers or the public.

13. DI Retirement Security
Objective:
Helps clients continue saving for retirement in the event of a qualifying disability.
Tip: Use as an employee perk
Offer DI Retirement Security as an added benefit for executives and key employees.
Client advantages:
Can receive benefits through retirement years
Investment options based on risk tolerance
Dedicated disability benefits for retirement savings
Taxation
When premiums are paid by:
An employer, benefits paid to the trust are taxable as income.
An individual/employee with after-tax dollars or an employer (and bonuses to the employee), benefits paid to the trust are not taxable as income.
Trust earnings are taxable annually and declared on the insured’s tax return unless benefits are invested in a tax deferred annuity.
Upon a qualifying disability, the insured receives an annual 1099 form listing interest, dividends and capital gain distribution information. The insured also receives a quarterly statement of assets and activity in the trust.
Program features:
Provides a minimum benefit of $1,000; maximum adjusts with IRS guidelines
Can be offered in addition to and above DI insurance issue limits
Benefits paid to an irrevocable trust

14. Retirement completion
Let’s look at what happens to retirement savings when a disability prevents someone from working. Without an income, there’s no money for contributions. The lost contributions plus the lost growth potential lead to a pretty significant gap in accrued savings. In this example, a disability starts at age 40. Assuming just a modest 5% rate of return on the investment, that’s a $1.2 million loss.
Assumptions: $2,000/month contributions beginning at age 30, 5% rate of return and age 65 retirement. Potential loss due to disability at age 40 without continued contributions to retirement savings..
For financial professional information only. Not for use with consumers or the public.

15. Business protection
For financial professional use only. Not for use with consumers or the public.

16. Overhead Expense Objective:
Reimburses business owners for covered business expenses incurred during a disability.
Tip: Share the benefits
Benefits can help the business owner maintain financial health and credit ratings
Client advantages:
Helps ensure a business can remain open and the owner can either:
Return to a financially sound business; or sell a business that has not depreciated because of the owner’s disability
DISCUSSION POINTS:
Having benefits to reimburse business expenses helps ensure the doors of your business can remain open in the event of a business owner’s disability.
Business owners often purchase other types of protection – fire/hazard, workers’ compensation – but not business protection.
Product Features:
Up to $50,000/month benefit available
Perfect for businesses with up to 8 owners
Premiums deductible as a necessary business expense
For financial professional use only. Not for use with consumers or the public.

17. Overhead Expense Sample covered expenses Lease or mortgage payments
Utilities
Employee salaries and benefits - some limitations
Payments for leasing or purchasing furniture and equipment
Accounting, billing, and collection fees
Janitorial, security, and maintenance
Premiums for malpractice, property, and liability insurance
Professional trade dues and subscriptions
For financial professional use only. Not for use with consumers or the public.

18. Business Loan Protection
Objective:
Reimburses owner for covered business-related loan obligations during a disability. Available as a rider on an OE insurance policy.
Tip: Work with lenders
Seek opportunities to set up referral arrangements with lenders.
Client advantages:
Helps keep the business open and operating
Creates goodwill with customers, employees and creditors
Helps maintain business owner’s credit rating
DISCUSSION: If you have a business-related loan, where would cash flow come from to stay current on loan payments if you’re no longer generating revenue for your business?
Types of covered loans:
Balloon
Term
Commercial mortgage
Lease financing
Loans for working capital or increase in inventory
Types of NON-covered loans:
Line of credit
Credit card
Revolving line of credit
Interest only
Product features:
Provides up to $20,000 in monthly benefits and up to $2 million in total
Benefits can be assigned to the financial institution holding the loan
Not approved in all states; not available in California. Go to: for more information. This is a cost rider available on HH702 and HH789 OE insurance policies.
For financial professional use only. Not for use with consumers or the public.

19. Key Person Replacement
Objective:
Protects small to medium-sized businesses from the loss of employees critical to the success of the business due to a total disability.
Tip: Pair with life coverage
Pairs well with key person life insurance.
Client advantages:
Can be used at the discretion of the employer
Benefits generally received income tax-free and are paid to the employer (should not be reassigned to employee)
DISCUSSION: If a key employee left the company, passed away, or became disabled, chances are, it would affect your profits.
The Business owner takes out a KPR insurance policy on an employee who is key to their business, and is the owner of the policy. Premiums are paid by the policy owner to Principal Life. If the key employee becomes totally disabled benefits are given to the business owner to be used at his or her discretion. Common uses include:
Covering recruitment costs
Temporary staffing needs
Revenue replacement
Benefits cannot be given to the key employee.
Product features:
Streamlined product design
Protects up to two times earned income, up to $500,000
Benefits paid in a lump sum or in a combination of monthly and lump sum
Not approved in all states; not available in California. Go to: for more information.
For financial professional use only. Not for use with consumers or the public.

20. Exit planning
For financial professional use only. Not for use with consumers or the public.

21. Disability Buy-Out Insurance
Objective:
Funds a buy-sell agreement; helps buy-out a disabled owner’s interest in the business in the event of a long-term disability.
Tip: Check the Buy-Sell Agreement
Help make sure a buy-sell agreement covers total disability and is properly funded.
Client advantages:
Benefits are income tax-free – the disabled owner is taxed only on the gain from the sale of the business*
Provides a funding solution for the business
DISCUSSION POINTS:
Your agreement only addresses the death, and not disability, of an owner.
You have DBO coverage to fund the buy-sell agreement, but the amount is insufficient.
The language of your agreement does not match the DBO policy in terms of the definition of disability, waiting period and/ or payout terms.
Your agreement does not stipulate a mandatory buy-out if an owner becomes disabled.
Your agreement is not properly funded.
Product features:
Provides up to $3 million in benefits
Benefits paid in lump sum or a combination of monthly and lump sum
Can be purchased by the business owners or by the business
*Clients should contact their tax advisor for details.
For financial professional use only. Not for use with consumers or the public.

22. Approach business owners
For financial professional use only. Not for use with consumers or the public.

23. Step 1: Get started JJ1834 Set an appointment
Use Comprehensive Disability Planning Worksheet (JJ1834)
Basic profile information
Owner/key employee census/key information
Existing disability coverages
Business planning summary
Each of the four planning areas
JJ1834
For financial professional use only. Not for use with consumers or the public.

24. Step 2: Offer value 1 2 Informal Business Valuation
Complimentary Business Planning Services 1
Informal Business Valuation 2
Buy-Sell Agreement Review
Principal Life helps you open doors with business owners with our no-cost business planning services. We provide customized reports that help you and your client learn more about their business and how to meet their financial needs.
First is an Informal Business Valuation
WHY? The business is generally a business owner’s largest asset; however, most business owners don’t know the value.
Determine Business Value: Determining the business value begins with some definition of value. Most commonly, this is fair market value. The definition of fair market value is “The price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts.”
Next is a Buy-Sell Agreement Review
Like the Whitman adage “Good fences make good neighbors,” well-crafted and funded buy-sell agreements and/or other exit planning strategies can make for good partners.
Why?
Fact Finder
BB10847C
For financial professional use only. Not for use with consumers or the public.

25. Step 3: Close the sale Identify IDI solutions
Present proposals to the business owner
Submit applications and any necessary financial documentation
Use the proposal
For financial professional use only. Not for use with consumers or the public.

26. Questions
DI | 02/2017 | © 2017 Principal Financial Services, Inc.
For financial professional use only. Not for use with consumers or the public.