1. Disability Buy-Out insurance
Individual disability insurance
Disability Buy-Out insurance
One-Way Buy-Out (HH794)

2. This information is provided with the understanding that Principal® is not rendering legal, accounting, or tax advice. Consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, or accounting obligations and requirements.
Policy and rider descriptions are not intended to cover all restrictions, conditions or limitations. Refer to policies and riders for full details. Riders are subject to state availability. Some riders are subject to additional premium.
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
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®.
Disability insurance from Principal® is issued by Principal Life Insurance Company, Des Moines, IA
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. Key features Affordability Flexibility
Lower new issue rates (in almost all cases)
6A occupation class
5% Preferred Business Owner discount
Flexibility
One-Way Buy-Out differentiator
Benefit Update Valuation rider
Full Benefit Continuation feature (cost)
Offer coverage To Age 67
Note: The underwriting guidelines for HH794 are consistent with HH703. State approval information is available at principal.com/distateapprovals.

4. How it works
Offer a disability buy-sell option for one business owner, with a One-Way Buy-Out policy.
Sole owner
Owner creates written agreement with key employee for an exit strategy
Agreement
Outlines that the key employee will buy the business upon the owner’s exit
Key employee
Funds the purchase of the business in the event of the owner’s total disability – and exit of the business

5. Who needs it? Smaller businesses with 11 to 10 owners2
Majority of policies sold are 3A/3A-M and above occupation classes
Businesses not owned by spouse, parents and children or owners with large age differences
Up to $20 million business value considered ($10 million and above, contact an underwriter)
1 Guidelines, limits and required documentation vary for single owner DBO policies. For more details, refer to the One-Way Buy-Out market guide (JJ2166).
2 Two to eight owners for 2A and 3A/3A-M occupation classes.

6. Lower issue rates
Double-digit rate decrease from HH703 in most situations
Larger decreases can be seen with older issue ages and when choosing a lump sum benefit option

7. 6A occupation class sample annual rates
Gender
Age
New 6A1
Previous 5A-Select2
Cost savings
Male 30
$231.80
$319.50
27% 35
$279.30
$387.90
28% 40
$344.85
$517.50
33% 45
$427.50
$697.50
39% 50
$532.95
$963.90
45% 55
$725.80
$1,528.20
53%
Female
$397.10
$467.10
15%
$426.55
$550.80
23%
$436.05
$709.20
$472.15
$909.00
48%
$570.00
$1,190.70
52%
$769.50
$1,709.10
55%
X% decrease (cost savings column) from the previous rates to the new rates
Assumptions: $100,000 lump sum, To Age 65, 365 day Elimination Period, non-tobacco. For illustrative purposes only. Actual rates may vary.
1 5% Preferred Business Owner discount applied
2 5A occupation class plus the 10% Select Occupation discount.

8. Preferred Business Owner discount
5% discount given on DBO – if another IDI product is purchased or inforce with Principal
Stackable discount on DBO with:
10% Association discount
20% Multi-Life discount
Not all discounts available in all states. Visit for details.

9. One-Way Buy-Out
Sales idea: Use this discussion as an opportunity to also address the need for Key Person Replacement coverage.
For businesses with only one owner, exit strategies upon total disability of that owner have been limited. Historically, the individual disability insurance industry norm for Disability Buy-Out (DBO) insurance required at least two business owners purchase coverage to fund a written buy-sell agreement.
Not anymore. Principal the first insurance carrier to offer a disability buy-sell option for just one business owner, called a One-Way Buy-Out. With this concept, the key employee purchases DBO insurance1 to fund a buy-sell agreement between themselves and the owner of the business. If the owner becomes permanently disabled, the key employee uses the benefits to buy the business.
Advantages of coverage:
Prevents the sole owner from having to find an individual to purchase the business while disabled
Provides the key employee with the finances to purchase the business or the necessary down payment for a loan
Allows a smoother transition of ownership

10. Product and underwriting guidelines
Issue ages: 18-55
Maximum issue limit: $1 million
Financial documentation required:
Prior two years of federal corporate tax returns
Current year-to-date profit and loss balance sheets
Complimentary informal business valuation by Principal business owner executive solutions (BOES) team
[Go over guidelines, requirements, & limits]
Target Markets:
Many businesses in the United States have only one owner and span a range of industries – from construction to retail to professional services. We recommend targeting:
Professional service-related companies, such as architecture, healthcare systems, law, dentistry, engineering, accounting and technology firms
Profitable, growing businesses with gross revenues of $500,000 or more
For each DBO case, ownership structure, agreement documentation and buy-out objectives are carefully reviewed. Cases with large age differences between the owner and key employee may not be insurable.

11. Benefit Update Valuation rider
Provides an informal valuation of the business every three years without medical underwriting
Plus, now offers an advance option when there’s been a 20% or more increase in the value of the business1
1 If an advance Benefit Update option is taken within 12 months preceding a regularly scheduled update, the regular update is not held to help minimize administrative redundancies.

12. Full Benefit Continuation feature
Provides full benefits to the end of the policy termination
Available for additional cost for insureds under the age of 55 at time of purchase
Ideal for those concerned about coverage nearing retirement

13. Full Benefit Continuation sample annual rates
Gender
Age
New 6A1
without FBC
with FBC
Cost increase
Male 30
$231.80
$257.45
11% 35
$279.30
$314.45
13% 40
$344.85
$394.25
14% 45
$427.50
$514.90
20% 50
$532.95
$683.05
28% 55
$725.80
$1,004.15
38%
Female
$397.10
$441.75
$426.55
$480.70
$436.05
$498.75
$472.15
$568.10
$570.00
$730.55
$769.50
$1,064.00
X% decrease (cost savings column) from the previous rates to the new rates
Assumptions: $100,000 lump sum, To Age 65, 365 day elimination period, non-tobacco. For illustrative purposes only. Actual rates may vary.
1 5% Preferred Business Owner discount applied

14. Additional details
Includes same features and benefits as the HH703 policy, while also offering:
Renewability: To Age 65 or To Age 67
Death benefit: Lump sum provides 3x the maximum monthly benefit
Plus, EKGs as an age or amount requirement for any IDI product is no longer a requirement.1
1 EKGs may still be obtained for cause at underwriter discretion.

15. Transition guidelines
Pending proposals
We’ll honor proposals before the rollout for 60 days after state introduction if it’s included with the application.
Pending applications
your case coordinator or underwriter indicating the application should be amended to include new BU rider and/or rates.
Policies pending delivery or inforce less than 60 days prior to state introduction
your case coordinator or underwriter to request a rewrite – additional underwriting requirements may be needed.
Policy will be rewritten and re-dated – to the state’s introduction date
A new contestable period will begin
Application will be amended
HH703 series policies inforce more than 60 days prior to state introduction
Request the new policy through the HH794 application and then cancel the existing DBO policy.
Requests will be treated as an internal replacement of coverage
Any change made to the application after it is submitted is considered and amendment; the amendment must be signed by the client.
Policies pending delivery or inforce less than 60 days prior to state introduction: For policies re-written and re-dated (to the state introduction date), there will be no persistency impact if the change is made within the designated time frame. Compensation, however, may be impacted.

16. Marketing tools
Consumer
Producer
JJ2165C – Policy highlights
JJ2174C – Promotional flier
JJ2169C – Comparison to other companies
JJ2166 – One-Way Buy-Out program profile
JJ2172 – Business owner program
Updated producer tools, including: competition pieces, product profile, underwriting guide and pocket guide, and more.
Don’t forget – We also offer a variety of approach tools, complimentary services and research for opening doors with business owners.

17. Questions?
HH794
DI   |  07/2017  |  © 2017 Principal Financial Services, Inc.