Insuring Your Future: Annual Policy Reviews May Yield Surprising Results

Over the years, the life insurance industry has undergone many changes, which have led to improvements in costs associated with maintaining life insurance policies. These improvements also include better policy guarantees and lower premiums, especially in the term and universal life market. Important advances in science and medicine have significantly extended our life span and, as a result, life insurance base rate tables have been revised industrywide. In 1999, a 45-year old male could have paid $5,875 annually for a $5,000,000, 10-year term policy. Today, that same male, if still in top health, could get the same coverage for $3,900 or less annually. This includes a new guaranteed premium period of 10 years!

This has created an opportunity that could reduce your life insurance premiums by more than 50 percent or increase coverage benefits without any increase in premium — excellent opportunities that, unfortunately, are often overlooked. In addition, the insurance industry has moved toward policies that transfer the future risk to the policy owner. This risk can provide opportunity for policyholders but may also create surprises. To assure that life insurance coverage is up to date, it’s crucial to review policies annually and conduct a comprehensive review at least once every three years.

For people in good health, we’ve found that more than half of the life insurance policies we review can be improved upon. This means you can save on your premiums, increase your benefits (with or without making premium payments), or maybe even stop paying altogether!

If you’re thinking of canceling your existing policy — stop! It may be worth more than you think. There are companies that buy existing policies, in some cases for several times the cash value. This process of selling an unwanted life insurance policy is called Life Settlement.

A Life Settlement is the sale of an existing life insurance policy that’s not performing up to expectations or is no longer needed because:

• The estate progressed to become highly liquid
• The estate size has reduced (and, therefore, less insurance is needed to pay estate taxes)
• Premiums are no longer affordable
• Premium payments are now required again
• Large loans against the policy are making it too expensive
• An insured executive has left the company, and the company still owns the policy
• The policy was acquired to fund a buy-sell or stock agreement — but the company has now been sold or dissolved

Not even term policies should be canceled without first checking to see if they have value in the Life Settlement market.

Whether you’re a business owner/executive, an individual, or a trustee — whether you’re looking to reduce the cost of your existing insurance or thinking of cashing in an existing policy — it pays to seek professional guidance. The life insurance industry is constantly changing, and it’s crucial to stay informed. Like all other investments, life insurance policies should be reviewed regularly.

How We’ve Helped

A husband and wife, ages 73 and 72, had a $1 million joint, universal, life policy. At current rates it required a $12,700+ annual premium to last to age 100. After reviewing their circumstances we were able to issue a new policy with a guaranteed premium of less than $6,000 — and it will last forever.

For Your Consideration

When conducting a policy review, it’s important to consider the following questions:

• Have falling interest rates put your policy in jeopardy of lapsing?
• Does your policy have cash values that could be better utilized?
• Do you have policy loans eating away at your policy values?
• Did you expect to be able to stop payments, and now you can’t?
• How has your policy performed relative to the initial projections and assumptions presented to you when it was sold?
• Has your estate become highly liquid, increased, or reduced since you initially purchased your policies?
• Has your insurance company’s financial strength or ratings decreased?

An initial review can be conducted fairly quickly to determine if there’s an opportunity to maximize your policy. Then your health will need to be verified to determine eligibility. Remember — never cancel existing insurance until a new policy has been issued.





Plante Moran Insurance Services is a member of FINRA. Securities offered through: Valmark Securities Inc., an unaffiliated securities broker-dealer. Member FINRA, SIPC.