Active versus passive management of financial products is an often-debated topic in the investment world. However, it is rarely discussed when it comes to life insurance, despite the fact that policies are intended to be held throughout an insured’s entire lifetime. To ensure an existing life insurance policy or portfolio meets a client’s original long-term objectives, policyholders must annually review and actively manage their insurance in the following areas:
Ownership / Beneficiary Status
Are current Ownership and Beneficiary designations still correct? If ownership is a trust or an entity, are the trust or formation documents still accurate?
Term Conversion Deadlines
Most term insurance products have a conversion provision that allows a policy owner to convert to a permanent insurance product without proof of insurability before a deadline defined in the original policy contract.
Cash Value Growth
How has the policy performed since it was purchased, and how are cash values being allocated going forward?
Counterparty Risk
In 1988, there were 2,343 life insurance companies approved in the United States; that number has consolidated to around 730 today¹. Understanding the current financial health of your insurance company at all times will ensure your policy cash values and death benefit are there when needed.
Premium Cost
Are the premium costs for an existing policy competitive versus new life insurance products? Due to Mortality improvements over the past 20 years we’ve helped some healthy clients with older policies reduce their premium payments by more than 15% per year just by moving to a newer life insurance product.
Guarantees
Are planned policy guarantees still in force? Some older products had guarantees that would vanish if premiums were not paid on time and in accordance with an original plan.
If you oversee a trust-owned life insurance policy or have fiduciary responsibility for a client’s policy, annual reviews are essential to avoid liability. AIP’s Policy Review process provides the analysis needed to accurately assess policy performance, minimize fiduciary risk, and facilitate necessary ongoing plan adjustments for the client’s benefit.
¹American Council of Life Insurers
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