Broker Check

Right Fit Insurance Confidence System

When a Life Insurance Policy is purchased, certain assumptions are made - assumptions about policy charges, interest rates, planned premiums, etc. Additionally, a life insurance portfolio is designed based on a client’s needs and objectives at that time. Just like any other financial asset, it is critical to periodically review one’s life insurance portfolio.

Reasons to Consider a Life Insurance Audit

  • One’s need for Life Insurance may have increased OR decreased
  • Extended periods of low interest rates may have affected policy performance and may require more premium dollars to meet policy charges
  • One’s health may have improved, qualifying for a better rating
  • Newly designed products may better meet a client’s goals and objectives
  • If a client’s life insurance needs are being met efficiently by existing policies, there is a peace of mind in knowing this. If not, there are opportunities for bringing one’s life insurance in line with one’s goals

The Process

  • Assess your current need for life insurance
  • Gather information about your existing policies, and complete the Insurance Review Inventory Form
  • You will be provided with a tailored report summarizing your existing portfolio and analyzing its effectiveness
  • If existing policies are performing as expected or better, and if needs have not changed, no further analysis is needed. Continue to review periodically to be sure policy is on course
  • If existing policies are not performing as expected, or if needs have changed, consider what actions may be required to reach your goals within your existing policies
  • If existing policies still do not provide the most efficient way to meet your goals, evaluate the appropriateness of replacing coverage with a new, more efficient policy

Top Reasons to Consider Exchanging a Life Insurance Policy:

Secondary guarantees

Some universal life products offer death benefit guarantees based on a fixed premium structure. The guarantee applies even if there is a sustained drop in interest rates or if the current cash value declines or disappears.

Lower mortality rate

Improvements in medical science have increased life expectancy. Because of this, many new life insurance policies have lower mortality expenses than existing policies.

Loan treatment

Under the 1035 exchange rules, the IRS allows for the transfer of a loan along with the cash value from an existing life insurance policy to another life insurance policy, as long as the customer is the owner. Some policies offer attractive loan interest rates that might not be available on an existing policy. (Remember, loans and withdrawals reduce cash values and death benefits. Surrender charges and taxes may also apply.)

More competitive plans

Insurers are cutting expenses and distribution costs. When combined with other pricing improvements, it may lead to a much more competitive product, with lower costs and/or features and benefits not available on earlier plans.

Preferred/Special Underwriting

There are now additional classes of underwriting for universal life. Customers may now fall into a better underwriting class and would benefit from lower mortality charges. Plus, if a customer has improved their health since their last policy was taken out, they may qualify for a different underwriting class.

Extended maturity dates

Some existing policies have a maturity date. On the maturity date, the life insurance policy terminates and the face amount is paid to the owner. The owner must pay income taxes on the amount received, including outstanding loans, to the extent it exceeds the cost basis.