Is Your Life Insurance Keeping Up with Your Life?

derek villars, clu®, casl®, chfc

You may have heard that there’ve been major changes in the life insurance industry. Costs have come down and policy guarantees have gotten stronger, mainly due to increased average life spans and improvements in how the insurance carriers are able to more efficiently administer their policies.

While most of the changes have been positive in nature, many families are not taking advantage of these improvements. If you have not had a thorough and independent evaluation done on your policies, you may be missing out on many of the new policy improvements that have become standard over the last 5 to 10 years.

Many new policyowners are surprised after finding that they can get a life insurance policy with more guarantees, more flexibility, and attractive options for the same price they are currently paying. Others find they can realize dramatic savings on premiums payments by switching to a term insurance policy, despite being much older now than when they applied for the existing policy. For those who are grantors or beneficiaries of trusts that contain life insurance, these policies are often not reviewed until it comes time for them to perform. If such a policy was underperforming, the trust may have paid far too much. Worse yet, if the guarantees and assumptions in the policy were based on longevity and performance numbers from years gone by, the policy may not perform at all.

How can you tell if your policy is performing as you intended? Where can you get information on your existing policy that is free of conflicts of interest? Surely you cannot call the insurance company and ask them to evaluate your policy against the current marketplace. The agent who sold or set up the policy for you gets rewarded for keeping you in the policy they sold to you. Knowing all of this, it would be easy to lose sleep over such a large investment. For those who are trustees, there also is now a legal fiduciary responsibility to systematically evaluate the strength of these policies with financial penalties if this is not done.

All of this has prompted the development of a life insurance audit service. There are now vendors who will conduct a 3rd party independent review and analysis of your existing policies. To do so, they require information about you, about your policy, and a fee ranging from a few hundred to a few thousand dollars. There also has emerged some select few financial advisors, CPA firms, and estate planning attorneys who are offering these reviews to their clients without a charge as a value add service. Often, the information gathered for such a review makes applying for a replacement policy much quicker and easier.

If you have a life insurance portfolio that has not had an independent 3rd party review for more than 5 years, it is time to seek out a qualified service and reap benefits ranging from increased peace of mind to catching a critical policy fault that would have cost you the intended insurance benefit.