Life Insurance Policy Review

Reviews should be scheduled in three to five-year intervals to ensure coverages continue to meet your needs. Life Insurance policy changes that may affect performance are:

  • Interest rate and dividend crediting rates may not be performing as anticipated
  • Some medical conditions are now considered standard rather than impaired
  • Changes in how life insurance is designed, priced, and underwritten
  • Life expectancies may generally improve with lower premiums
  • More favorable medical underwriting classifications are now offered

Case Studies

  • Situation: An 88-year-old woman with a trust-owned policy purchased 12 years earlier to pay estate taxes. The yearly premium is $242,000.  No analytical review had been done since the policy was initially purchased.
    • Analysis: It was determined that with the interest credit rate dropping, the policy was scheduled to lapse in two years without value, well before the expected mortality age. The review and subsequent changes ensured that the policy continued to age 105 safely beyond the mortality age.
  • Situation: Business owner, male age 55, had a personal policy paid by his company with an annual premium of $155,000.  Its purpose was primarily to fund tax-favored yearly cash distributions. The policy was ten years old and had not been reviewed or analyzed since initiated.
    • Analysis: It was determined that the policy would lapse several years after annual cash distributions commenced resulting in adverse taxable phantom income.  Also, the chosen crediting formula was flawed. Crediting was reconfigured among several choices which allowed the death benefit to be frozen at the desired level, instead of a corridor formula siphoning cash buildup. The resulting cash distribution was guaranteed to age 100 with no adverse taxation.