Policy Review: Be Sure Your Life Insurance Policy Still Fits Your Life
Life insurance is a complex and highly flexible financial instrument. But too often, it’s purchased for a very specific purpose, crossed off the financial “to-do” list and tucked away.
Why You Need to Evaluate Your Existing Life Insurance
Life changes constantly and your insurance needs change with it. That’s why it’s important to review your life insurance coverage on a regular basis to make sure it still meets your needs.
A Policy Review is a critical component of a sound financial planning strategy. It begins with some basic questions:
- Is your existing life insurance policy providing adequate coverage?
- Have the needs that prompted the purchase of your existing life insurance policy changed?
- How is your policy performing relative to its original objective?
- Is it on track to meet intended goals?
- Are your insurance products among the most competitive and cost-effective on the market today?
What is a Policy Review?
The objective of a Policy Review is to ensure that your life insurance coverage is in alignment with your current financial needs. It takes into account personally owned contracts, trust owned contracts and employer provided benefits to provide you with an unbiased assessment of the adequacy of your coverage.
Due to significant changes within the life insurance industry in recent years, this is a good time to review your life insurance policies to ensure that you are getting the most benefit possible out of your life insurance coverage and that you have the right type of life insurance to meet your specific needs. Over the past decade, life insurance products have advanced considerably. A Policy Review ensures that your life insurance policy meets your needs today.
We can provide you with a thorough explanation of how your policy has performed, projected cash values at designated intervals, and an assessment about the number of years that the policy will remain in force based on current assumptions. In cases where there is a clear advantage, we will also provide you with information on alternative policies.
What Factors Into the Evaluation?
Your current situation
- Have there been significant changes in your family life? Have you gotten married, divorced, or added another member to your family?
- Have you begun caring for an aging parent?
- Do you now have grandchildren who you would like to provide for?
- Has there been a change in your employer-sponsored benefits?
- Started or expanded a business?
- Have you taken out or paid off a loan?
- Has your net worth increased or decreased significantly?
- Is your retirement plan adequate to fund your future?
Why would I exchange an old policy for a new policy?
- Lower costs. In many cases, newer policies have lower cost structures than policies issued as recently as two or three years ago.
- Carriers’ financial status. If the financial stability of a carrier changes, it’s often advisable to switch to a financially sound company.
- Health changes. Improvements in health that affect the underlying policy cost.
- Underwriting issues. New underwriting programs could reduce a policy’s mortality costs or eliminate undesirable ratings.
The status of your coverage & your carriers
- Are your policies performing as projected?
- Have there been changes in the rating of your life insurance policy’s carrier?
- Are there newer insurance products that are more cost efficient or that offer better guarantees?
- Could you benefit from new riders that offer more appropriate features such as return of premium or guaranteed death benefit protection?
- Does term insurance coverage meet your longer-term needs?
- Is your policy’s premium scheduled for a significant jump?
Is your present coverage enough?
- Pay off your current liabilities?
- Provide sufficient income for your family over the next 10 years without your salary?
- Support your plans for your children’s education?
- Provide liquidity for final expenses and any taxes?
Your insurance policies can provide important financial protection and peace of mind for you and your family. That’s why an annual insurance review is so important. If you have any questions about the annual insurance review process, contact your Lenox advisor.
A policyholder must understand that replacement can include: new sales loads, new company rights to challenge a death claim during contestability and suicide periods, changes in age or health that increase the risk, changes in policy loan rates, less favorable non-forfeiture values and guarantees, loss of grandfathered rights, gain in policy values for income tax purposes, and potential surrender charges for replacing the policy. When taken together, whatever financial gains might be anticipated by the replacement of one policy for another may also involve significant trade-offs. The loss of these may outweigh the potential gains
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