The Life Insurance Review

Most people review their investment performance regularly. Few however take the time to review their life insurance. Yet life insurance is a complex financial product worthy of careful review.

We recommend a periodic checkup of your life insurance based on the following Criteria:.

The Insurance Need.

The insurance review centers on the need for the life insurance, as it was initially assessed and as it may need to be recalculated based on current needs. In fact, this is probably the single most important factor in evaluating an insurance program. The remaining four areas of review are evaluated in the context of a clearly identified need. Is the original need still valid? Have the client’s circumstances changed so that there is a new need?

Adequacy of Coverage.

Does your client have the proper amount of life insurance, a sufficient amount to meet the need? A client’s estate may have increased (or decreased) dramatically. Relative to insurance purchased to fund a buy-sell, the business value may have increased, a shareholder may have died or retired, and a child may have entered the business.

Proper Type of Coverage.

Is the coverage type appropriate? Did the client buy term insurance to meet a permanent need just because it was cheaper? Has the client’s health changed (for better or worse)? Does the client have term insurance that can be converted without evidence of insurability

Ownership and Beneficiary Designations.

Frequently, insurance ownership and beneficiary designations are incorrect. The clients may personally own their life insurance, when it should be owned by adult children or an irrevocable trust. Or the owner, insured and beneficiary are different individuals, resulting in a potential gift from the owner to the beneficiary upon death (the Goodman rule). The clients may have a cross purchase buy-sell agreement, but the insurance may be owned by the corporation.

Policy Performance.

Has the policy performed as expected? Have premiums been paid as scheduled? Is the insurance expected to stay in force under a reasonable set of assumptions? What guarantees does the policy have? Is the client paying too much (or not enough) for his or her coverage?

Now is the best time to start the review process. Items needed for the review:

1. Copy of the policies

2. Copy of the original illustration (if available)

3. Copy of the most recent policy statement