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'Life insurance audits' can help manage an overlooked asset
With over $3 trillion in cash values, life insurance ranks second only to the mutual fund industry in magnitude. And though its use has expanded dramatically, particularly in sophisticated planning scenarios, it is rarely evaluated once put into place. Most people consider it a "static asset" that requires little maintenance. Nothing could be farther from the truth.
Life insurance is a significant financial asset, providing valuable protection and planning flexibility. But as with any important asset, policies must be monitored to make sure they continue to meet their intended objectives. With bolli fixed- interest and investment yields having fallen over time, the performance of existing policies simply has not met the assumptions made at the time of purchase. With I o wer- than -expected market returns, most life insurance policyholders will face increased premiums, reduced benefits or both, lhis often comes as a surprise to affected policyholders, who turn back to the life insurance market in search of an updated solution.
The life insurance industry continues to evolve in favorable ways. People live longer as a result of improvements in health, fitness, medical procedures and technology, which has resulted in better pricing of life insurance products. In addition, innovative product design provides greater flexibility while delivering superior, lower-cost guarantees. However, existing policies are not always updated due to the focus on new products, industry consolidation, economics and new regulations. Independent studies have indicated that the majority of policies could be improved by reduced premiums or increased death benefits with newer products.
A NEW KIND OF AUDIT
We developed the forensic life policy audit process to provide clients depth beyond the basic suitability of a life insurance policy and to address whether it meets their specific personal or business planning goals. It is essential to employ a level of sophistication that matches the client's needs and delivers solutions that take into account their overall...