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Do You Know When Your Life Insurance Policy Expires?

A Policy Audit Review Can Tell You—and Reveal So Much More

As we continue to help clients purchase their first life insurance policies, we also take great pride in offering, at no cost, policy audit reviews for clients who hold existing policies that they may have purchased years ago from any source. We believe very strongly in the value of this service. For so many reasons, it is extremely important to have your policy reviewed at different stages in your life.

Many people do not know even basic details about their life insurance policies—what’s in them, what they cover, what they don’t cover, key exclusions, beneficiary provisions and so on. They know that they bought insurance, but over time, the details get a bit muddy. Unfortunately, and way too often, people may get a notice in the mail notifying them of a failing or expiring policy. Usually, they’re totally blindsided by this shocking news. This situation can be avoided with a simple policy audit review.

Policy audit reviews can be extremely valuable. Here are some reasons why:

1) Insurance term periods expire. If the term on your term product expires, it could present real problems. If your policy’s term period is close to expiration, and with term rates being at an all-time low, now may be a good time to explore new policy options, including a term conversion to a permanent product. As mentioned earlier, many people do not know basic information about their life insurance policies—including when they expire. Likewise, they may not know that a term conversion option is even available to them.

2) Performance of universal life/variable life products varies; yours could be serving you well—or not. We highly recommended that your policy undergo a policy audit review by an experienced insurance professional in order to better acquaint you with the details of it, and assess its performance. Given that interest rates continue to be low, and market volatility remains an ever-present reality, we are finding that some market-driven policies are not performing as originally intended. In this case, people often must pay a substantially higher premium to keep their policy in force and active. In many cases, this becomes so cost prohibitive that they may have no choice but to lapse the policy. A policy audit review may uncover this potential problem early enough to find viable solutions to the problem.

Consider this recent example: A 69-year-old client of ours had a $256,000 universal life policy that was projected to expire/lapse at around age 87. Based on our policy audit review, we were able to transfer the internal value of her existing policy to a new policy, with no taxable consequences. Additionally, we were able to guarantee this new policy to last for her lifetime, up to age 120; we increased the death benefit from $256,000 to $326,000; we added a chronic illness rider to the new policy; and on top of all that, no additional premium payments were needed! All that this cost our client was her time—specifically, time to complete the application and a short medical exam.

3) Loans and withdraws can profoundly affect your policy. Depending on the type of policy you have, loans and withdrawals can potentially cause a reduction in the cash value, interest to accrue and a possible erosion of the policy due to insufficient values necessary to sustain the policy. Also, with certain universal life policies, withdrawals can potentially erode the life of the benefit guarantee (e.g., shortening a benefit that would normally last to age 100 to age 85). Also, if you have a universal life policy, and you were delinquent in making a premium payment, that event could possibly take years off a death benefit guarantee. You may not have any idea that the whole design of your original policy has changed.

4) Missed details with normal life events can cause a failure. For example, consider what would happen if a change of beneficiary was never completed after a divorce, or if an ownership change within a business occurred.

Reviewing a policy is a value-added safeguard to help uncover potential policy failures. It doesn’t cost a cent to have your policy reviewed; but it could cost you plenty if an unforeseen problem lurks within the policy itself.

Want more information on policy audit reviews? Please contact Deborah R. Marino, Insurance and Risk Assessment Specialist, at 440.449.6800 or email Deborah.

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