Failing Life Insurance Policies

With the recent steep stock market decline and steadily reducing interest rates over the past 20-25 years, both variable and non-variable life insurance policies have been negatively impacted, and many are underperforming seriously enough to be on the road to an early demise.  This is  particularly true of those policies that were underfunded because the premiums were based on unrealistically high illustrated stock market rates of return or unrealistically high assumed ongoing interest rates.  Unfortunately, many, if not most, policyowners are totally unaware of this impending disaster.  This problem is highlighted in the Wall Street Journal article published on May 26^th titled “Keep Tabs on Insurance That Covers Estate Tax.”

To find the best solution for your clients to this serious situation, we urge you to use Provada’s comprehensive Personal Policy Review program.  Under this program, we carefully analyze inforce policies, look at alternatives, and make appropriate recommendations.  In some cases, often depending on the client’s current state of health, the client is better off keeping the inforce policy; in other situations, implementing a Section 1035 tax-free exchange to a new policy best serves the client’s objectives; and in still other situations, a life settlement may be in order, either because the insurance coverage is no longer needed or where the net proceeds serve as the seed money for a new policy.

Do not delay.  Look through your client base, select the clients who may be most in need of a Policy Review, and let us know if you have any questions. We’re here to help.