When Permanent Isn't Enough:

Why Many "Permanent" Policies Have Shorter Life Expectancies Than Those They Protect

TASA ID: 22346

OVERVIEW

Many life insurance policies are underperforming original projections and are forecasted to terminatesooner than anticipated.¹ This may come as a surprise to many policyowners since 70% of inforce policies have not been reviewed in the past five years.² With the extended ultra-low interest rate environment, even policies labeled as “permanent” may be at risk. Advisors can provide value and security to their clients by being aware of this situation and offering assistance in reviewing inforce policies to prevent surprises. Rest assured, life insurance is not rocket science and understanding the basics will take you a long way in helping your clients make sound decisions.

ANALYZING INFORCE COVERAGE

Insurance can be a valuable component in a well-designed financial plan. It’s important for the policy to perform as originally intended or for proper adjustments to be made along the way. If the insurance policy is owned by a trust, the trustee must monitor the policy.³ Unfortunately, policies are rarely reviewed⁴ and over the past few decades, many policies have fallen short in meeting original projections. But wait…haven’t insurance agents been monitoring these policies? Where are the agents that sold the policies? Simply put, they’re gone. It's estimated that 70 to 95% of trust-owned life insurance policies have no agent assigned to help service the policy.5 Very often, the original agent who sold the original policy is no longer in business – she may have retired, left her firm or changed careers altogether. In fact, research shows there are simply less insurance agents available to help.6 Clearly, insurance is no good if it’s not around when needed so what can be done to better understand how a policy is performing?

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