Broker Check

Life Insurance Performance Evaluation

Life Insurance performance evaluations, also referred to as audits, have been a focus of my Seattle area practice for 15 years. Life insurance is another part of your portfolio that should be reviewed at least annually.

What Performance Evaluation will do for you:

  • Offers an analysis of your in-force life insurance policies.
  • Gives you an understanding of actual life insurance policy performance with an emphasis towards increasing value.
  • Integrates existing policy coverage and performance analysis with your life insurance needs as well as current product efficiencies.

What is the rationale for doing a Life Insurance Performance Evaluation?

Consider this: You spend your life building a portfolio of stocks, bonds, real estate and IRA’s. You keep a good pulse on the performance of these financial instruments, monitoring market fluctuations, interest rate trends and pricing efficiencies. You continually set and revise investment objectives as your financial plan evolves, making changes to both your financial assets and investment strategy, as needed. Formally or informally, you have set up a periodic financial review process tailored to your individual needs. That’s good financial practice.

Life insurance products are complex products that require similar monitoring and evaluation.
Life Insurance Performance Evaluation – key questions answered:

Life Insurance Performance Evaluation – key questions answered:

  •  Has your current life insurance policy performed as projected or exceeded your expectations?

  • Have those expectations changed since policy inception?

  • Does the marketplace offer more competitively priced, efficient life insurance products?

  • Has your financial plan changed?

  • Are there features available that you may add to your life insurance policy now that were not available when you purchased your policy?

When you purchased your permanent life insurance policy, you invested in a financial product designed with certain performance expectations. Have you evaluated actual results versus original expectations? If not, you may be in for quite a shock. Your policy may be at risk – you just don’t know it yet. Over the past decade, interest rates and dividend scales on life insurance policies have suffered a steady decline, hitting historic lows in recent years. This has critically impacted life insurance policy cash values and premium adequacy causing a reduction in policy performance. Initial goals are falling well short of expectations. Life insurance policies originally thought to be “paid-up” are requiring additional premiums and worst case – policies are lapsing. Americans are outliving the duration of their life insurance contract than initially designed and insurance companies are requiring you to pay additional premiums or coverage will result in a lapsed policy. Therefore, it is imperative to review your life insurance policy to make adjustments based not only on your goals and objectives, but the continuously changing economic conditions as well.

Medical advancements and healthier lifestyles contribute to longer life expectancies. Certain life insurance companies provide more favorable treatment with certain medical conditions (diabetes, cancer, etc.). New life insurance product developments, such as indexed universal life and hybrid long-term care pricing have changed the landscape completely. Even if your life insurance policy has performed up to par, the innovative products available today may improve cash accumulation, increase coverage, add hybrid long-term care or reduce premium outlay.

The end result of our life insurance performance evaluation may validate your original life insurance policy, offering a few funding alternatives, if any at all. It may also result in a complete revision of your policy. Either way, you achieve the goal of evaluating an important financial part of your financial plan and portfolio – your life insurance policy.

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