Are you going to outlive your life insurance policy?

Are you going to outlive your life insurance policy?

By Laura Bottoms Higginbotham
Vice President, Insurance Services

The tough reality behind life insurance is that you will not be around when the benefits are paid. If you were to leave this earth tomorrow, in 5 years, 20 years or even 40 years from now, in what state would you like to leave your affairs? I can’t think of anyone who would say they don’t care what kind of financial stress their loved ones are left with in the event of their death.
Life insurance serves many purposes for people in all areas of life and the below scenarios are only a few reasons why one would explore getting life insurance.

• Have you recently been married and have a baby?
You need life insurance.

• Are you a business owner or key executive?
You need life insurance.

• Have you accumulated significant wealth?
You need life insurance.

• Do you wish to leave a legacy?
You need life insurance.

Now you’re probably saying, “I’m good. I already have life insurance.” And to that, I say “fantastic!” However, do you really understand the life insurance you currently have and how it fits with your family’s financial security goals? These are some quick questions to ask yourself:

• Do you know if your insurance is term or permanent (whole life, universal life, etc.)?

• If term, do you know how long the level premium period lasts? Do you know if it is convertible (swap the policy for a permanent plan at that insurance company without medical underwriting)?

• If permanent, when was the last time you saw a current illustration? Are you paying the right premium to sustain the policy during low interest rate environments?

• Do you have a need for long term care insurance now?

You might be surprised to know that many people do not even know what kind of insurance they have. This is why periodic policy reviews are very important. Without diving into too many details (that’s the purpose of your insurance review), there are many provisions within life insurance that go far beyond the amount of the death benefit. With term insurance, the important provisions include but are not limited to the level premium period and conversion provision. Sometimes the ability to convert the policy to a permanent policy is the insured’s only option as they would be uninsurable if they tried to obtain new insurance with medical underwriting.

One of the best things about universal life is that it is flexible. However, this flexibility could potentially lead to surprises down the road. Factors like current interest rates, missed premiums, not paying the right premium, etc. can all affect the death benefit guarantees and projections of the policy. To see if you are on track, a review of a current illustration would be in order. You might find that when you purchased the policy, interest rates were higher so you set your premium to a lower figure. Then as interest rates fluctuated and remained low for many years, your low premium might not have sustained the policy as well as you had hoped. It may be time to increase the premium to get it back on track with your original (or new) goals.

Whether you are a current client or not, it is our goal that your insurance will be healthy when your family needs it most. For a new client, our process entails a thorough review of all current insurance before any new insurance is recommended. For our current clients, we are excited to be utilizing an improved software later this year to better track the progress and important deadlines within your policies. If you feel that it is time for a “check-up” on your current insurance portfolio, please reach out to us and we will be happy to assist you.

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