Overview

In 2000, a study by Trusts and Estates Journal revealed a startling statistic:

85% of life insurance policies owned within trusts, could obtain a 40% reduction on premium costs or obtain 40% more death benefit for the same cost.

As a whole, society is living longer with improvements in medicine and health awareness. This has caused life insurance rates (aka mortality expenses) to come down dramatically over the past 20 years. Unfortunately, this is not reflected in existing policies; only in new policies as carriers create new products and pricing. To add “insult to injury,” policies tied to interest rates and/or the stock market have performed poorly leaving the policy in jeopardy of inadequate funding and thus the potential for lapse. Finally, the life insurance industry has undergone dramatic changes with mergers, acquisitions, demutualization and the move towards an independent brokerage model (not having to work for a carrier to sell their product). This increased competition has brought new, innovative and less expensive products to market.

To maximize the value of your life insurance investment, a Life Insurance Policy Review should be performed every 24 months to make sure that the policy is still suitable, competitive and performing to expectation.

Below are some staggering statistics to consider.

92% of existing trust owned policies could be restructured to provide 20% greater value
85% of restructured policies provide either a 40% increase in death benefit or a 40% reduction in premiums
1 out of every 3 life insurance policies held in trusts will lapse prior to the payment of a death benefit

A Copperstone Policy Review involves an in depth review of 8 key components. This information will give you and your advisors the information you need to make an educated decision to either retain the current coverage or consider replacement coverage.

Contextual Analysis – First and foremost we must establish if the policy is still suitable for the current estate plan as circumstances are constantly changing in clients’ lives as well as applicable tax law.
Underwriting Assessment – Assessing the policy rating when obtained and whether or not this was indeed accurate and negotiated well during the underwriting process. We also assess whether or not a lifestyle/health change has occurred which could create room for improvement.
Lapse Analysis – Unbeknownst to many clients, their policy(s) will eventually lapse due to poor policy performance leaving the client with a sizeable premium increase if they want to keep the policy in force. It is important to analyze the crediting rates (both guaranteed and non guaranteed) and their impact on cash values in order to prevent this unexpected sum coming due from the carrier.
Cost/Fees Analysis – Many policies have excessive fees that need to be compared against industry benchmarks. These fees include loads, surrender charges, mortality/expense charges, subaccount management fees (variable), and other possibly hidden management fees.
Performance Analysis – During this process, we look at the relationship between the policy’s cash values, fees and crediting rates. For Variable policies, we also look at the subaccount performance and choices. For Whole Life, we look at dividend payments and how this affects the policy. Ultimately, we look at how the performance stacks up against industry averages.
Carrier Stability Analysis – With hundreds of carriers in the marketplace, we provide an assessment of the carrier’s financial stability (Moody’s, S&P, AM BEST) and we also provide an objective view of the financials and underlying exposure. Lastly, we look at anything in the news that should be of interest or concern.
Market Comparison – With Life Insurance rates at historical lows and newer features available, it is important to assess whether there are savings and other benefits available to the client should they choose to switch to a new carrier. We will provide a market comparison from 40 of the nations largest carriers.
Secondary Market Analysis – A high percentage of policy owners will lapse or surrender their policy(s) in their senior years due to a variety of reasons including a change in circumstance or a dramatic increase in cost. They may be able to achieve significantly more by selling the policy to a third party institution in exchange for an immediate cash settlement (aka life settlement) OR securing a lender for the premium payments.

Summary of Options – In summary we will outline the client’s options along with our recommendations to either stay in the current policy, make changes within the current policy, or acquire a new policy.