Will Your Clients' Life Insurance Expire Before They Do?

What You Need to Know

Low rates can make policies lapse sooner than expected.
Many clients may give up and take the cash surrender value.
Some clients have other options.

Is it a regular part of your practice to review your clients’ life insurance policies or offer a review to potential clients?

Whether the review shows a need for more, less or the same amount of insurance, policy reviews represent an outstanding opportunity for you to get in front of your clients to perform a valuable service.

Perhaps the most important part of the review should be to see if the policies are performing as expected.

Why Policies Disappoint

With lower interest rates, it is quite likely that many are not working as originally illustrated and that more money will be required to keep the coverage in force.

Or, perhaps, the clients’ objectives or needs may have changed.

Or, if term insurance, the policy must be monitored to determine when the conversion period expires or when the premium guarantee period ends.

At the review, questions you should ask are:

• Have you had a change in your family situation such as marriage or divorce, the birth of a child or the death of a beneficiary?

• Have you expanded, bought, or sold a business?

• Have you retired or taken on a new job or business opportunity?

• Have your finances changed, or has the need for estate liquidity been reduced or increased?

An Example

Here’s an example of a real-life situation.

A recently widowed 76-year-old was approached by her insurance advisor for a policy review to evaluate the change in her life circumstances.

She owned a $500,000 universal life policy that she felt she could no longer afford on her own, and she no longer needed the coverage. The cash surrender value was about $20,000.

Fortunately, her advisor knew about life settlements, and, as a result, he was able to obtain an offer for her of $73,000.

The client was, of course, thrilled. She had never heard of a life settlement as an alternative to surrendering a policy.