Although simple in concept, a life insurance policy can be a complex financial instrument.

Just as you regularly review your investment portfolio, a life insurance policy needs to be monitored to be certain that it remains appropriate for your goals and performs according to expectations. Changes in the life insurance industry have led to new, more efficient policies that were developed in response to a more competitive environment brought on by mergers and demutualization. In addition, interest rate and market volatility can significantly affect the underlying cash value in a permanent life insurance policy.

Any number of factors have an impact on a life insurance policy, including:

  • Policies that were illustrated at rates that are inconsistent with today’s economic environment and may be underperforming expectations.
  • Policies that were under funded or funded with a combination of term and permanent coverage, to minimize outlay, and may require an extension of the premium payment period or an increase in the current premium outlay due to recent declines in interest and divided crediting rates.
  • Recent policy feature developments that guarantee death benefits for a specified premium, regardless of actual investment performance.
  • Insurance company ratings that may have declined, threatening the financial ability of the insurance carrier to perform on its contractual obligations.
  • Term or graded premium policies that may increase substantially in cost.
  • Recent design advances in the medical field, underwriting improvements, technology and mortality improvements in product pricing which may provide opportunities to enhance benefits or reduce outlay.

If your health has improved, you may benefit from current underwriting programs or enhancements in policy pricing due to:

  • Lowered mortality costs associated with improved longevity.
  • Ailments or illness that can be better managed than at the time the policy was originally used.
  • New special concessions in underwriting programs.
  • Changes in their profession or lifestyle.

A life Insurance Review evaluates your existing life insurance coverage. By analyzing information on the performance of your current policy and reviewing options for optimizing the benefit and cost effectiveness of coverage, it ensures that your current and future objectives are being met. As part of the Life Insurance Review Process, we provide you with a thorough explanation of how your policy has performed, projected cash value at designated intervals, and an assessment of the number of years that the policy will remain in force based on guaranteed and current assumptions. We may also provide you with information on alternative policies.

Essential questions that factor into the review process include:

  • Is your life insurance coverage on track to meet intended goals?
  • How is your policy performing relative to its original objective?
  • Are your insurance contracts among the most competitive and cost effective on the market today?
  • Have the needs that prompted the purchase of your existing life insurance policy changed?

Documents and information that factor into the analysis include:

  • A policy summary
  • The structure of the policy such as ownership, beneficiaries, and payment methods
  • The underwriting rate class and potential improvements.
  • The effect of change in interest rates and increase in the cost of insurance
  • The financial stability of the insurance company

A Trustee has a fiduciary duty to invest and manage trust assets as a prudent investor. This includes not just traditional investment assets, but other frequently overlooked assets, such as life insurance.

The Uniform Prudent Investor Act (UPIA), which most states have adopted some version of, provides that:

“[A] trustee who invests and manages trust assets owes a duty to the beneficiaries of the trust to comply with the prudent investor rule…a trustee shall invest and manage trust assets a s a prudent investor would, by considering the purpose, terms, distribution requirements and other circumstances of the trust. In satisfying this standard, the trustee shall exercise reasonable care, skill, and caution.”

Trustees who breach this duty may be liable for monetary damages to the trust beneficiaries:

A key responsibility of the trustee is to have a disciplined investment process that seeks the greatest return for the least amount of risk. In order to help minimize potential trustee liability with respect to trust owned life insurance, it is advisable to develop an investment policy statement (IPS) for the purpose of documenting this process. At a minimum, the IPS should cover the following:

  • Duties and responsibilities of the trustee with respect to trust owned life insurance
  • The purpose for the coverage
  • Type of coverage to be held by the trust, based on the designated risk tolerance
  • Premium level to be adhered to based on grantor’s gifting limitations a key component of an IPS is a commitment to regularly review each policy owned by the trust.