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The Prudent Policy Review™

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The Prudent Policy Review™

My Financial Coach is proud to present our latest guest blog written by Chris Roehm, CFP®, also known professionally as the Life Insurance Guy™. You can read more about him and our other Subject Matter Experts on our SME page.



No long-term financial instrument should be left unattended over time. A life insurance policy typically spans several decades and must be managed. Policy portfolios may be impacted or influenced by policy owner actions/inaction, the general economic environment, tax laws, health changes, family changes, risk tolerance changes, evolving goals, and changes in financial resources. 

Policy management entails the monitoring of policy performance over time, the future employment of contractual features and options, and necessary adaptations to the inevitable changes that occur over a multi-decade time horizon. Proactive management means trying to identify issues before they arise where possible and development of strategies to address issues such as declining interest earnings, missed premium payments or policy loans.

Similar to refinancing a mortgage, a review of your life insurance coverage is something you should investigate every two to five years. Changes in economic factors, especially interest rates, affect how existing policies perform and how insurance carriers design and price their new products.

First, we ask some questions:

  • Why do you continue to own this policy?
  • How does it serve your financial plan? 
  • Is the amount of death benefit appropriate? 
  • Is the premium funding level adequate?
  • Is it affordable? 

How can we best manage the policy to accomplish your goals? 

  • Is it funded adequately to last beyond life expectancy? 
  • If there is a policy loan, should it be repaid?
  • Is there flexibility to lower or stop paying premiums?
  • Can the death benefit be lowered to make premiums affordable?
  • If variable, do the separate accounts need to be re-allocated? 
  • Is it owned properly?    Are the beneficiaries correct?   

Here is an outline a conscientious life insurance professional, or you as the attorney, can use when reviewing a policy for a client.  

Process Outline and Checklist

  1. Discuss Goals and Objective questions with Grantor.
  2. Call carrier and get Policy Review Questions answered.
  3. Obtain copy of original policy, application, and as-sold illustration.
  4. Order in-force ledgers with the following parameters:
    • No more premiums
    • Pay planned premiums
    • Minimum premiums to guarantee age 100
    • Minimum premiums for current assumption to 100
  5. Review insurance carrier’s financial strength ratings (A.M. Best, Fitch, Moody’s, Comdex)
  6. Order report comparing costs, crediting rates, and other peer-comparative data. 
  7. Run competitive illustrations and determine if any of the following are possible
    • Better underwriting offer
    • Increased death benefit
    • Better guarantees
    • Lower risk product 
    • Financially stronger carrier
    • Lower premiums
  8. Prepare written policy assessment report
    • How does the in-force policy illustration compare with the original illustration?
    • Is the life insurance policy death benefit guaranteed for life? 
    • If not guaranteed for life, how long are the guarantees and is that consistent with the objectives of the grantor?
    • Is the expected duration based on current assumptions acceptable to the grantor / trustee?
    • Are the life insurance policy provisions and features still consistent with the objectives of the grantor/trustee?
    • For variable and indexed policies, is a recommendation to change the investment allocations appropriate?
    • Should the grantor/trustee consider a life settlement?
    • What is the reduced paid up death benefit guarantee?
    • What is the after-tax cash proceeds from surrendering the policy?
  9. Possible next steps
    • Review again in X years
    • Obtain life expectancy study
    • Further test policy duration with stress testing of policy assumptions like crediting rate, cost of insurance and sequence of returns
    • Adjust policy management guidelines and/or take remedial action


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