Tag Archive for: Life Insurance Review

Knowing Your Life Insurance Options

Life insurance can be a crucial tool for:

  • Tax planning
  • Spousal protection planning
  • Wealth transfer planning, and
  • Business planning

However, as your personal and financial situation changes over time, so could your need for coverage. It is important that you know all your options regarding your life insurance, as well as when to audit your life insurance, so you can make informed decisions as to how to handle this valuable asset. You may have just one policy, or several life insurance contracts of varying types and designs. 

Let’s discuss your life insurance options.

Life Insurance Options

Below are the four primary options available regarding your life insurance.

Option #1: Continue Your Coverage

If you still need life insurance to meet your planning goals or if your health has deteriorated, you may wish to retain your coverage. Some policies allow for premium flexibility and reduction in policy size. 

Option #2: Stop Paying Premiums and Let Your Coverage Lapse

Seniors over the age of 65 lapse over $100 billion of life insurance coverage every year. Your premiums will end but so will your life insurance coverage when it eventually lapses. 

Option #3: Surrender Your Policy

You can surrender your policy to the insurer and cancel your coverage in exchange for the cash surrender value (permanent policies only).

Option #4: Sell Your Policy via a Life Settlement

If your permanent (whole, universal, index, or variable life) policy qualifies, you can sell it to an investor group who will pay you an amount in excess—sometimes four to five times—of the cash surrender value, in exchange for paying future premiums and eventually collecting the death benefit. Some convertible term policies can also qualify so it could be worthwhile checking before you let it lapse.

Make sure you fully understand the potential tax consequences of lapsing, surrendering, or selling your life insurance policy before moving ahead. 

The Importance of Auditing Your Life Insurance Policy

In addition to knowing your options, it’s just as important to regularly audit your life insurance coverage.

Why? Taking the time to review and understand your existing policies can help you:

  • Reduce carrier and contract risk
  • Check that you are carrying the right amount and type of coverage
  • Ensure the policies are owned by the correct person or entity
  • Consider new policy features, such as critical illness coverage, and
  • Improve overall policy earnings over time

Remember, over the years, life insurance contracts have changed, become more efficient, and regularly offer different features and benefits. Today’s policies are different even compared to those purchased just a few years ago.

This considered it makes sense for every policy owner to periodically take a look at their existing life insurance contracts and make adjustments accordingly.

Infographic of Knowing Your Life Insurance Options

Let’s Develop a Plan – Together

Knowing your options is key. At Acumen Insurance Solutions, our trusted advisors have decades of experience to help you develop a customized plan. Please contact us for a complimentary policy review so we can help you reach your goals.

Interested in learning more? Read on for more about auditing existing life insurance plans for credit unions or the difference between term life insurance and permanent life insurance.

Couple walking along the beach

Can I Change My Life Insurance?

Secret’s out—life insurance is not a one-and-done deal. Contrary to popular belief, you can change your life insurance policy and your coverage amount throughout your life as your situation inevitably changes.

But why would you want to change your life insurance in the first place? What elements can you change? 

Let’s discuss.

Why Would I Change My Life Insurance?

There are many reasons why one might decide to change their life insurance coverage. Some policyholders might modify their life insurance to:

  • Reduce their premiums to an affordable amount
  • Find a policy with features better suited to meet their current needs
  • Update the amount of coverage

Additionally, there are various life events that might trigger changing one’s life insurance policy. These changes include, but are not limited to:

Changes in Career

This might include a career change, business ownership change, or the decision to launch a new company. 

Changes in Family Circumstances

Marriage, divorce, the arrival of new children or grandchildren, a family member’s death, and the need to care for one’s aging parents, are all reasons why one’s life insurance policy might need to be revisited.

Changes in Health

A policyholder might want to change their life insurance if the insured experiences a significant change in health, either positive or negative, or has a greater need for other features like living benefits.

Policy or Industry Changes

There can also be policy or industry changes that might prompt one to change their life insurance, such as updated mortality tables, and new product features and benefits. In addition, changes to tax laws – especially inheritance taxes – can increase or decrease the need for life insurance.

Infographic for "Can I Change My Life Insurance?"

What Can I Change About My Life Insurance?

So, we’ve addressed the fact that life insurance can be changed — but what about it can be changed?

As the policyholder, you are in control of the choices you make regarding your life insurance policy, whether it’s your life or someone else’s that is insured. This might include:

  • Buying additional life insurance coverage
  • Amending your life insurance policy with your current carrier
  • Canceling or selling your insurance policy and finding a policy better suited to your current needs
  • Withdrawing money from your plan

There are many reasons to both change, and not change, your existing policies. Some of these reasons include:

Reasons to Keep My Life Insurance

  • Competitive rates of return on dollars invested
  • Tax-favored characteristics and benefits 
  • Preservation of favorable health status
  • Changes in tax laws
  • Wait out surrender charge periods
  • Explore life settlement options

Reasons to Change My Life Insurance

  • Rising premiums
  • Outdated features and benefits
  • Unfavorable contract guarantees
  • Policy type is no longer aligned with current risk or need profile
  • Carrier quality concerns
  • Lack of underwriting upgrade programs

The bottom line? Life changes, and as it seems, life insurance policies are actually created with this fact in mind. The life insurance plan you structured 10 years ago isn’t irrevocable.

The Importance of Auditing Your Life Insurance Policy

Life insurance policy audits should be a part of your routine checklist. This includes taking a look at your existing policy’s premiums, death benefit, and guarantees as well as its current cash and surrender value.

But why do you need to audit existing plans? Improving an existing life insurance policy can mean:

  • Reducing risk;
  • Improving yields on premium dollars invested; and, 
  • Achieving peace of mind knowing that your affairs are in order. 

Part of our job at Acumen Insurance Solutions is to routinely audit our clients’ life insurance policies to ensure coverage continues to meet client needs. Get in touch today and read on to learn more about the importance of auditing your existing life insurance plan.

*Disclaimer: Life insurance policies are based on the claims-paying ability of the underlying insurance carrier and are not FDIC-insured. Pricing can be based on many factors, including the insured’s age, gender, health, and state of issue. Please refer to a current policy illustration for details.