Hey, how is going?It's me your life insurance policy. Would you maybe want to grab a coffee sometime? It's been too long.
If you were to go on a date with your life insurance policy, would it sound something like this? If so, it is time you revisited your plan. It is time to find out if your policy will last as long as your life, especially if your policy is designed to build cash value over time, and you haven't had a checkup over the last few years.You might end up not understanding what’s happening until it is too late, or be forced into a very expensive “fix” if you procrastinate.
Time to rekindle the flame with your life insurance policy.
(Note: The issues and advice below do NOT apply to term life policies, which remain in force when you pay a fixed premium for aset number of years, typically 20 or 30 years.)
Why get a policy checkup?
— Low Investment returns on cash value.
Approximately 20 years past, people were urged to purchase “universal life insurance,” adding additional cash to the policy, which would grow tax-free at a calculated interest rate.
Another type was “universal variable life,” which provided investment options such as mutual funds for the extra cash within the policy. The growth of your cash value would alter depending on your selection of investments.
When these policies were bought years ago, many of these proposed premium “models” were based on the premise that interest rates on universal life policies would remain 8 percent to 10 percent — and that enough extra cash value would build up to help pay premiums in future years. However, these models are not guarantees.
Interests rates have fallen to the minimum promised rate and have persisted to be low for years. Now there is not adequate cash inside many policies to pay the year-end premiums.
Presently, if you want to keep your policy in place, now that you are older and closer to needing it, you might be urged to pay huge annual premiums to keep the policy going. (And you might not be well enough to qualify for a new, cheaper expensive policy.)
— Insurance charges skyrocket. The insurance companies can’t change the face amount of their policies. And they are obligated to continue to pay the guaranteed minimum interest rate, as high as 4 percent on some older policies.
So they are doing the one thing that is allowed in the contract: raising the “mortality charges” and expenses — the cost of insurance (COI) within the policy. That indicates that your cash value doesn’t build as quickly. It also saves the insurance company a lot of money. And it may mean you’ll need to pay greater premiums down the road to keep the policy in place.
— Policy loans cause problems. One of the most attractive things about life insurance, besides the tax-free growth of your excess premium inside the policy, is the ability to borrow some of that cash out of the policy on a tax-free basis. It is so convenient that many people forget to repay the loan!
That means the death benefit will be lowered by the amount of the loan plus interest. In some cases,those unpaid policy loans trigger a larger premium, requirement to keep the policy in force. That can come as quite a surprise, especially if you’re older and retired.
This is your life insurance policy, and you must stay informed and updated on any changes. Here’s how to get a policy checkup. (Those who have policies owned by an insurance trust should encourage the trustees to do this type of review.)
You cared enough to acquire life insurance and to pay premiums all these years. Rekindle the flame you found so many years ago with a life insurance checkup. And have a happy Valentines Day!
Contact us for your insurance analysis today -- http://www.insdm.com/insurance-analysis.