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Tuesday, November 12, 2013

Your Life Insurance Policies Don’t Have a “Check Engine” Light

By Anthony DeGregorio, Zenith Marketing

Early last week, an article appeared in the Wall Street Journal, entitled “Low-Rate Era Hits Insurance Policies.” It paints a grim picture of various types of universal life (UL) insurance policies purchased in the late 80’s and 90’s, and how many are imploding due to dwindling cash values coupled with the low interest rate environment.

Many of us in the industry have been trying to draw attention to this imminent threat for years now. You would call me crazy if I suggested not performing routine upkeep and maintenance on your house or your car. In fact, I’d be willing to wager that if you didn’t take your car to the mechanic every once in a while, it wouldn’t stay on the road for very long. The same goes for your life insurance policies! Periodic policy reviews need to be done – they are not optional.

Unfortunately, many clients don’t seem to appreciate the negative ramifications that can be brought about by lower-interest rate environments, especially on products they may have purchased years ago when rates were significantly higher. We’ve all heard the phrase “An ounce of prevention is worth a pound of cure”, and this sentiment rings true here as well – many of these policies could have been easily saved years ago with timely intervention, either via policy adjustments or additional premiums. Sadly, it may be too late for some of your clients – their policies may very well be living on borrowed time.

There have been billions of dollars of life insurance sold in the past decade, and these policies need to be actively managed. The following questions are an easy way to get started:
  • Have your clients been paying their premiums on time?
  • Have your clients skipped paying any premiums?
  • How have your clients’ contracts performed? Have the actual interest rates earned kept pace with projections?
  • Have you or your clients requested inforce illustrations to accurately assess the health of their policies?
Believe it or not, the whole “doom and gloom” thing really isn’t the point here. The message I am trying to convey is a simple one; there are NO DOWNSIDES to performing regularly scheduled policy reviews. Not only do policy reviews further cement your relationship with your clients by getting you more face time with them, they also provide you with unique opportunities to dig more deeply into the financials of these clients. By doing so, you can create openings to write additional business, and more importantly, ultimately create more value for your client. And don’t forget about all that term life insurance floating around out there – not only do opportunities exist for conversions, but other term options are now available with products designed to offer living benefits, such as terminal, chronic, and critical illness protection. Do your clients need these types of coverage? You’ll never know unless you ask!

The last line of the WSJ article really hit home for me – a policyowner stated “I’m mad at myself for buying the damn thing in the first place.” How would you feel if one of your clients said that to you?

Conducting a policy review is simple, and the advisor’s goal is twofold; first, to make sure that the policy is healthy and performing as intended, and second, to make sure that the policy still supports the client’s overall retirement and estate planning goals. The questions above are an easy way to get started.

However for those advisors actively looking to dig more deeply, Zenith Marketing Group has designed a proprietary Comprehensive Policy Review (CPR) system to help you specifically address your clients’ policy review needs. With CPR, you have access to a wealth of policy review resources to share with your clients. Contact me today to find out how to get started.

The full text of the aforementioned article can be found on www.online.wsj.com by searching for “Low-Rate Era Hits Insurance Policies”.