A Matter of Life and Breadth

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jeanne-keshishian_concordeThe importance of conducting life insurance reviews

By Jeanne Keshishian

Many Americans view life insurance as something you purchase, stick in a drawer and promptly forget about. The reality is that you’re doing yourself a potentially damaging disservice if you neglect to conduct periodic life insurance reviews. 

Insurance policies evolve over time, and policyholders’ circumstances change. Whether it’s a personal change or national economic context, the type of policy and coverage you have and how you’re paying for it can vary. Many times, people can pay less for the same amount of insurance, get more benefits for the rate that they’re paying, or simply restructure the nature of their policy to better reflect their evolving needs.

Policy priorities

Many Americans already own life insurance. Reasons for purchasing a policy include a desire to leave a tax-free legacy for loved ones, a sizable donation to a charity, or a gift to a religious institution, alma mater, etc. Life insurance is an efficient way to do that, because you’re putting in relatively small amounts of premium and getting comparatively large amounts of insurance in return—and beneficiaries don’t have to pay income tax on it.

Costs and coverage

Applying for life insurance is like going to the bank and asking for a loan: the less you need it, the more likely they are to give it to you. Serious medical diagnoses—Alzheimer’s disease, cancer, or a heart attack—are the most common hang-up. Those are typically considered uninsurable events—at least in the short term. With the latter, lifestyle changes and medication can make it possible to get underwritten within years after a significant event. Because approval frequently comes down to case-by-case reviews, an experienced agent can help guide you through the process, directing you to an insurance company who understands that disease.

New kinds of life insurance can also pay you—you can spend down the life insurance to pay for Long-Term Care.  Life insurance can be used either in monthly payments to pay for a caregiver, or nursing home care, or, in lump sums whereby you could choose to use the money to render your home wheelchair accessible, for instance. 

Factors and funding

Things that might prompt you to review or revise your existing policy include:

  • Major life changes: divorce, remarriage, new family members, etc.
  • Funding a special needs trust for a grandchild diagnosed with autism or other condition. With life insurance money in a trust, the child is still eligible for Medicaid, and parental resources are freed up.
  • Estate planning, especially to offset taxes for future wealth transfer.
  • Building endowment for an alma mater, place of worship, etc.
  • Any big changes in tax laws.
  • Protecting yourself for retirement. Repositioning your life insurance to a whole life insurance policy that has no correlation with the stock market is a wise move as you age, avoiding losses at a time when you won’t be able to wait out a market recovery.

The value of a review

Life insurance is an asset class, and it’s essential to periodically review what you’re paying for, determine if you still need it and find out if you own the right kind of coverage.

Americans are living longer than ever thanks to improved sanitation, healthcare and nutrition. Insurance companies are not exposed to the same risk today as they were a century ago, when life expectancies topped out in the late 40s. Consequently, policies purchased 20-30 years ago might not be giving you the best value for your money.

Reviews can determine what you’re comfortable paying, if you’re currently paying a fair price and if you’re paying for life insurance in the best possible way and can help secure a new policy that doesn’t require additional payments.

Securing the services of a professional

Ideally, you want an experienced life insurance specialist with a professional designation as Chartered Life Underwriter (CLU). Independent professionals have the flexibility to shop around that captive agents do not, which is something else to consider. Ratings also matter. You want an insurance company that has A or better ratings from the four top ratings agencies: A.M. Best, Fitch, Moody’s and S&P–and a COMDEX score (which rates an insurer’s financial reserves) greater than 75.

The right professional will help ensure your policy is best suited for you—and help you make any necessary changes needed. Part of that process is a commitment to regular reviews, encompassing your life and all of its personal, professional and financial circumstances. The bottom line is that life insurance today is surprisingly affordable. You can secure a quality policy for the equivalent of a single trip to Starbucks every week—an incredibly small price to pay for one of the most important investments you can make to protect the security and wellbeing of yourself and loved ones.

Jeanne Keshishian is president of Concorde Insurance Agency.