Just like any product, insurance policies change over time – they improve, they offer new features, they drop old features that aren’t working. It’s very likely that our audit will find a new, improved insurance policy to replace your old, outdated model – as it did for this couple:
The Previous Coverage: Fifteen years ago, our clients purchased a survivorship policy – one that insures two people and pays a death benefit upon the death of the second person to die. Due to a strong family history of longevity, they were concerned that they would outlive the policy, which was set to mature at age 100.
Our Audit: Our audit discovered that, when the policy matured at age 100, the death benefit would be reduced from $2 million to the extremely low cash value of the policy, estimated at about $1,000. Our research revealed that in order to fund the policy to yield the $2 million projected cash value at maturity, the couple would need to increase their annual premium payments from $29,116 to $43,060 – nearly a 50 percent increase. While they had the funds available to pay the increase, we cautioned them against this option, because the only way they would benefit is if one or both of them lived past age 100. If they died prior to age 100, the extra money paid into the policy would go to the insurance company.
A Better Solution: We identified an option to transfer the cash value of the current policy into a new policy with no maturity date. The full death benefit would remain in effect until the second death, no matter the age at death. Even better, the premium for the new policy was $27,554 – five percent less than their current costs.
Is your policy outdated? Find a better model.