Many times, the life policies owned by Americans were purchased when interest rates were much higher. These, usually universal life policies, had assumptions based on the higher rates and lower internal charges. But, where are we today? Interest rates are much lower, insurance companies are having a rough time earning the necessary spreads and administrative and mortality costs aren't what they planned. So, many times, your client gets a statement that says "based on current premiums, your policy will lapse on xxx date.” Or, "If no further premiums are paid, your policy will lapse on x date." So, what to do?
Ask your client to get the policy and the last statement. Ask the insurance company to produce a re-projection based on the current interest rate (or guaranteed rates), the highest mortality costs and the highest administrative costs. Then ask the insurance company to tell your client what needs to be paid in premiums to guarantee that the policy won't lapse. When that comes back, you advise your client on how to proceed… if the policy is good, or if they have to increase the premium, reduce face amount, or… allow you to shop the market for guaranteed premiums they can afford, a death benefit they desire, and the good feeling that the death benefit will be there when they need it.
So, what do you do now? Call Levon or one of our other marketing consultants to assist you in this life insurance review. Manage the life insurance asset like you would manage any other. Everyone wins at this.