Got Whole Life Insurance? Time for a Checkup!

For many individuals and families, life insurance plays a central role in their wealth management and estate planning strategies.  Are you certain that you are adequately covered?  Even if you are, it’s wise to periodically re-evaluate your situation.  

Here are four important questions to consider: 

1.  Might you outlive your policy?  Although newer policies may ‘mature’ well beyond age 100, that’s not always true of older policies. With longevity on the rise, you or your parents could live beyond a policy’s maturity date.  

If so, what happens?  That depends.  Some insurance companies simply continue the policy while others may issue a check to pay it off.  Generally, the proceeds will be subject to income taxes;  moreover, the timing and amount of the payment will be different than you planned for…and…may create problems. 

2.  Is your policy underfunded?  Low interest rates have been bad news for fixed-income investors…and…they have caused some insurance policies to become ‘underfunded’.  That may require higher premiums or settling for reduced death benefits.  Alternatively, a policy might become worthless over time.  

3.  Has your net worth declined?  Given what has happened in financial and real estate markets over the last 5-10 years, your net worth may have significantly declined.  If so, you may not be leaving nearly as much as planned for loved ones.  It may be appropriate to consider additional insurance to compensate for any funding gaps. 

4.  Are your beneficiary designations in order? As the saying goes, “Life is full of changes.”  People die, get divorced, become ill, get married, graduate, have children, and become estranged…to name just a few possibilities.  In light of these possibilities, take a few moments to review your beneficiary designations and include your retirement accounts, wills, and trusts while you’re at it.  Do those designations still make sense?  

The bottom line:  life insurance is important and can be very complicated, so it’s never a bad idea to call your insurance agent and arrange for a review.  It may also make sense to contact your estate planning attorney and wealth manager for a more complete review of your situation.

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