Old life insurance policies can cost you money

Insurance policies, like other components of a well-designed retirement plan, require diligence both prior to their purchase and after their activation.

The dangerous, though common, practice of purchasing Variable Universal Life and Universal Life Policies and then ignoring them through the years, can result in a significant loss of money.

If you are not careful these policies can actually eat themselves from the inside, when the cost of insurance rises above the planned premium payments.  It is best to catch this as early as possible.  A telltale sign of this happening is when your cash value on the most recent annual statement is lower than the cash value on the previous year’s annual statement. This means that the planned premiums going in are not enough to cover the cost of insurance and the difference is being pulled from the cash value.

We help people in this exact situation come up with the best solution to their insurance requirements all of the time.  Because we are an independent firm and not tied to a single insurance company, we can work with you and your insurance company to adjust premiums to carry your policy to a desired age, or we can look at alternatives with other insurance companies.

Not all permanent policies get into trouble like this.  Sometimes Variable Universal Life and Universal Life policies are performing well and still growing cash value.  In general Whole Life Insurance will not run out of cash value.  Whole Life is designed to be more expensive up front with premium dollars, and they can return some of the unused premiums in the form of dividend payments.  This is a more expensive way to purchase permanent coverage.

If you have a permanent policy (either Whole Life, Variable Universal Life, or Universal Life with cash value in it) you need to ask yourself one question: What is the purpose for this coverage?  If your goal is strictly to have the policy pay out at the time of your death, you may be leaving money on the table.

We have helped people move their cash value in one policy to a newer less expensive type of insurance, Guaranteed Universal Life.  In doing so, their death benefit amount has increased and their death benefit is guaranteed to be paid.

So, if you have an old insurance policy and want to know if it is still the best vehicle to accomplish your goals, we can help you make sense of it all, and put you mind at ease.

Call to set up an appointment and we’ll be glad to review your policies for you.