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Procedures and Cost for Basic
Preliminary Review of Existing Permanent Life Insurance
- Obtain authorization from client to request in-force ledger
of existing insurance policy showing projections for future
years.
- Also, where possible, obtain and review original policy,
including application, and illustration used at the time
the policy was sold.
- Have an independent agent run comparable illustration
with reasonable underwriting and investment assumptions
to test (1) reliability of projections with regard to policy’s
duration (i.e., whether it will likely survive as long as
insured might live) and (2) competitiveness of policy’s
internal rate of return compared to possible alternatives
of similar risk.
- Review the insurance company’s financial soundness
ratings from the various rating agencies (A.M. Best, Moody’s,
Standard & Poor’s, Fitch, and Weiss Ratings).
- Prepare written review of preliminary findings and recommendations
and possible next steps. These could include: (1) do nothing,
(2) conduct more in-depth testing of assumptions behind
policy projections, (3) increase premiums, (4) reduce death
benefit, (5) seek new or substitute policy from same company
(without any new underwriting required) that would guard
against risk of policy lapse, and (6) explore possible replacement
of policy with one offering a likely superior long-term
rate of return without an increase in risk.
Estimated cost for basic service: $500
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