5 Questions To Ask During A Life Insurance Policy Annual Review

September 17, 2018 | By Adam Lippman

A life insurance policy is an important investment for consumers. We’re diligent about choosing a policy that seems to best meet our family’s needs and then we reliably make those required premium payments on time so we can keep the policy in-force as the years go by.

Unfortunately, too many seniors tend to just stuff the policy in a drawer and forget about it because they fail to view their policies as what they truly are — investments — and don’t evaluate them through the same lenses they use when considering other assets in their portfolios. After all, few of us bought a stock or bond we found attractive 30 years ago and then just closed our eyes to the performance of that investment, oblivious to whether or not it still made sense to own that stock or bond.

Pause for a moment and revisit the original reason why you purchased your life insurance policy in the first place. If you’re like most of us seniors, chances are that the appeal of buying a policy was due to one of these factors:

  • To provide an inheritance for your surviving spouse and/or children;
  • To protect your family from debts that would need to be paid;
  • To help fund educational expenses for your children or grandchildren;
  • To pay for your funeral expenses so your family wouldn’t need to front the costs; or
  • To leave behind a charitable legacy that your family could carry out.

For most of us, the decision to purchase a life insurance policy came down to the basic idea of trying to provide financial relief for our loved ones in the event of our untimely death. But today, many of us are in a different place in our life journeys than we were when we first bought that policy. As a result, the reasons we purchased our life insurance policy in the first place may no longer apply like they once did.

Financial advisory experts recommend that seniors conduct an annual review of their retirement funding plans, including an evaluation each year of your life insurance policy investment. Here are five questions to ask in that annual review in order to help you evaluate whether your life insurance is still serving its purpose in your portfolio:

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  1. Do you still need any life insurance coverage?
  2. If so, what is the right amount of life insurance benefits for you today?
  3. Are the current premiums on your policy affordable for you?
  4. Have changes to your estate or tax bracket affected the need for the policy?
  5. Do you have need to generate cash from the policy to offset other retirement expenses, such as health care bills or travel plans?

It’s important to conduct an annual review of your life insurance policy investment and reassess whether it is still serving its original purpose as one of the assets in your portfolio. If it is, then terrific — you should keep that policy in-force and stay on top of those premium payments. But if it is no longer serving its purpose, you should know that you have options for how to realize value from that policy today. One option you may want to consider if your life insurance policy is no longer serving its purpose is to sell the policy to a third party in a life settlement transaction.

A life insurance policy is considered your personal property and — as such — you have the right to sell that policy just like any asset that you own, such as a house or a stock. In a life settlement, a policy owner receives a cash payment, while the purchaser of the policy assumes all future premium payments and receives the death benefit upon the death of the insured. Candidates for life settlements are typically aged 70 years or older, with a life insurance policy that has a death benefit or at least $100,000, and those seniors who sell a policy can obtain roughly seven times more money than the cash surrender value of the policy.


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