POLICY ANALYSIS AND CARRIER REVIEW
WHY POLICIES NEED TO BE REVIEWED REGULARLY
Prolonged low interest rates have pressured insurance companies to seek new avenues to increase profitability. In addition to raising the cost of new policies and reducing their contractual guarantees, several major insurance companies have increased mortality costs on existing coverage.
In these cases, the projected duration of the policies will be shortened, and policyholders will be required to pay significantly increased premiums to be certain their policies will last their lifetimes. These challenges have become more problematic when larger estates and corporate insurance arrangements are involved.
THE IMPORTANCE OF CARRIER FINANCIAL STRENGTH
Several insurance companies are making foundational changes in the way they conduct business which could have an adverse impact on your clients’ policies. For example, some companies have sold large blocks of business to non-insurance entities which may not be equipped to properly manage in-force policies.
LIKE MANY ADVISORS, PERHAPS YOU HAVE CLIENTS WHO ARE ASKING “WHAT SHOULD I DO…”
- My insurance company just increased my annual premium from $40,000 to $180,000
- My insurance coverage that was guaranteed until age 100 will now end at age 85
- My insurance company (or a division of) was just sold to a private equity firm
- I can’t afford or don’t need my insurance coverage any longer
- My insurance company’s financial ratings were significantly downgraded
- Now that estate tax thresholds are lower, do I still need insurance for my estate plan
GIVE YOUR CLIENTS PEACE OF MIND
With years of experience reviewing thousands of complex insurance arrangements, Stone Point has the expertise and proprietary analytical tools to evaluate your client’s policy and the strength of the life insurance company that is guaranteeing the policy.
With each policy analysis, you and your clients will receive a detailed, written report with recommended action steps. The results are often surprising, always enlightening, and enable you to give your clients and trustees peace of mind.
SECOND OPINION UNDERWRITING
Our proactive underwriting advocacy process helps remove barriers to obtaining favorable underwriting offers and policy pricing.
THE MOST COMMONLY-INVOLVED ASPECT OF INSURANCE PLANNING
When your client’s estate, financial and business planning strategies involve life insurance funding, the most difficult challenge may be negotiating the best possible offer from the insurance companies. This is particularly true for larger insurance amounts on older clients with medical issues. In these cases, managing the underwriting process is critical for obtaining the best possible offer and avoiding the risk of being denied coverage.
WHEN TO GET A SECOND OPINION
HOW UNDERWRITING ADVOCACY CAN MAKE A DIFFFERENCE
potential for positive underwriting offers and pricing through a proactive approach that adds detail, expertise and clarity to the application process. Additionally, our underwriters leverage their strong technical abilities and deep relationships with home office underwriting departments to proactively represent your client’s case.
POLICY MANAGEMENT
The life insurance industry is constantly evolving; impacting new and existing coverage. In many incidences, this has led to some policies not performing as originally intended, creating a mismatch between your clients’ expectations of their policy and their policy’s results. Additionally, policyholders’ needs and objectives can change after the policy is initially designed.
To ensure your clients’ expectations and financial needs are always being met, Stone Point uses state-of-the-art technology and a dedicated team of experts to provide ongoing monitoring and management of your clients in-force life insurance policies.
Using a detailed, written review process and annual analysis, we work closely with you and your client to determine if the policy’s performance meets current expectations, and if it does not, other solutions may be identified.
On an ongoing basis, we provide:
- Monitoring of real-time, effective ongoing policy performance
- Access to policy information in one centralized location
- Automated trust administration for documenting policy performance
- Ongoing policy service by a trusted provider
By working together, we can form a durable bridge that connects your clients’ expectations of promised policy benefits with actual results.
LIFE SETTLEMENTS
Situations may arise when your clients no longer need or want their policy. Generally, this is due to:
- Changes in your clients’ planning needs (e.g., retirement income needs, changes in estate taxes,
business changes, etc.) and/or - Changes in the policy structure (e.g., carrier-imposed premium increases, reduced duration of
coverage, and other policy performance problems)
When these situations occur, we work with you and your client by first analyzing the existing policy and examining the potential for a life settlement. Based on our findings and the client’s objectives, we provide detailed analyses and recommendations of various options that may include:
- Allow the policy to lapse
- Surrender the policy for cash value
- Restructure the policy
- Exchange for a new life policy or an annuity
- Pursue a life settlement when a higher net value seems likely
REASONS WHY YOUR CLIENT MAY WANT TO TERMINATE THEIR POLICY
- Recently had their insurance premium increase significantly and unexpectedly. As a result, they no longer want to pay premiums and would like to sell the policy for a lump sum cash payment.
- Will likely outlive the maturity date on their life insurance policy.
- Estate tax exemption thresholds have been lowered, making estate planning life insurance unnecessary.
- Funds are needed to focus on personal needs such as retirement, long-term care insurance, or family emergencies.
- Term policy is nearing the end of a term period. The client can convert to a permanent product and receive, through a life settlement, proceeds for an asset that will terminate if not converted.
- Business is sold or changes are made that result in insurance no longer being needed.
- Executive has retired and received unneeded insurance through a deferred compensation arrangement.
- Policies held within a trust are no longer meeting the original trust plan objectives.
- Current policy is underperforming. The need for insurance may still exist, but the client wants coverage that has better guarantees.
- Client would like to exchange their current policy for a variable one that provides equity opportunities.
- Business partners have made changes within their Buy-Sell Agreement which makes insurance no longer necessary.
- Charitable-owned policies are under-performing and need to be replaced in order to preserve the benefit to the charity.
IS YOUR CLIENT A CANDIDATE FOR A LIFE SETTLEMENT?
- Individuals age 65 and older (age 70 or older if female)
- Life expectancy of 14 years or less
- Decline in health from original policy issue
- Life insurance policies with a net death benefit of $250,000 or more (no maximum)
- Policy type: Universal Life, Guaranteed Universal Life, Survivorship Universal Life, Variable Universal Life and Convertible Term (Sometimes Whole Life)
- Owner can be an Individual, Trust, or Corporation
- Premium should be 5% of the Death Benefit (or less) and Cash Surrender Value should be 15% of Death Benefit (or less)
In a life settlement agreement, the current life insurance policy owner transfers the ownership and beneficiary designations to a third party, who receives the death proceeds at the passing of the insured. As a result, the buyer has a financial interest in the seller’s death. When an individual decides to sell their policy, he or she must provide complete access to his or her medical history, and other personal information, that may affect his or her life expectancy. This information is requested during the initial application for a life settlement. After the completion of the sale, there may be an ongoing obligation to disclose similar and additional information at a later date. A life settlement may affect the seller’s eligibility for certain public assistance programs, such as Medicaid, and there may be tax consequences. Individuals should discuss the taxation of the proceeds received with their tax advisor. ValMark Securities, Inc. supervises all life settlements as a security transaction. ValMark Securities, Inc. and its registered representatives act as brokers on the transaction and may receive a fee from the purchaser.
LONG TERM CARE
Advances in medicine, technology and health awareness have allowed us to live longer. However, with greater longevity comes the risk of eventually needing some type of extended health care. How you prepare for that possibility directly impacts the security of your entire portfolio, and can pose one of the greatest threats to your retirement income security.
As health care costs continue to rise, more and more people are wisely deciding to assign the risk of needing long term care (and the financial impact that comes along with it) to an insurance company through a hybrid life and long-term care insurance policy.
After we assess your personal situation, we can help you design a policy and plan individually tailored to protect your assets now and in the future for a variety of situations. These plans can help:
- Cover the costs of long-term care,
- Provide emergency funds when you need access to liquid assets, and
- Create a financial legacy that you can leave to your loved ones.
Have a case you would like to discuss?
Securities Offered Through Valmark Securities, Inc. Member FINRA, SIPC
Customer Relationship Summary (CRS)
Investment Advisory Services Offered Through Valmark Advisers, Inc. a SEC Registered Investment Advisor 130 Springside Drive, Akron, Ohio 44333 | 1-800-765-5201
Stone Point Financial Group is a separate entity from Valmark Securities, Inc. and Valmark Advisers, Inc. Stone Point Financial Group, Valmark Securities, Inc. and Valmark Advisers, Inc. do not provide legal or tax advice.
