Risk of Policy Lapse: The critical and overriding issue with your current policy is the serious risk that it will lapse (i.e., terminate) before your death, even though you bought and have paid for the policy with the intention and expectation that the coverage would be permanent.

Even without reviewing a current projection of the policy’s performance from the carrier (which involves a more extensive analysis than this initial review entails), we can tell from our own calculations that the current cash value and the planned future premium payments will not be adequate to sustain the current death benefit if the insured lives a reasonably long and healthy life. In fact, the policy may well expire by the insured’s age ____.

This risk results largely from the substantial decline in interest rates since this policy was purchased. (In some cases, the risk may be caused – or compounded – by the failure to pay premiums on a regular basis and/or because of loans taken from the policy. With a variable policy, the underlying investments, which are usually in equities, may not have produced an average rate of return that was used in projecting future policy performance). Policies which rely for their sustainability on the assumption of relatively high interest rates or investment returns that do not persist will fall apart – at least at older ages. To keep such policies going as long as the insured might live will generally require either a higher premium or lower death benefit. With a more extensive analysis, we can help you explore these, and perhaps other, specific alternatives, depending on your preferences and goals.

Rate of return/competitiveness of existing policy: While the question of greatest importance for this policy is whether it will last with the current premium payments, we also believe that, if the relative health of the insured has not changed markedly since the policy was issued, a new policy with a different company will offer a better return on the existing cash value and future premiums. That is because the existing policy is currently crediting an interest rate of 4.75%. We would suggest looking at alternatives with the largest and financially strongest companies (more than one of which has current policy interest rates of 7% percent or more). Even with some transaction costs in making a policy switch (which, with our expertise and oversight, are kept to a minimum), the advantage of a replacement should be clear if the health classification on the new policy is reasonably favorable.

If you like, please call at your convenience to discuss our findings and suggestions and the additional ways we can help you protect your life insurance coverage and obtain the best value from your past and future premium payments.