Competitiveness of existing policy: A new policy with a different company may offer a much 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 from the largest and financially strongest companies (more than one of which has current policy interest rates of 7% percent or more).

Please note that this finding assumes that the insured’s relative health has not markedly changed since the current policy was issued and that the new insurer would offer a reasonably favorable health classification that approximates, or is not much less favorable than, that of the current insurer.

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 earnings on the cash value and future premiums are significantly higher and the future insurance costs for the new policy roughly equal or improve upon those of the existing policy.

Policies with high death benefit rate of return guarantee: If you consider replacing your existing policy, you might want to review a newer type of policy that has a very competitive guaranteed death benefit in contrast to the conservative guarantees of traditional policies. If the premium is paid regularly and on time, the guaranteed death benefit on these policies (universal life with “no lapse” guarantees) remains in effect for the insured’s life even if the policy cash value falls to zero. Because of the inflexibility of these policies, their low cash values, the consequences of missed or late premium payments, and the lack of upside potential if interest rates increase, we are quite selective in the circumstances that we recommend these policies over the best traditional policies. But you may wish to pursue this alternative if the high guaranteed death benefit rate of return is especially attractive to you.

Financial strength of insurance company: The financial strength ratings of your existing insurer are reasonably good (with a specific mention of what they are). But there is no reason not to switch to a company with all of the top ratings if (1) it also has a record of delivering superior value to its policyholders, (2) the cost of making this change can be minimized and would be far more than offset by the higher returns from the new policy, and (3) the new company would offer the same or similar underwriting (i.e., health) classification as the current policy.

If you like, please call to discuss our findings and suggestions and the additional ways we can help you obtain the best value from your existing cash value and future premium payments.