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Fair Market Value Determination. A policy may have a fair market value that is significantly higher in the secondary market than its cash surrender value indicates. In coordination with step 5, this part of the process can yield hundreds of thousands of dollars to the participant.

The following case study is representative of the type of improvements to be made:

Current Policy Facts -- Universal Life Policy issued in 1990, $1,000,000 level Death Benefit, with a policy and cash surrender value of $317,309 Current annual premium, $30,000 (Standard, non-smoker) Policy guaranteed to age 83, projected to remain in-force to age 92

Post-audit recommendations -- Policyholder can obtain Preferred non-smoker status with a different, comparable (A++) carrier, $1,000,000 level Death Benefit, Annual premiu

Most people who own Life Insurance are overpaying for it. If your insurance policy is two or more years old, and/or you are paying more than $10,000 per year in insurance premiums, you are at risk of utilizing an "underperforming" product. Why? Improvements in insurance products and pricing, underwriting technology and mortality assumptions, and changes in the insurance marketplace, have created large discrepancies among the performance of various policies. Unfortunately, a lack of information, along with hurdles to "comparison shopping", often results in higher premium payments coupled with lower death benefits.

A simple solution to this problem is a thorough, independent, third-party audit of existing insurance. For reasons that will become clear, an individual insurance provider or financial advisor is quite simply technologically incapable of adequately performing an audit (as opposed to a "policy review"). You are little better off if you use a Trustee. According to a study in the May 2003 issue of Trusts & Estates, only 16.5% had a formal process for reviewing their trusts' life insurance policies. The GOOD news? According to one auditor, over 60% of the cases examined resulted in a significant -- greater than 30% -- improvement recommendation. In other words, you are likely to lower your premiums or increase your death benefits by more than 30%, by simply "scheduling a consult". The remainder of this article will be devoted to a description of the type of information you should demand of your auditor, along with a brief case study.

A true policy audit should consist of, at a minimum, the following six components:

1. An Underwriting Analysis. Mortality costs are, obviously or not, the single most expensive portion of a life insurance policy. Medical technology has driven rapid advancements in underwriting. Tests for liver function, kidney function, illegal drugs, nicotine, PSA, HDL/LDL, and glucose levels are readily available. Selective use of non-invasive procedures such as EBCT, when warranted, aids in further risk stratification. Use of updated mortality tables can also result in significant premium reduction. The expertise to skillfully negotiate mortality risk is a primary differentiating factor among auditors.
2. A Product and Carrier review. An auditor must have access to, and the technological expertise to review and compare, hundreds of insurance carriers and the literally thousands of products they make available.
3. A thorough Carrier Assessment. "Acceptable" S&P, Comdex, or Weiss financial ratings don't tell a complete story. Consolidations, Merger & Acquisitions activity, or Wall Street imperatives have changed the way many companies manage blocks of business.
4. An In-Force Ledger Examination. Verification of current policy projections, funding levels, and guarantees ensures policies will remain in force for as long as necessary.
5. A Case Design Review. Current financial planning objectives considering updated policyholder circumstances and current tax law changes should be reassessed. Often underemphasized and consequently overlooked, this is a vital aspect of a true audit. The most expensive life insurance policy is the one for which you are paying, but no longer need.
6. Fair Market Value Determination. A policy may have a fair market value that is significantly higher in the secondary market than its cash surrender value indicates. In coordination with step 5, this part of the process can yield hundreds of thousands of dollars to the participant.

The following case study is representative of the type of improvements to be made:

Current Policy Facts -- Universal Life Policy issued in 1990, $1,000,000 level Death Benefit, with a policy and cash surrender value of $317,309 Current annual premium, $30,000 (Standard, non-smoker) Policy guaranteed to age 83, projected to remain in-force to age 92

Post-audit recommendations -- Policyholder can obtain Preferred non-smoker status with a different, comparable (A++) carrier, $1,000,000 level Death Benefit, Annual premium

technologically incapable of adequately performing an audit (as opposed to a "policy review"). You are little better off if you use a Trustee. According to a study in the May 2003 issue of Trusts & Estates, only 16.5% had a formal process for reviewing their trusts' life insurance policies. The GOOD news? According to one auditor, over 60% of the cases examined resulted in a significant -- greater than 30% -- improvement recommendation. In other words, you are likely to lower your premiums or increase your death benefits by more than 30%, by simply "scheduling a consult". The remainder of this article will be devoted to a description of the type of information you should demand of your auditor, along with a brief case study.

A true policy audit should consist of, at a minimum, the following six components:

1. An Underwriting Analysis. Mortality costs are, obviously or not, the single most expensive portion of a life insurance policy. Medical technology has driven rapid advancements in underwriting. Tests for liver function, kidney function, illegal drugs, nicotine, PSA, HDL/LDL, and glucose levels are readily available. Selective use of non-invasive procedures such as EBCT, when warranted, aids in further risk stratification. Use of updated mortality tables can also result in significant premium reduction. The expertise to skillfully negotiate mortality risk is a primary differentiating factor among auditors.
2. A Product and Carrier review. An auditor must have access to, and the technological expertise to review and compare, hundreds of insurance carriers and the literally thousands of products they make available.
3. A thorough Carrier Assessment. "Acceptable" S&P, Comdex, or Weiss financial ratings don't tell a complete story. Consolidations, Merger & Acquisitions activity, or Wall Street imperatives have changed the way many companies manage blocks of business.
4. An In-Force Ledger Examination. Verification of current policy projections, funding levels, and guarantees ensures policies will remain in force for as long as necessary.
5. A Case Design Review. Current financial planning objectives considering updated policyholder circumstances and current tax law changes should be reassessed. Often underemphasized and consequently overlooked, this is a vital aspect of a true audit. The most expensive life insurance policy is the one for which you are paying, but no longer need.
6. Fair Market Value Determination. A policy may have a fair market value that is significantly higher in the secondary market than its cash surrender value indicates. In coordination with step 5, this part of the process can yield hundreds of thousands of dollars to the participant.

The following case study is representative of the type of improvements to be made:

Current Policy Facts -- Universal Life Policy issued in 1990, $1,000,000 level Death Benefit, with a policy and cash surrender value of $317,309 Current annual premium, $30,000 (Standard, non-smoker) Policy guaranteed to age 83, projected to remain in-force to age 92

Post-audit recommendations -- Policyholder can obtain Preferred non-smoker status with a different, comparable (A++) carrier, $1,000,000 level Death Benefit, Annual premiu

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1. An Underwriting Analysis. Mortality costs are, obviously or not, the single most expensive portion of a life insurance policy. Medical technology has driven rapid advancements in underwriting. Tests for liver function, kidney function, illegal drugs, nicotine, PSA, HDL/LDL, and glucose levels are readily available. Selective use of non-invasive procedures such as EBCT, when warranted, aids in further risk stratification. Use of updated mortality tables can also result in significant premium reduction. The expertise to skillfully negotiate mortality risk is a primary differentiating factor among auditors.
2. A Product and Carrier review. An auditor must have access to, and the technological expertise to review and compare, hundreds of insurance carriers and the literally thousands of products they make available.
3. A thorough Carrier Assessment. "Acceptable" S&P, Comdex, or Weiss financial ratings don't tell a complete story. Consolidations, Merger & Acquisitions activity, or Wall Street imperatives have changed the way many companies manage blocks of business.
4. An In-Force Ledger Examination. Verification of current policy projections, funding levels, and guarantees ensures policies will remain in force for as long as necessary.
5. A Case Design Review. Current financial planning objectives considering updated policyholder circumstances and current tax law changes should be reassessed. Often underemphasized and consequently overlooked, this is a vital aspect of a true audit. The most expensive life insurance policy is the one for which you are paying, but no longer need.
6. Fair Market Value Determination. A policy may have a fair market value that is significantly higher in the secondary market than its cash surrender value indicates. In coordination with step 5, this part of the process can yield hundreds of thousands of dollars to the participant.

The following case study is representative of the type of improvements to be made:

Current Policy Facts -- Universal Life Policy issued in 1990, $1,000,000 level Death Benefit, with a policy and cash surrender value of $317,309 Current annual premium, $30,000 (Standard, non-smoker) Policy guaranteed to age 83, projected to remain in-force to age 92

Post-audit recommendations -- Policyholder can obtain Preferred non-smoker status with a different, comparable (A++) carrier, $1,000,000 level Death Benefit, Annual premiu

housands of products they make available.

A thorough Carrier Assessment. "Acceptable" S&P, Comdex, or Weiss financial ratings don't tell a complete story. Consolidations, Merger & Acquisitions activity, or Wall Street imperatives have changed the way many companies manage blocks of business.

An In-Force Ledger Examination. Verification of current policy projections, funding levels, and guarantees ensures policies will remain in force for as long as necessary.

A Case Design Review. Current financial planning objectives considering updated policyholder circumstances and current tax law changes should be reassessed. Often underemphasized and consequently overlooked, this is a vital aspect of a true audit. The most expensive life insurance policy is the one for which you are paying, but no longer need.

Fair Market Value Determination. A policy may have a fair market value that is significantly higher in the secondary market than its cash surrender value indicates. In coordination with step 5, this part of the process can yield hundreds of thousands of dollars to the participant.

The following case study is representative of the type of improvements to be made:

Current Policy Facts -- Universal Life Policy issued in 1990, $1,000,000 level Death Benefit, with a policy and cash surrender value of $317,309 Current annual premium, $30,000 (Standard, non-smoker) Policy guaranteed to age 83, projected to remain in-force to age 92

Post-audit recommendations -- Policyholder can obtain Preferred non-smoker status with a different, comparable (A++) carrier, $1,000,000 level Death Benefit, Annual premiu

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Fair Market Value Determination. A policy may have a fair market value that is significantly higher in the secondary market than its cash surrender value indicates. In coordination with step 5, this part of the process can yield hundreds of thousands of dollars to the participant.

The following case study is representative of the type of improvements to be made:

Current Policy Facts -- Universal Life Policy issued in 1990, $1,000,000 level Death Benefit, with a policy and cash surrender value of $317,309 Current annual premium, $30,000 (Standard, non-smoker) Policy guaranteed to age 83, projected to remain in-force to age 92

Post-audit recommendations -- Policyholder can obtain Preferred non-smoker status with a different, comparable (A++) carrier, $1,000,000 level Death Benefit, Annual premium of $10,400 (65% reduction in premiums) Policy guaranteed for life. Alternatively, the policyholder was willing to maintain premium payments in return for enhanced death benefits. The same highly rated carrier offered$1,538,750 level Death Benefit (54% and $500,000+ improvement!) Annual premium, $30,000 (Preferred, non-smoker)Policy guaranteed for life.

Bottom Line: A thorough appraisal of in-force life insurance requires a simultaneous process to evaluate performance and negotiate risk. Not a static or academic comparison, but an actual underwriting process, resulting in a negotiated offer. A true second opinion. Is it worth going through the process? Judge the results for yourself.