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The First 3 Steps to Life Insurance Serenity

Life insurance and serenity are seldom paired, but if you have life insurance or have been thinking about purchasing some, knowing what you’ve got and what it does can raise your sense of financial preparedness and calm.

We live in a world of risk, always seeking the balance between risk and security, and life insurance is a fantastic tool when applied appropriately. Life insurance may not always be the right tool for the task, but when it is, it performs loyally and with great potency.

The following information introduces three of the eight steps you and your financial planner should consider to ensure that your life insurance is ready for the unexpected. Having your life insurance policy or policies in satisfactory order confirms your policies are structured to suit your circumstances, helps you avoid unnecessary taxes, determines whether premiums can be reduced and still provide sufficient coverage, unearth potentially significant errors, and evaluate the balance of price and performance. The cost for this exercise is minimal, especially when considering the substantial damage from errors.

Step 1: Locate All Your Policies

Before starting the review, identify all the life insurance policies in your family. You and your spouse or partner may have different policies, and you may also have policies issued by professional associations or through your employment. Many professionals also have term life insurance policies, so collecting all your insurance policies helps organize your files for clarity for better understanding the total effect of your coverage.

Step 2: Conduct an Inventory

Each policy should be reviewed for:

a. The insured’s name

b. The insurance company’s name and address

c. The type of policy, whether term, whole life, universal, or variable

d. The policy number

e. The policy owner

f. All beneficiaries

g. The death benefit amount

h. The annual premium

I. The cash value

j. The anniversary date

k. Outstanding loans

l. Riders, if any

Furthermore, a calendar should be created that identifies the premium due dates for increased efficiency by setting reminders.

Step 3: Review the Insurance Company’s Ratings

Just as you would evaluate various elements of a stock before purchasing it, so also should you confirm that the insurance company has a strong financial rating. You should review the long-term ability of the company to pay its claims and evaluate the long-term cost of your policy. When a company is struggling financially, there are likely to be increased mortality charges or decreased dividends and interest rates that help the company protect itself from rating downgrades which further damage the insurance company.

Company ratings are available by checking with highly reputable rating services like A.M. Best, Fitch, Moody’s and Standard & Poor’s. They have specific categories for rating the current and future financial strength of an insurance carrier. A rating check can be conducted by your financial planner if you choose.

Should you and your financial advisor decide to replace a policy, consider the following before making a change:

a. Is the insured in good health so a new policy can be acquired at reasonable rates?

b. What are the surrender charges on the policy you wish to terminate, and what are the sales load fees on the desired policy? If costs are too high, making a change may not be financially appropriate.

c. Identify the annual premiums and determine if they are going to be much higher than the existing policy because of the age change of the policyholder.

d. Are there tax implications for surrendering an existing policy?

e. A new policy triggers a new two-year period that precludes payout for suicide and includes a number of other incontestable clauses. These clauses give the insurance company permission to void the policy, so be sure to read the fine print.

Our next blog post will continue this conversation about reviewing your life insurance policies. We hope this initial article about protecting yourself and your family by conducting a detailed review of your life insurance policies has been helpful.

Synergy Financial Management welcomes your inquiries and is available to discuss your insurance needs. We are also available to review your investment portfolio’s capacity to preserve your wealth from undue risk while also generating sufficient revenue to meet your retirement lifestyle’s needs. We are delighted to offer a free introductory discussion about how we can reduce your investment risk while accelerating your portfolio’s performance. Thank you!


Synergy Financial Management, LLC

13231 SE 36th Street, Suite 215

Bellevue, WA 98006

ph: 206.386.5455

fx: 206.386-5452

This article is for general educational purposes only. Nothing should be construed as individual tax advice. Please consult a tax advisor to see if this information is right for your situation.