By Jeff Ditsworth, CLU, ChFC, Sales Vice President, North American Company for Life and Health Insurance
Did you ever carry a brick cell phone around, perhaps in its stylish leather bag? Believe it or not, these retro brick phones are still sold online (in case you want to turn some heads and get a few laughs). Technology has evolved in the cell phone industry from brick phones to smart phones. We've gone from "comes with its own carrying bag" to " fits in your pocket." "Weighs only 3 pounds," to "weighs 4 ounces." "Stores 99 phone numbers," to "stores 20 full length movies." The technological improvements in cell phones are similar to those in life insurance policies. While it's not necessary to "upgrade" your life insurance every year or two, it's important to understand that the products and market conditions have evolved in 3 main ways drastically over the last 30 years. Life insurance is a financial asset, and like all financial assets, needs to be reviewed. Here's what to look for in your policies:
1) Fees and expenses mainly from what's knows as the "cost of insurance" may have decreased due to advancements in medical technology which has increased how long we live. Many life insurance policies written up until just a few years ago were based on mortality tables and medical assumptions from 1980. There are numerous medical conditions that even 10 years ago were assessed additional expenses such as high cholesterol, high blood pressure, and diabetes. Medical advancements have led to better treatment of these conditions, which increases how long we live. A decade ago, for example, someone with controlled hypertension may have faced an additional 150% to 200% cost of insurance, where today they may not.
2) Market conditions have changed drastically in the last 30 years. Think about interest rates. Many of these older life insurance policies were written when interest rates were much higher. Now that they are significantly lower, there may not be enough cash value in the policy to support the fees and expenses as once assumed. Additionally, many policies did not offer the guarantees on the payments or insurance amount that are offered today. Don't wait too long to have your life insurance reviewed - for many that threw their policy in a drawer, set it and forget it, it may be too late.
3) New product features have been a game changer for people purchasing life insurance. There have been dozens of positive features and benefits introduced in the past 10 years. In the past, there was only one way to access a life insurance death benefit, and that method may not overly attractive to most people. Today, life insurance companies have developed living benefit features that allow their policyowners to access a significant portion of insurance under certain conditions. When Americans are surveyed, usually a key concern about retirement is how to pay for healthcare expenses in retirement. These new features could be a significant cornerstone to someone's financial plan.
Now is the time to consult a reputable financial professional to review your life insurance. You may find better pricing, new features, and in many cases significantly better guarantees built into the policy. When we review older life insurance policies, we often find opportunities for people to either obtain larger amounts of life insurance coverage for the same cost of premium, the ability to obtain the same amount of coverage and stop or reduce their payments, or the opportunity to upgrade their insurance to obtain these living benefits and additional features. Once reviewed, you may find that for your situation, your insurance is perfectly positioned, in that case, wouldn't that make you more confident? It's also a best practice to regularly review your beneficiaries. Left unchecked, these can often lead to ex-spouses or even deceased individuals named as the beneficiary. Wouldn't it be unfortunate if your benefits paid out to someone other than who you intended? People purchase life insurance when they love someone, have it reviewed to make sure it will be there for them when it's needed.
So... when it comes to your life insurance policy, are you carrying the outdated brick phone, or the new smart phone? Review your policy with a financial professional today!