Important Questions to Ask About Term Life Insurance Policies & Proposals
Amount: Is the amount of life insurance correct for the client’s needs?
Basic Assumptions: Are the illustrated assumptions accurate and reasonable? (i.e. age, sex, health underwriting)
Ownership: Is the policy ownership structured correctly within your client’s estate, business or financial plan?
Beneficiaries: What are the appropriate primary and contingent beneficiary designations? Who is responsible to ensure that policies have appropriate designations? (i.e. attorney, CPA, insurance representative, client)
Guaranteed Premium: Does the policy have a guaranteed level premium for a long enough period (e.g. 10, 15, 20 or 30 years) to minimize your client’s total term insurance premium cost for the projected duration of the term insurance need?
Cost: What is the term insurance company premium offer after the underwriting (insurability determination) is completed? What does the life insurance really cost? Please keep in mind that life insurance companies evaluate “smokers” differently, and have different levels of “preferred” premiums as well as “substandard” premiums.
Conversion Guarantee: Does the term insurance policy guarantee the right to convert to cash value life insurance at the term insurance underwriting classification without further evidence of insurability? Does this conversion guarantee extend for the entire premium guarantee period or to a maximum possible age for older insureds, usually age 65, 70 or 75?
This conversion guarantee is your client’s “Plan B” if the insured’s insurability worsens or the client’s need for the life insurance lengthens and the policy owner wants to continue the life insurance cost effectively beyond the term insurance guarantee period.
Insurance Company: What are the size and financial ratings of the life insurance company? Also, does the term life insurance company have sufficient size, adequate financial ratings, and good historical performance to be likely to offer cost effective cash
value life insurance if the client’s life insurance needs or health change in the future and the conversion guarantee is exercised? Has the company been downgraded by the rating agencies recently?