Important Questions to Ask About Variable Life Insurance Policies & Proposals
Amount: Is the amount of life insurance correct for your client’s needs? Should the death benefit be a level death benefit or an increasing death benefit?
Basic Assumptions: Are policy projections based upon a reasonable assumed gross annual rate of return?
Ownership: Is the policy ownership structured correctly within your client’s estate, business or financial plan?
Beneficiaries: Are the primary and secondary beneficiary designations structured correctly within your client’s estate, business or financial plan? Who is responsible to ensure that policies have appropriate designations? (i.e. attorney, CPA, insurance representative, client)
Insurance Company: Is the life insurance company a strong competitor, based upon premium volume, in the variable life insurance industry?
Surrender Charge: What is the surrender charge duration and amount?
Subaccount Choices: Does the life insurance company offer an acceptable variety of well managed subaccounts to provide the desired investment alternatives within the policy? Are the management fees for these subaccounts competitive? Are these subaccounts managed by external money managers or internal money managers in the insurance company? Does the company offer competitive interest bearing accounts within the policy? How does the insurance company evaluate the performance of their money managers? What is their process for changing money managers? Please remember that the policyowner’s primary option if he/she is dissatisfied with the subaccount choices and/or performance is to apply for a replacement policy with a new life insurance company. This process requires the insured to reprove insurability, and the new policy will have new acquisition costs.
Asset Allocation Models: Does the life insurance company offer asset allocation models tailored to the policyowner’s risk profile and investment objectives? Will the life insurance company automatically rebalance the subaccounts to the asset allocation model, and at what intervals? Is there a charge for this service?
Full Documentation: Do the policyowner and the appropriate advisors have a complete copy of the variable life illustration, policy prospectus, historical investment performance, and any other materials relevant to the money managers, risk tolerance and investment objectives, and the asset allocation models?
Ongoing Service: Who will monitor the actual investment performance and the impact of the investment performance on the long term policy performance?