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Is It Time For A Life Insurance Review?

By David Thatcher CFP®
August 2018

Cypress Wealth Management

When you look at everything on your never-ending task list, it’s easy to see how a life insurance review gets pushed to the bottom of the pile. There are so many other pressing financial issues to take care of, such as estate planning, maximizing your retirement accounts, and creating a Social Security strategy, that it’s easy to think that the life insurance policy you purchased years ago will suffice. 

But a life insurance review, as unexciting as it sounds, may be necessary and beneficial. Like changing the oil in your car, if you put it off for too long it could lead to bigger problems. Here are a few of the reasons you might want to pursue a life insurance review:

1. You Could Outlive Your Policy

What would happen if you lived longer than your life insurance policy? Poor performance, loans, incorrect ownership, or beneficiary choices could lead to a mess for your loved ones when your policy is needed most. There’s a chance your current policy may have an expiration date that you aren’t aware of. Many policies are set to endow at age 95 or 100, and while that may seem like a long time to live, in the past 30 years alone, the U.S. centenarian population has grown 65.8%. [1] 

If you outlive your policy, the repercussions could be disastrous. Make sure you understand and plan for this situation, especially if you purchased your life insurance policy at a young age.

2. You Could Run Into Tax Problems

Life insurance is often thought of as being income tax-free at your death, but some policies are inadvertently set up to be taxable at death. If your policy was created this way, would that cause issues for your family? If it would, or if you aren’t sure if it would, an advisor may be able to help you rectify this problem and create a strategy to ensure your family isn’t caught off guard.

3. Your Policy Could Be Performing Better

How do you know if your life insurance policy is performing as expected? When you purchased the policy you were most likely provided a projection of values, but have you seen an updated estimate since then? How would it compare to what you were originally shown?

It’s possible that your policy is outperforming its original projection, but considering the direction of the economy over the past few years, it’s more likely that the policy has underperformed. If so, what might that mean for you and your plans for your loved ones?

Now may be a good time to update your projections and ensure they are on track. Most often, it’s easier to adjust a policy before it goes too far off course. Your advisor can help you evaluate how the policy has performed since you purchased it and how it is projected to perform in the future.

4. Your Policy May Be Outdated

Throughout the last few decades, life insurance has evolved into a more valuable and robust risk management tool. Today’s policies can cover more than just premature death. There are options to cover chronic illness and long-term care and they have the ability to direct policy cash values among multiple options — not just the insurer’s general account.

If it’s been a few years or decades since you first purchased your policy, you may need to add additional coverage, such as long-term care, with a rider, which can be more cost-effective than buying a separate policy.

Even if you don’t need to add features, you may still need to verify that your beneficiaries are up-to-date and check if you have the correct amount and type of coverage.

Reviewing Your Policy

Life insurance can be confusing, and it is often difficult to know if your policy is doing what it’s supposed to do. Through an insurance update, we can help you examine your policies in-depth so that you can have increased confidence that your plans are on track. If you are concerned about your life insurance policy or would like to schedule a review, contact one of our offices today.

About Cypress Wealth Services

Cypress Wealth Services, an independent RIA firm providing financial planning and investment management to high net worth individuals, families, business owners, and institutions. CWS is comprised of professionals with diverse backgrounds and extensive experience and qualifications. CWS is uniquely qualified to serve a broad range of client needs. Their experience and expertise act as a foundation for their client service process, The Second Growth, which focuses on efficiently protecting, growing, and transferring to their loved ones the wealth and legacy a person has already built. With offices in Palm Desert and Anchorage, the firm serves clients across the country. Learn more by visiting