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Here are only a few of the common problems discovered in many portfolios:
- Crediting or dividend rate at time of purchase was 4% to 6% higher than the current crediting rate of the policy, and no adjustment to the contribution amount has ever been made. The policy is greatly underfunded and will lapse well before the insured’s projected mortality, unless much higher premiums are added to the policy today.
- Client's policy was issued when the client was a smoker; but the client stopped smoking over 10 years ago. Premiums still reflect the smoker classification.
- Client took out large loans on whole life policies. The loans are still outstanding and the client is paying interest rates of 7% or higher.
- Client has large life insurance policies paying premiums in excess of $100,000 per year. Given reduced interest rates, policy values are not projected to be high enough to ever pay the policy premiums. This could mean 20 or more years of premiums still to be paid.
- A business owner client has a key man policy on his life. The policy is over 20 years old. The client is 75 and the cash value well exceeds the contract basis. There would be a large income tax due if the policy were cashed in.
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