By LouAnn Schulfer, AWMA®, AIF®
Accredited Wealth Management Advisor^SM
Accredited Investment Fiduciary®

When is the last time you’ve had your life insurance policy reviewed?

As with all types of business, the life insurance industry has evolved.  There are things we can do with life insurance today that could not be done years ago.  One of my favorite ways to help people with their life insurance analysis is reviewing old policies.  Often times, we’ll find whole life policies that have been in place for many years and have accumulated cash value.  We talk through the various uses for this cash value and how it will affect the policy’s death benefit.  Most times, the clients do not wish to take the money out of the policy after all, rather, they wish to leave the cash value so that the death benefit remains intact for their beneficiaries.

This is where things can get exciting!  If the insured person is still insurable, we check around with various insurance companies to see what is currently offered that would fit the individual’s profile.  Then, we analyze the old policy versus new offerings to see which one is the best going forward.  If a new policy is more beneficial, we can facilitate a 1035 exchange into the new life insurance policy.  “1035” is a section in the IRS tax code that allows a tax free transfer of the policy’s cash value, which often times, can purchase more death benefit than the existing old whole life policy, and sometimes, for far less or even no more premium due.  This is called a “paid up” policy, and always makes people happy!

Long term care cost concerns can be addressed as well, as we can look at adding a long term care rider to the new insurance policy.  This is very often the preferred method of risk management for long term care costs versus a traditional long term care policy where if you don’t use the long term care benefit, you lose the money you’ve paid in premium.  Not so with the life insurance policy that has the long term care rider, because if you are fortunate enough to not use the long term care rider, the money that you’ve paid into the policy is returned to your beneficiaries in the form of a death benefit, often in multiples of what you’ve actually paid into the policy, income tax free! (consult your tax advisor for tax advice specific to you)

It’s also worth having your existing term life insurance policy reviewed.  Is it convertible?  A term life insurance policy covers the insured for a specified “term”, for example, 20 years.  If the policy is convertible when it is issued, it can be converted to permanent insurance at a later date regardless of health conditions, no medical exam required!  This can be a very valuable feature, providing guaranteed death benefit to your loved ones past the original “term” date of the policy.  As I recently told a client of mine, even with the new higher premium associated with the converted policy, there is not an investment in the world that I can offer that can guarantee a “return” via payout of the death benefit, for the new premium that will be paid into his converted policy, regardless of how long he pays the new premiums into the policy.

I have worked with individuals and their life insurance for nearly two decades.  There is almost nothing that is more professionally fulfilling to me than completing a thorough analysis and placing proper life insurance coverage for my clients and their families, knowing their families are financially prepared for the life chapter of when death occurs.  The only thing more fulfilling than the aforementioned is, when tragedy strikes and one’s final day has been realized, having played a part to help carry out their wishes as they had planned.

LouAnn Schulfer is co-owner of Schulfer & Associates, LLC Financial Professionals and can be reached at (715) 343-9600 or [email protected].  Visit www.SchulferAndAssociates.com | blog.

Securities and advisory services offered through LPL Financial, a Registered Investment Advisor.  Member FINRA/SIPC.  Accredited Wealth Management Advisor ^SM and AWMA® are trademarks or registered service marks of the College for Financial Planning in the United States and/or other countries.  The Accredited Investment Fiduciary® designation is earned through the Center for Fiduciary Studies.  ​