Is Your Life Insurance Any Good? Probably Not!
Here’s The Deal…
People are living longer = life insurance premiums are lower
The life insurance industry uses a standardized table to help them determine how much to charge on a new insurance policy called the Commissioners Standard Ordinary Mortality (CSO) table. The most recent table available was the 2001 CSO, prior to that it was the 1980 CSO and well before then insurance companies used the 1958 CSO. Because of advancements in technology, medicine and healthier lifestyles people are living longer and to remain competitive, life insurance companies have lowered the cost of insurance on new policies. According to Accuquote, insurance costs are near historic lows down 75% since 1990.
What the insurance company is not telling you is that your older policy may be cheaper today even though you are older. Think about it. If you are an insurance company and someone is sending you a payment of $300 per month for $250,000 of death benefit, would you want to tell them that they could buy that same $250,000 death benefit and only send you $200 per month – I think not. Ultimately, incentives drive behavior and the insurance company has no incentive to go back and help you fix your old life insurance policy.
One other point of consideration is that the insurance companies didn’t immediately switch to the new tables. They weren’t required by National Association of Insurance Commissioners (NAIC) to switch to the 1980 CSO table until January of 1989 and to the 2001 CSO table until January of 2009. This means that if you bought a policy in 1986, you policy may have been priced based on the 1958 CSO table or if you bought a policy in 2006, it may have been based on the 1980 CSO table. The point is that just because you are older doesn’t mean a new policy today won’t save you money and we can help.
Click Here To See If You Can Start Saving Money Today!
Interest rates are low = policies lapsing (dying)
Years ago when you bought your policy, the prime interest rate was probably much higher than it was today. In the early 80s, it was as high as 21.5% and in the 90s, it was as high as 10.5%. Today, the prime interest rate is at a record low 3.25%. The agent who sold you your insurance policy may have assumed rates at 7-8% or higher and based on those rates told you how much money you would have to pay every month or year to keep the policy in-force. However, as interest rates decreased at the federal level, your insurance company probably reduced rates down to 3-4%. If that’s true, then you would need to pay a much higher premium to keep your insurance in-force. Without the additional assumed interest and as your costs go up with your age, there may not be enough excess cash value to cover the cost of the insurance.
Most policy holders may be in for a rude awakening when their insurance company sends them a large bill to cover fees after the savings balance runs dry. Imagine paying $250 per month on the policy you bought in 1994 only to get a bill that says you need to put in $850 per month to keep the policy in-force. You want to call someone, but you haven’t talked to the insurance agent that sold you this policy in 15 years who probably isn’t even in the business anymore. If you don’t know if your policy is working correctly, you should know and we can help. Click Here to Find Out
You may have too much insurance = you are wasting money
When you are young, you may not have a need for life insurance. However, as you take on more responsibility and your family grows, your life insurance needs increase. Your needs may then decrease after your children are grown. You should periodically review your needs to ensure that your life insurance coverage adequately reflects your life situation. According to the Insurance Information Institute, 32 million US Households own insurance policies that may not be appropriate for them. Your life insurance needs change as your life changes.
Since the extra money that you spend on premium could be used for other things, such as saving for retirement or college, you should buy only as much coverage as you need. It’s wise to periodically review your insurance coverage – especially as you undergo a significant life event (e.g., divorce, birth of a child, change in your financial situation) – to make sure that have just the right amount of coverage and aren’t overinsured or underinsured. The amount of life insurance you should have depends on several factors, including your income, assets, debts, expenses, and financial goals. Email or call us if you would like some help in determining if how much life insurance you should carry.
When you take action to fix your insurance policies, the insurance company loses a substantial amount of revenue from YOU. That means you win.
Find out if this applies to you. A Certified Financial Planner (CFP®) will personally audit your policy within 24 hours. CLICK HERE
Life Insurance Audit
Tell us a little about yourself and your current insurance policy and we’ll get back to you within 24 hours with a full assessment of how your policy compares to the competition. Using some basic information from your existing policy, we can quickly determine:
How much money you could be saving?
How much coverage you could have for the same cost?
How much coverage you could have if you didn’t want to pay anymore premiums (paid-up)?
Your information is confidential and our report is . Click Here For a Life Insurance Policy Review