Kicker: Warning Signs

Potential Life Insurance Problem Areas

–Underperforming policies. A few years ago it was not unusual to see variable universal life policies illustrated at 10% or 12% assumed gross rates. In the 1980s and 1990s both universal life and traditional life policies were illustrated with high-anticipated crediting rates. Small decreases in rates of return can have a significant, negative effect over time.

–Policies that are insufficient for current client needs. A clients needs may have changed and a different amount of death benefit might be needed.

–Newer products that may be more cost efficient. Better mortality, better underwriting and the streamlining of expenses among major insurers have driven much of this development.

–New products and riders that may offer better options. The new generation of products offer secondary guarantees and riders designed to address many current clients needs.

–Policies scheduled for a jump in premiums. This could be a matter of policy design (as in the case of older graded premium policies) or simply a function of poor underlying policy mechanics.

Reproduced from National Underwriter Edition, May 14, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.