There are many existing life insurance portfolios that are “chaos in waiting.” Helping those whose life insurance may be in chaos can not only help you with your sales, but also help you maintain and build strong, lasting relationships.

The most common question I receive as an analyst/consultant from a new client or from an advisor is: I have a policy from XYZ Insurance Company, and is it any good? And that’s the basic question that it always boils down to — is this policy (or policies) any good?

Four questions you should ask when reviewing a client’s existing policy:

1) Is there an appropriate amount of life insurance? Most likely, life has changed for the insured since buying the policy, and more life insurance is needed. Often, an individual will be under-insured and/or have policies that don’t fit their needs.

2) Can you lock in a level premium? On term insurance, the length of the level premium period remaining may fall short of the client’s anticipated period of need. If the client has an annually renewable term policy, then locking in a level premium can save them money.

3) Is the policy underfunded? Permanent life insurance policies can often be underfunded. You can assist the client by obtaining and reviewing an in-force illustration, showing how the policy will perform based on current assumptions. The policyowner may need to purchase supplemental coverage or replace the coverage with a newer/less-costly policy.

4) Can the client get a lower rate? Review the rate class that a policy was issued at. Depending on the client’s medical history, you can either assist the client in getting a lower rate on an existing policy or assist them in finding a new lower priced product.

If a policy’s life expectancy is less than the client’s need and/or life expectancy, then the policy will be of no benefit. Being able to recognize whether a policy will outlive a client is something that requires diligence and understanding. Replacing a policy is also something that needs to be carefully reviewed and not taken lightly. It’s important to make sure that replacement is in the client’s best interest.

Tony Steuer, CLU, LA, is a specially licensed individual life and disability insurance analyst, one of about 30 such analysts licensed by the state of California. Tony also serves as a member of the Curriculum Board for the California Department of Insurance. Tony is the author of “Questions and Answers on Life Insurance,” a reference book covering the wide spectrum of life insurance topics in a format accessible to consumers and advisors. Email him at tony@lifeinsurancetoolbook.com or visit his website at www.lifeinsurancetoolbook.com.

For more articles on policy reviews, see:

Is Your Clients’ Coverage Up to Par?

Life insurance checkup: An important tool for financial health

8 tips for success in tough times