Low interest rates and widespread changes within the life insurance industry have significantly impacted the performance of many life insurance contracts and have changed many of the products currently available on the market.

Never before has it been more important to undertake a complete analysis of your life insurance coverage to determine whether existing policies are still appropriate for long-term needs and if they are performing as projected in the original illustration when the policy was sold to you (highly unlikely).

An objective review of your life insurance coverage could reveal essential information, such as whether:

1. Coverage you currently have is insufficient or too much,
2. Policies have failed to perform due to changes in interest rates,
3. Policies are scheduled for a premium increase,
4. There have been changes in insurer financial ratings,
5. Newer products might be more cost efficient or offer better guarantees,
6. Underwriting changes could reduce the cost of existing coverage,
7. New riders could offer more favorable features, such as return of premium or guaranteed death benefit protection and,
8. There is the potential to tap into assets from an existing policy through the use of a Life Settlement.

The purpose of a Life Insurance Review is not to replace existing insurance. If you have good coverage at a price that is competitive with the market, the policies should is most cases be left alone. A Life Insurance Review is part of an ongoing assessment of your current and future needs. The review will uncover how policies are performing, an assessment of the number of years that the policy will remain in force based on current assumptions, and where appropriate, information about alternative policies. The major problem with older policies (particularly those written prior to 1997), is that they were illustrating at very high interest rates that could not possibly be maintained. These policies may have reflected a premium vanish of say 10 years which due to a drop in interest rates is now more than 20 years.

Over the last few years, new designs in life insurance, a much more efficient, competitive marketplace, along with improved mortality have resulted in stronger, more cost effective products. You may be in a position to benefit from these improvements and optimize your life insurance coverage. When the replacement of an existing policy is appropriate, a "1035 Exchange" should be considered. An Internal Revenue Code Section 1035 Exchange refers to a tax-free method of swapping an existing life insurance policy for another policy with another company. Using a 1035 Exchange, the contract holder can exchange insurance contracts while preserving the original policy's tax basis and deferring recognition of any gains for federal income tax purposes. Lastly, when coverage is no longer necessary, a sale of that policy in the Life Settlement Market often will return more dollars than a surrender of the policy for its cash surrender value.

Questions?

If you have any questions regarding this matter or any other estate planning techniques, please contact a Maurice Kassimir & Associates, P.C. Trusts & Estates attorney or e-mail us: sklawyers@skpclaw.com.