Life Insurance Policy Audit
Making the Most of Your Insurance Portfolio
The Life Insurance Policy Audit and Review process integrates the client’s need for a brief education in the complex world of life insurance, with their need to understand their specific policy’s existing and future benefits, costs and options. The following process helps to identify the current need, value and appropriateness of your existing life insurance policies.
Step 1: Client Interview
The process begins with a brief but important client interview. Through a seven-question client questionnaire, we are able to ascertain whether the insured’s original intentions and life insurance needs are still valid. We are also able to gain an understanding of the insured’s philosophies, as applied to policies longevity, premiums and death benefits.
Step 2: Data Gathering
To properly evaluate a life insurance policy it requires very specific policy information that is not always easily obtainable from the insurance company. As always, the quality of results depends strictly on the amount and quality of the data obtained. The life insurance audit and review process includes obtaining the original policy and as sold illustrations, recent annual and quarterly statements and current in-force projections with the detailed accounting pages.
Step 3: Interpretation of Data
Upon receipt of the data, it is verified for accuracy through a specific review process. Once the data is determined to be accurate, the interpretation process is implemented. The interpretation of data process is where the policy specific data is evaluated and converted into our standard format. This format prepares the data for our next step, which includes an overall policy evaluation, performance and policy tax analysis.
Step 4: Policy Analysis
This step involves an intensive study and evaluation of all policy data, beginning with an existing policy spreadsheet to organize each policy. The primary analysis includes an evaluation and comparison of prior and future premiums, cash values, expenses, cost basis, taxable gain and other financial related data. We also review each policy’s longevity, meaning how long will the policies last, assuming the planned premiums are paid. We will then identify policy longevity options with varying premium amounts and compare to the current policies in the market. We will also identify IRR as a measure of financial value.
Step 5: Company Evaluation
Not all insurance companies are of equal strength. Accordingly, the insurance company evaluation step is critical to the audit and review process. In this phase we evaluate an insurance company’s financial stability, its ability to pay future claims, its investment portfolio and yields as well as its overall rating as compared to all life insurance companies. This step draws company specific data from the leading independent rating agencies in the world including A.M. Best, Moody’s, Standard & Poor’s and Fitch. In addition, we have developed a more in depth procedure for evaluating the relative strength of the insurance companies.
Step 6: Recommendations
In this final step we provide clients with our recommendations regarding their existing insurance policies. To this end, clients will receive a written summary of their policies with recommended modifications that should be implemented. It will be presented in a simplified one to two page format so that the suggestions and policy recommendations are easily understood.
For a detailed explanation of the Platinum Peak Policy Audit and Review Process, please contact us.