Prolonged Low Yield Bond Rates Should be Investigated
It would be normal to think that the Pandemic might be a concern to life insurance companies. I would guess that it is a concern, but the long term low interest rate environment relative to “inforce” permanent life insurance policies is a much more pressing issue.
“Permanent Life insurance is built on a growing cash value”
Why a policy audit?
Permanent Life insurance is built on a growing cash value. Other than Variable Life contracts, most permanent life insurance policies have a built in 3%, even some with 4% interest rate guarantee. In today’s interest rate environment those yields are hard to achieve!
2020 year-end tax law revisions reflected the problem allowing insurer’s to reduce the policy guarantee to 2%, but that is only for new purchases. The end result of that adjustment is premiums on permanent life insurance policies are going up!
That tax law change is an indicator that all permanent life policies should go through a routine policy audit to determine the impact of the long term, low interest rates. Determining that a permanent policy is properly funded periodically is prudent but the low interest rates, would suggest that the audit be completed more frequently. Having a policy lapse that was set up to last a lifetime is not the intention of coverage being permanent.
If you have a permanent policy that you would like audited drop Kyle an email at firstname.lastname@example.org or call 203.698.9342. Better to be safe than surprised!
Kyle’s extensive sales and account management expertise transcends both Commercial and Personal Lines. Coupling that with his finance and life insurance licenses, Kyle serves as full service insurance agent for all of his valued clients. The goal for Kyle is to provide tailored risk management to address his client’s current and future exposures, and to optimize wealth preservation.