Hidden Opportunities in Every Policy Review

Picture this: a client walks into your office with an old life insurance policy and asks you to review it with them. The instinct is often to replace it with another policy carrying a higher death benefit. Sometimes that’s the right call, but not before you’ve evaluated the current condition of the existing policy and identified any coverage gaps that could turn into problems down the road.

The client sitting across from you today has different needs than the younger version of themselves who bought that policy. Is there LTC exposure; premium fatigue; an underinsured spouse; or a risk tolerance that has shifted significantly? A thorough inforce review reveals all of this.

The Information Needed to Run a Solid Review

1. An “as-is” illustration. This shows how the policy performs under current
   premiums and values. Your case design team will identify key data points – product
   type, riders, cash values, and funding design.
2. A solve-to-age-100 illustration. This is required to determine whether additional premiums will be needed to sustain the policy. Some policies hold up well; others see cash values erode quickly in later years due to COI charges. This new premiumfigure becomes your baseline for evaluating replacement options.
3. The annual statement. This is not absolutely required, but valuable – particularly for reviewing premium history and recent COI charges.
4.  Cost basis. This is important if there is an existing loan on the policy.

With the above information in hand, the SPG Life & Annuity case design team can assess how the policy is likely to perform going forward, help you explain your findings clearly to the client, and begin designing alternatives around your clients’ current needs.

Current needs may not be premium driven at all. Maybe the clients need less death benefitand solid LTC coverage. Maybe the variable policy they bought years ago carries more risk than they’re comfortable with now and something guaranteed makes more sense. Maybe a paid-up policy would free up cash flow for other financial priorities. The options below don’t apply to every case, but they’re designed to help you think creatively when evaluating a replacement.

Policy Review – Sample Case

Inforce Policy Specs:

• Male, age 61 | Preferred Non-Tobacco
• Death Benefit: $1,025,000
• Cash Value: $276,250
• Ongoing Premium: $22,000
• Premium projected to vanish in 9 years at current dividend rates

This is not a distressed policy. Cash values are still maturing, dividends and death benefit are projected to grow, and there’s a clear path to premium elimination. But “not broken” does not mean “optimal.” Let’s look at what else is possible.

Option 1: 1035 the existing policy and apply 9 premium payments into a new Whole Life contract. This buys $1,275,000 of initial death benefit but it contains a small term rider to prevent a MEC issue. The death benefit then drops to $800,000 in year 3 when the term rider is removed.
Result: This is not a good solution for this client.

Option 2: 1035 the existing policy with an ongoing premium, solved for maximum
guaranteed death benefit to age 100 using a Guaranteed Universal Life (GUL) contract. This would provide $1,490,000 of guaranteed coverage – a level the current policy would not reach until age 91 under current dividend rates. It also locks in the premium payment period rather than relying on a projected vanish. The tradeoff: the client gives up the cash value that exists in the Whole Life contract.
Result: This is a viable option when the death benefit is the primary objective.

Option 3: Same GUL structure as in Option 2 but add an LTC rider. These clients are approaching the age where LTC exposure becomes real. They’re watching friends and family go on claim. The same premium and 1035 amount would provide $1,380,000 of guaranteed death benefit plus an LTC benefit pool paying $19,253 per month for 72 months. (HIPAA limits may cap the monthly benefit and extend the benefit period accordingly.)
Result: Guaranteed death benefit, guaranteed premium period, and LTC protection in one contract.

Option 4: Remove the ongoing premiums entirely and run the analysis on a paid-up basis. This returns $22,000 per year to the client for 9 years. $198,000 can be redirected toward other financial needs.

• 4A: 1035 the existing policy into a GUL solved to age 100 buys $915,000 of
  guaranteed death benefit. This is only $110,000 less than the current death benefit, and the client keeps $198,000 in premium. (Note: this comparison is based on the current death benefit and does not account for projected growth in the existing policy.)
• 4B: 1035 the existing policy into a GUL with a LTC rider buys $849,198 of guaranteed death benefit. This is $175,802 less than current death benefit, but again, the client recovers $198,000 in premium. Same note on projected growth applies.

Option 5: A split 1035 of the existing policy may be the most versatile solution here. This will allow the client to fund both a guaranteed paid-up policy and a separate hybrid LTC contract including a compound inflation rider on the LTC side.

• 5A: $100,000 of the 1035 funds a single-pay hybrid LTC policy. The monthly benefit starts at $6,277, growing at 3% compound to $9,495 by age 75 and $12,760 by age 85. All values are fully guaranteed.
• 5B: The remaining $176,250 of the cash value plus 9 years of $22,000 premiums funds $1,160,000 of guaranteed death benefit.
• 5C: For clients who want a no-premium scenario, the remaining $176,250 alone would purchase $580,000 of guaranteed death benefit. That may not be sufficient on its own, but it remains a viable option worth presenting.

Option 6: Apply the 1035 for the male client to purchase a guaranteed policy with LTC structured as above, providing $849,198 of guaranteed death benefit with the LTC rider. Redirect the $22,000 annual premium for 9 years to purchase the same type of policy on the spouse (Female, age 61, Preferred). That premium buys $547,000 of guaranteed death benefit with a monthly LTC benefit of $7,604 for 6 years. Both clients are now covered.

As the options above show, a policy review is not just a service call; it is a planning conversation. Done well, it reveals needs the clients did not know they had and creates a clear path to better coverage. That is worth initiating!

A few types of policies worth keeping on your radar for proactive reviews include:

1. Whole Life contracts with underperforming dividends. Carrier dividend
   performance varies. Current products may offer better results, and remaining
   payment years can often be matched to improve efficiency.
2. Older IUL contracts. Cap and participation rates may have been reduced over time, limiting performance. Newer IUL products offer more index options, improved chronic illness and LTC riders, and stronger guarantee structures.
3. Older Variable policies. Limited fund selections are common. Newer VUL products often carry expanded investment options, chronic illness and LTC riders, and indexed account options that can be valuable during income distribution years.
4. Older Universal Life products. Some carry favorable crediting rates but have seen COI increases that hurt performance over time. Many are underfunded, and catch up premiums can significantly exceed what was originally illustrated.
5. Loaned contracts. Loan rescue designs require commitment from both the advisor and the client, but the opportunity is real. SPG Life & Annuity has recently seen an uptick in these cases. They take work, but they represent some of the most meaningful conversations you can have with a client.