The Importance of Inforce Policy Reviews

Policy reviews may not be the flashiest topic, but they are a vital part of what we do. Many consumers (and even some advisors) assume that once a life insurance policy is purchased, you can “set it and forget it.” But life doesn’t work that way. Your clients’ circumstances evolve, and their life insurance protection should evolve with them. Regular reviews ensure their coverage continues to support their goals, needs, and financial future.

As your clients’ families, incomes, and liabilities grow, their needs can too. They may want to pivot to a cash value-oriented policy to provide future income or to pay for college.  As your clients age, their needs may shift toward estate planning or preparing for long-term care needs.

A straightforward question like “When was the last time your policy was reviewed?” may be just the nudge a client needs to schedule that meeting you’ve been trying to get on the calendar.

Reasons Your Clients Need Inforce Policy Reviews

• Adapting to Life Changes: Major life events such as marriage, divorce, the birth of a child, purchasing a home, or a new job can significantly alter a client’s financial obligations and require updates to their coverage.
• Ensuring Adequate Coverage: A policy review helps determine whether the current death benefit is still adequate to cover existing debts – like a mortgage – and future expenses – such as college tuition or retirement needs. It also highlights potential coverage gaps that could leave beneficiaries financially vulnerable.
• Updating Beneficiary Designations: Life events often necessitate changes to named beneficiaries to ensure the policy proceeds go to the intended individuals, avoiding legal complications or unintended payouts down the road.
• Optimizing Costs and Benefits: The insurance market continually evolves, and new products with better features, lower costs, or improved underwriting opportunities (eligibility changes after positive health improvements like quitting smoking) may be available. These updates can save your clients money or significantly enhance their coverage.
• Evaluating Policy Performance: For policies with a cash value component (like whole or universal life), reviews ensure the policy is performing as expected and not at risk of lapsing due to underfunding or lower-than-projected growth rates.
• Estate and Tax Planning: A review helps ensure that the policy continues to align with broader estate planning objectives, including tax efficiency and asset distribution strategies. 

How Inforce Policy Reviews Benefit the Advisor

• Building Trust and Credibility: Proactive, regular check-ins position you as a trusted advisor who genuinely cares about the client’s long-term financial well-being, rather than just being a transactional salesperson.
• Enhancing Client Retention and Loyalty: Clients who feel well-served are less likely to shop around for insurance or financial advice elsewhere. This helps to improve retention rates and foster long-lasting relationships.
• Identifying New Business Opportunities: Reviews naturally uncover new needs or coverage gaps and lead to opportunities for cross-selling additional policies (e.g., disability riders, long-term care options) and/or gaining referrals from satisfied clients.
• Professional Oversight: It is a professional best practice that helps ensure policies remain “in force” and appropriate for the clients’ circumstances over time. Reviews also help to protect the client and the producer from potential issues in the future.

You have successfully scheduled a meeting with your clients to review their in-force coverage, but it’s been a while since you last discussed their estate or life insurance plans. What exactly do you need to conduct a thorough policy review?

Option A: The Quick “High Level” Review

You can then better gauge what is important to the clients. While a new premium may be higher, including a living benefit, a longer guarantee, or shorter premium duration may be attractive. Conversely, some clients may no longer need the same level of death benefit and would be happy to learn they can reduce coverage and premiums or eliminate them entirely with a full paid-up contract. To provide a meaningful evaluation of their current coverage, in-force illustrations are essential.

Option B: The “Detailed” Review

If you wrote the original policy, we can help obtain inforce solves. If you are not the agent on the inforce policy, we recommend calling the carrier along with the policy owner, who will authorize the carrier to speak with you. We can then review the information with you to determine whether new coverage might be a better fit or if adjustments to the existing policy could enhance its overall design.

Option C: The “Works” Review

A detailed review helps us narrow those needs, allowing our Underwriting team to negotiate the best possible offer and deliver the right result.

Real Examples of Inforce Reviews

Case One: Male age 54 with an inforce whole life policy.  Dividend performance had been greatly reduced and, as a result, the projected death benefit did not show much growth over time.  Current death benefit was $890,000, the premium was $8,000 annually and the current cash value was approximately $180,000.  While cash value was not the focus, the advisor still wanted to show alternatives that would maintain cash accumulation inside the contract. 

1. Maximum death benefit – using an Indexed UL, the full 1035 of $180,000 and premium of $8,000 annually will buy $1,257,580 of death benefit guaranteed to age 105 with the upside of index-based interest crediting.
2. Introduce LTC benefit – the same no-lapse solve to age 105 but with a $500,000 pool of LTC allowing for a $10,000 monthly benefit and 50-month benefit period.  The new death benefit solve – Guaranteed to age 105 with LTC – is $1,204,650.  While this is a small reduction from option A, it adds a valuable Living Benefit.
3. A full 1035 to fund an LTC focused hybrid policy.  This option has a more robust LTC benefit with a 6-year benefit period and monthly benefit that grows 3% annually.  Initial monthly benefit was $12,794 per month.  The advisor believed the monthly benefit was too high and was not sure if the client would think it was necessary.
4. Since the hybrid solve generated too much monthly benefit, we designed a split 1035 design using the original premium and dump in.  Using about a third of the 1035 we were able to buy a hybrid policy with a $5,000 monthly benefit with a 3% COLA. We used the remaining $110,000 of the 1035 and the $8,000 premium to buy a Guaranteed IUL to age 105 resulting in $925,000 of guaranteed coverage on top of the increasing LTC pool.

The result? The advisor and client liked the combined death benefit and hybrid options but also wanted to see a shorter payment stream.  The advisor will obtain a short-pay inforce illustration for BSMG to review and compare once it is received.

Case Two: Male age 60 with a $1.1MM Whole Life policy.  He pays $7,000 annually and has a current cash value of $510,000.  Ideally, the client wants to get more death benefit and eliminate the $7,000 premium he pays.  The initial conversation revealed that the client’s wife – 56 years old – is underinsured. The couple would consider buying up to $1MM of coverage on her if the premium was not considered too high.  BSMG proposed several alternatives including:

1. A $510,000 1035 exchange, with no premium, provides $1,695,630 in guaranteed death benefit to age 105.
2. The same $510,000 1035, with no premium, can buy $1,580,488 of death benefit guaranteed to age 105, along with a full LTC rider.  This would provide 4 years of LTC with a maximum monthly benefit of $32,927 monthly.
3. The additional $1,000,000 coverage on his wife would cost $11,753 per year. 
4. Since the client wanted to eliminate his $7,000 premium, we added another scenario applying that amount of his current premium to his wife’s new policy.
5. $7,000 of premium annually will buy $592,666 of coverage guaranteed to age 105.
6. Adding the LTC rider and keeping the premium the same would drop the death benefit to $519,562, guaranteed to age 105.  This adds an LTC monthly benefit of $10,824 for 48 months.

The result? To be determined, however, while the clients are still considering their options and obtaining another round of inforce illustrations, they intend to move forward with an application on the wife using the reallocated premium.  

Case Three: A review of a family insurance portfolio.  This family had 4 inforce Whole Life policies. Two on the husband and two on the wife.  All of the policies were over 20 years old and, unfortunately, both clients are now considered uninsurable.  They had a few missed premium payments over the years which resulted in loans on 3 of the 4 policies.  After obtaining the inforce ledgers, BSMG was able to make the following recommendations:

1. Policy one had no loans and large enough dividend payments to cover the premium payments.  We changed the dividend option to reduce the premium with the remainder going to paid-up additions.  This freed up premium for reallocation towards loan repayments on policy 4.
2. Policy two had a smaller loan.  We used the dividends to reduce the loan over the next 3-4 years.  The client was advised to keep paying the premium as scheduled and the loan would eventually be paid off using the dividends over time.  After the loan is extinguished, we will review switching the dividend option to reduce premium and paid up additions.
3. Policy three was paid up but had a small loan.  Again, we used the dividends to reduce the loan over time and then plan on switching to paid up additions after the loan is extinguished.
4. Policy four was quite over loaned with the current dividends purchasing paid up additions. We modeled a surrender of the non MEC paid up additions pool to reduce the loans significantly. Changing the dividend options to reduce the loan will eliminate the remaining loan balance over the next 7-8 years.  The client will need to pay premiums in full and possibly use some of the savings from policy one to further pay down the loan.  As the loan is repaid it will allow the death benefit to increase slightly, and once the loan is eliminated, we can revisit dividend options again.

The result? While a new sale was not possible due to the client’s health challenges, the above policy changes better positioned the family moving forward by eliminating the liability, improving long-term death benefit performance and freeing up some premium budget for other needs.

As a benefit of this in-depth policy review, the advisor obtained referrals to other family members and will be meeting with them in the future.

Policy reviews can be more than routine check-ins. They are a strategic service that protect your clients, strengthen relationships, and uncover meaningful planning opportunities. As the case studies demonstrate, established policies can drift off course or reveal new potential when revisited. Whether you are addressing changing family needs, evaluating market improvements, or optimizing existing coverage, a review ensures clients’ insurance continues to work for them. In return, you build trust, uncover opportunities, and reinforce your role as a truly indispensable advisor.

We support every step of that process, from high-level comparisons to detailed design analysis and underwriting consultation – servicing your every need in one place.

"Article written by Ed Stark, CLU, ChFC, VP Case Design at our partner, AgencyONE"

Contact the BSMG Case Design Team for more information or to discuss a case.