The Importance of Life Insurance Policy Reviews

Updated: Dec 10, 2019

Life insurance is an important part of an overall financial plan. Regular life insurance reviews performed by an experienced professional can determine whether the policy is performing according to expectations and meeting financial objectives.

There are many factors to consider that may impact the performance and suitability of a life insurance policy. It is important to review and determine that both product and planning objectives are being met. Some of the most significant reasons to conduct regular life insurance policy reviews include:

Product Considerations

Policy Funding Adequacy

Policies that have been underfunded may require additional premiums, adjustments to the benefits, or other corrective action. Overfunded policies may require fewer premiums.

Loans and Withdrawals

Lifetime distributions from permanent cash value life insurance products will affect policy performance. Periodic monitoring and review is essential to help ensure policies are meeting the intended objectives and to help avoid unexpected tax consequences.

Crediting Rate and Charge Assumptions

Life insurance policies are illustrated under certain assumptions that may change over time, both positively and negatively. This may impact policy performance.

Product Enhancements

New product types, features, and riders may provide increased planning opportunities.

Policy Maturity

Older life insurance policies may have a maturity1 date of age 95 or 100. A policy review can help mitigate this problem.

Favorable Tax Treatment on Exchanges2

Life insurance is a unique asset that receives special treatment under the Internal Revenue Code. If an opportunity exists to improve on an existing life insurance policy, in most instances, a permanent life insurance policy may be exchanged, allowing the policyowner to obtain a new permanent life insurance policy while continuing to defer income taxation on any accumulated gain.

Planning Paradigms

Changes to Needs and Objectives

Risk tolerance can change over time and life insurance should be reviewed periodically to make sure the product type and design continues to be appropriate. Additionally, it is important to review policy ownership and beneficiary designations to ensure the objectives of the life insurance policy will be met.

Regulatory Changes

State and Federal laws change over time and may impact planning objectives and results.

Carrier Financial Strength

Like other major financial institutions, life insurance companies are reviewed by rating agencies to analyze strength and stability.

Medical Advances

Improvements in how conditions are detected and treated may impact the underlying mortality assumptions used to price life insurance products. Newer products may provide superior overall financial performance.


1 Coverage terminates and the cash value is paid

2 Section 1035 of the Internal Revenue Code

Life Insurance Trusts

Life insurance trusts are frequently utilized as a part of sound planning. As with any other asset held in trust, the Trustee of a life insurance policy has a fiduciary responsibility to review trust owned life insurance and ensure that policies are performing adequately.3 Failure to do so may result in litigation for which the Trustee is personally liable. Trustees may seek the services of an insurance specialist for this purpose, who can help to evaluate the performance of the policies and advise on appropriate actions. In addition, an insurance specialist can help the Trustee in assessing the current level of life insurance protection and whether it provides the appropriate amount of coverage necessary to meet the trust’s financial objectives.


3 Uniform Prudent Investor Act (UPIA)

#lifeinsurance #policyreview #lifeinsurancetrusts


Copyright © 2020 TRC Financial. All rights reserved.

TRC Financial Insurance Services and affiliates are presently licensed to sell insurance and annuity products, as well as other securities products in the following states: Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Idaho, Illinois, Iowa, Kansas, Kentucky, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nevada, New Jersey, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Washington, West Virginia and Wisconsin. Residents of other states should consult with a local registered representative for insurance services and securities products. Proper state registration is mandatory prior to conducting business in that state. This is not an offer to sell securities, which may be done only after proper delivery of a prospectus and a client suitability review. CA License - #0E14614 \ CA License #0B40789 \ CA License #0B52893 - The principle place of business and the state of domicile for TRC Financial is: 1 Post, Suite 150, Irvine, CA 92618. Securities offered through Registered Representatives of M Holdings Securities, Inc., a Registered Broker/Dealer Member FINRA / SIPC. Check the background of this Firm and/or investment professional on FINRA's BrokerCheck. TRC Financial is independently owned and operated and is a Member Firm of M Financial. Please go to and click on “Disclosure Statement” at the bottom of the home page for further details regarding this relationship. For important information related to M Securities, refer to the M Securities’ Client Relationship Summary (Form CRS) by navigating to

(949) 509-2940