Vol 10 No 10		November 2008

Katt & Company is a national fee-only life insurance advising firm. The June 2002 Forbes magazine, and a July 16, 2003 Wall Street Journal article, name Peter Katt as one of only four nationally recognized advisors. The Forbes article states that, "…advisers are well worth the money… These savants are working for no one but you…" For references please contact us.

Policy Reviews and Management - Still a Good Idea

"What started out as the routine management of policies to confirm their good standing turned into a $1,000,000 rescue."

The most common work I do is the review of existing life insurance policies. A case study demonstrating the critical importance of reviewing policies is found in my August 2006 (Vol. 8, No. 5) Perspectives. In that case I believed that a creative alternative to the "tried-and-true" obvious route should be examined. Specifically, instead of paying premiums by using policy values, I believed that policy loans would provide better benefits. In fact loans did provide a 15% advantage. Earlier this year I suggested a quick review of those policies with my client. I wanted to be sure there weren't any pricing surprises, that loans continued to be advantageous, that each company's financial strength ratings were holding up and to observe any errors in the way the policies were being handled. Sixteen of the policies checked out, but one didn't.

One of the policy reviews showed policy future values that were lower than expected. Following up I discovered that the instruction to the company to begin paying all future premiums via policy loans was only partially being done with the remaining portion of the premium paid from dividend values. The present value difference in correcting the error is significant. What started out as the routine management of policies to confirm their good standing turned into a $1,000,000 rescue. The review and management of life insurance policies is imperative.