Example - Life Policy Audit
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Example - Life Policy Audit

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LIFE INSURANCE AUDIT E VA LU AT IN G T H E LIF E IN S U RA NC E F O R TOMMY THOMPSON P R EPARE D FO R RUSSELL ROBISON J U L Y 2 0 0 9 980-A Pier View Dr 208-356-3189 Idaho Falls, ID 83 402 208-529-6628 (Fax) 888-359-4050 WEBSITE: www.tlnnet.com EMAIL: info@tlnnet.com PURPOSE Life insurance is a financial instrument owned boyst mindividuals, businesses, and estate plans. It is often one of the top astsheints aw ifinancial statement yet it is seldom evaluated, appraised or assessed in a cohmepnrseive manner – that needs to change. Statistics compiled after having performed saelv ethrousand audits demonstrate that nearly 70% of all life insuranocelic ipes can be significantly improved. The Legacy Network’s mission is to provide consusm aenr objective evaluation of the life insurance they own. It is with that mission din, mThine Legacy Network works with a select group of insurance professionals across Uthneit ed States. We assess the current coverage and, when appropriate, recommend altevrnea tsiolutions for all that depend on life insurance to be there for their familuiessin,e sbses or charities. WHY ASSESS LIFE INSURANCE? In every industry change is constant and then sluifrea nice industry is no exception. The insurance industry has seen changes in the wa y inlisfuerance is designed, priced and medically underwritten. Having an objective thpiradrt-y assess the performance of ...

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Language English
L I F E I N S U R A N C E AU D I T
E VA L U AT I N G T H E L I F E I N S U R A N C E F O R TO M M Y T HOM P S O N
980-A Pier View Dr Idaho Falls, ID 83402
P R E PA R E D F O R R U S SE L L R OB I S O N
J U L Y 2 0 0 9
WEBSITE: www.tlnnet.com EMAIL: info@tlnnet.com
208-356-3189 208-529-6628 (Fax) 888-359-4050
P U RP O SE
Life insurance is a financial instrument owned by most individuals, businesses, and estate plans. It is often one of the top assets within a financial statement yet it is seldom evaluated, appraised or assessed in a comprehensive manner – that needs to change. Statistics compiled after having performed several thousand audits demonstrate that nearly 70% of all life insurance policies can be significantly improved. The Legacy Network’s mission is to provide consumers an objective evaluation of the life insurance they own. It is with that mission in mind, The Legacy Network works with a select group of insurance professionals across the United States. We assess the current coverage and, when appropriate, recommend alternative solutions for all that depend on life insurance to be there for their families, businesses or charities. W H Y AS SE SS LI F E I N SU RA N C E ?
In every industry change is constant and the life insurance industry is no exception. The insurance industry has seen changes in the way life insurance is designed, priced and medically underwritten. Having an objective third-party assess the performance of life insurance is no different than having real estate appraised or an investment plan’s asset allocation reviewed. Life insurance must be treated as a critical component of an overall financial plan and given the attention it deserves. Life Insurance is intended to protect the well-being of families, charities and businesses – the Life Insurance Audit makes certain that it does.
W H AT H AS C H A N G E D ?
Life Expectancies have changed. Medical advances have lengthened people’s lives and insurance companies have implemented pricing and underwriting standards to reflect these improvements. Insurance companies are now offering favorable underwriting classifications for individuals with heart disease, cancer, diabetes or
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other medical histories. These same medical histories ten years ago may have been deemed uninsurable or highly rated. Today, many are considered standard risks.
Interest and dividend crediting rates have changed. Economic trends have forced the insurance companies to lower their crediting rates over the last ten years. These crediting rates are directly tied to the overall rate of return experienced within the insurance company’s investment portfolio. Due to today’s low interest rate environment, many policies issued prior to 2000 are not performing as originally intended.
Market conditions have changed. Fluctuations in the stock market have impacted every aspect of the financial services marketplace, including Life insurance. Many customers purchased Variable Universal Life policies in the 1990s that are at risk of failing due to these fluctuations.
Industry structure has changed. Life insurance companies have undergone widespread changes in corporate structure, including mergers, acquisitions and demutualizations. Many times policyholders are not aware of the impact of these corporate changes. Historically, many of these changes have resulted in negative implications to policy holders.
Planning goals may have changed. Evaluation of current goals and needs is an essential part of the life insurance audit process.
W H O CO N D U C T S T H E AUD I T ?
The Audit Agent has been certified to facilitate and present the Life Insurance Audit. Certification is granted by The Legacy Network who performs life insurance audits on a national scale and has been assessing life insurance since 1975. The Legacy Network understands how to comprehensively evaluate life insurance. The Legacy Network team has expertise in reviewing life insurance companies, in force ledgers, policy design and, most importantly, the underwriting and cost of insurance assessment process. These characteristics put The Legacy Network in the unique position to objectively evaluate any life insurance policy.
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W H AT I S I N C LUD E D I N T H E AU D I T ?
A client and policy summary.
A review of the structure of the policy, ownership, beneficiaries, payment methods, relative to the client objectives.
A re-evaluation of the underwriting rate class.
An assessment of possible rate class improvements.
An evaluation of the effect of changes in interest rates/sub-account performance, increase in cost of insurance, or any combination of these.
An evaluation of the financial stability of the insurance company.
An objective evaluation on whether there is a more cost effective and reliable way to provide the results the client expects. This is intended to ensure that the client’s current and future objectives are being met.
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C LI E N T & P O LI C Y S U MMA RY
Tommy Thompson (7/19/1945)
Current Insurance Company:Jackson National
Product:Universal Life
Death Benefit:$1,500,000
Current Annual Premium:$22,600
Policy Date:5-18-1985
Policy Owner:Tommy Thompson Living Trust
Objective:Strengthen the policy
Audit Objective:
Improve face amount
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P O LI C Y OW N E RSH I P, F UN D I N G A N D B E N E F I C I A RY RE V I E W
This policy is currently owned by the Tommy Thompson Living Trust.
The Tommy Thompson Living Trust is the listed beneficiary.
UN D E RW RI T I N G RAT E C L A S S RE V I E W
The 1985 Jackson National policy indicates that Tommy Thompson was issued in a standard mortality classification.
An extensive evaluation of the medical underwriting elements was conducted. Based on the medical information provided, a few select insurance companies are likely to offer Tommy Thompson a preferred non-smoker rate class.
Medical testing will be required to validate rate classification.
It is important to note that a reduction in policy cost is to be expected if Tommy Thompson were to obtain a preferred non-smoker rate class. See the figure below for a general idea of the relationship between an underwriting rate class and policy costs.
Lower Cost
Preferred and Elite Non-Smoker Rate Classes
Standard Non-Smoker Rate Classes
Preferred Smoker Rate Classes
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Standard Smoker Rate Classes
Higher Cost
Rated and Substandard Rate Classes
P O LI C Y P E RFO R MA N C E ASS ES S ME N T
This portion of the audit focuses on the current and future performance of the existing policy. Interest rates, cost of insurance, premium level, projected and guaranteed assumptions are assessed. Jackson National In-Force Ledger 1 The current net death benefit is $1,500,000. 2 The annual premium is $22,600, currently no premium is being paid 3 The year end projected surrender value is $185,250. 4 At the current funding level, current cost of insurance charges and current interest crediting rate, this policy is projected to remain in-force to age 100. 5  The current policy is not guaranteed for any period. (see next page)
Policy values were obtained from insurance company papers and were treated as current.
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F I N A N C I A L STA B I LI T Y – JAC KSO N N AT I O N A L
A.M. Best Company Rating
A+ (2)
Superior. Assigned to companies that have, in our opinion, a superior ability to meet their ongoing obligations to policyholders.
Standard & Poor's Financial Strength Rating AA (3)
An insurer rated 'AA' has VERY STRONG financial security characteristics, differing only slightly from those rated higher.
Moody's Financial Strength Rating A1 (5)
Insurance companies rated A offer good financial security. However, elements may be present which suggest a susceptibility to impairment sometime in the future.
Fitch Ratings' Insurer Financial Strength Rating AA (3)
Very strong. 'AA' IFS ratings denote a very low expectation of ceased or interrupted payments. They indicate very strong capacity to meet policyholder and contract obligations. This capacity is not significantly vulnerable to foreseeable events.
Comdex - VitalSigns Composite Index 94
The Comdex gives the average percentile ranking of this company in relation to all other companies that have been rated by the rating services. The Comdex is the percentage of companies that are rated lower than this company.
Ratings received from Vital Signs Financial and Ratings Reports.
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AUD I T & O P T I O N S
Tommy Thompson Policy #123456789 Where you are now: You have a $1,500,000 Life Insurance policy. The Annual premiums are $22,600 Based upon the last annual statement your have not been paying these premiums *Based upon guaranteed assumptions, this policy will require the premium to be paid for this policy to continue through your age 100. Option A* Simply accept the policy update and have $1,500,000 Life Insurance policy guaranteed through you age 100 with no further premiums. Option B*accept the policy update and have $1,900,000 of Life Simply Insurance guaranteed to age 88  *Premiums are $12,600 annually. Option C*accept the policy update and have $2,500,000 of Life Simply Insurance, guaranteed to age 91.  *Premiums are $22,600 annually. *Other options are available. Options are not a contract. Options have to be medically approved
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Underwriting Rate Class:
$1,500,000
Non-smoker
$1,500,000
Fitch
Moody's
S & P
Annual Premium:
A1
AA
A+
Non-smoker
Aa3
10
Years Guaranteed:
SU M MA RY CO M PA RI SO N
Objective: Cost Reduction - Increased Guarantees
AM Best
AA
AA-
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Lincoln Financial $0
Jackson National $22,600
0
Company Ratings:
AA
A+
Death Benefit:
 Comdex 94 94 Comments: Assumes all additional underwriting requirements are within Sun Life’s non-smoker rate class. Assumes a 1035 exchange of $185,250. This report should only be used in conjunction with the complete illustrations, reports, and professional interpretation of a properly licensed representative. This is not tax or legal advice.
CO N C LUSI O N S
Review of alternatives suggests: Policies are available that will enhance performance oPremiums can be remain the same while increasing a lifetime guaranteed death benefit oDeath benefit can be increased while maintaining current funding level
W H AT TO D O N E X T
Consult with the Audit Agent regarding the results of this audit and address the following: oReview and update financial planning objectives oDetermine if the existing policy should be maintained If an alternate solution is appropriate: oWork with the Audit Agent to complete necessary paperwork oSchedule medical examination and assist in gathering medical records This report should only be used in conjunction with the complete illustrations, reports, and professional interpretation of a properly licensed representative. This is not tax or legal advice.
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