As part of our services at ITM, we review every new policy and replacement policy for our clients. Lately, I have seen a rise in the number of “bad” replacements. I can think of a couple reasons for this. Even though I have no statistical evidence, I believe that insurance agents/advisors are having a harder time selling new policies in the TOLI marketplace; likely due to changes in the estate tax laws. Replacements are often an easier sale than a new sale. The agent just needs to show he has a “better" policy. In addition, because of the volatility in the equity markets affecting Variable policies and the low interest rate environment affecting Universal Life and Whole Life policies, many older policies have not performed up to expectations, making them ripe for replacement.
But what is a “better” policy? And are you sure that the “old” policy needs to be replaced? I have seen cases come in where the client (grantor...actually that is not really your client, more about that in our next Blog) agreed to replace a policy and after review by ITM it was clear that the replacement probably did not make sense. In fact, I have seen instances where the trustee could possibly be held liable if the replacement went through.
On Friday June 21st we are going to review the replacement process and the steps you need to go through to ensure a “good” replacement. After a general overview we will get into some actual cases and I will show you how “good” replacements looked pretty bad once we looked under the hood.
If you have never taken part in our webinar series, this would be a good one to start with. If you have taken part in the past, I think you will find this is one of our most informative yet. I hope to see you on the 21st. Go to www.youritm.com to sign up.