Life Insurance As An Asset Class
Life insurance – as any important asset – must be managed. Modern life insurance policies contain many useful features. Depending on whether universal or whole life or “no lapse,” policies may include options such as flexible payments, the ability to select and manage underlying sub-accounts, and obtaining a given death benefit and premium guarantee. Each of these features, however, have important caveats that must be managed to make certain the policy benefits are maximized and to insure that options are not lost or guarantees voided.
Many of today’s policies also provide for current expenses that are substantially lower than those guaranteed in the policy. Insurers have latitude to increase their pricing, and assessment and management is necessary to understand the long-term implications of possible changes in policy expenses.
For so-called “universal” style policies, it is the policy owners responsibility to make certain that sufficient premium is paid into the policy throughout the insured’s lifetime so that policy death benefits can be paid whenever the insured dies. Periodic assessment is essential to make sure suficient premiums are paid- and that independent calculations are made to anticipate possible expense changes in the policy.