Clarity, Vision, and a Strategy for the future

The Objective Advisor

That Life Insurance in Your Trust—How’s it Doing?

September 08, 2014

That Life Insurance in Your Trust—How’s it Doing?If you have cash value life insurance parked within a trust, do you have any idea how those policies are performing? Don’t you think you should?

Lately we’ve fielded an unusually high volume of requests to audit life insurance performance, especially from people who have policies held within a trust with banks acting as a fiduciary. Clearly, investors are concerned about risk management.

You should be, too—it’s your (and your children’s) future at stake. But you may not have a clear idea of how your insurance is performing. Here’s why.

You bought a policy based on an illustration.

It’s only natural that, when you purchased your policy, you were shown an illustration to demonstrate how it was designed to function. But an illustration is only an example, based on multiple assumptions. And assumptions can be wrong.

That Life Insurance in Your Trust—How’s it Doing?

Illustration only — Reality (the red line) may be completely different.

I’ve often warned against buying insurance based on an illustration, but the problem isn’t just buying. Years later, are you still counting on the performance promised by the illustration?

That can be a major problem. The reality is, a very high percentage of life policies do not perform anywhere close to satisfying the original intent or projections of the illustration. And a high percentage of policy owners don’t know it.

Some very frightening realities.

So you thought you owned a life insurance policy with long-term protection, but what if it’s underfunded? Surprise! You might have to dramatically increase your premiums to keep the policy from imploding.

These frightening realities are most common with the Variable Universal Life and Indexed Universal Life policies that have gotten so popular. In our opinion, these policies are too connected to market performance, and too volatile, to provide the stable risk management life insurance is intended for.

But even more conventional life policies are subject to fluctuations in value and return. To avoid unhappy surprises, you need to monitor their performance closely.

But what about your annual report?

If your trust pays the premiums, the insurance companies remit annual statements to the trust and fiduciary bodies, who may or may not forward them to you. You should demand they do so.

That Life Insurance in Your Trust—How’s it Doing?

But even the annual report may not give you a clear picture. In most cases, the annual report does not show any long term projections of functionality. They show cash value and current years’ mortality charges, but they won’t alert you to the red flags—adverse rates of return that directly reflect the actual performance of the policy.

What about your insurance representative? Unfortunately, the insurance companies have changed their compensation models, so there’s no real impetus for an agent to provide that analysis, unless there’s the prospect of a future sale. Your original agent may no longer even be in the business.

You need an impartial audit.

So, back to our original question—how are the life insurance policies in your trust performing?

It’s important you know the answer, and the only way to get an accurate picture of that performance is through an impartial review or audit.

As the founder of LifeAuditors, I have more than 40 years of experience delivering exactly that kind of confidential, unclouded financial assessment. We sell no products, have no alliances with financial services firms, and manage no accounts. We can help you be more proactive in your personal finances, because we have no stake.

If you want to know more, visit us at


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