This is to alert, but not alarm, you about a consequence of the recent financial decline that you may have overlooked: the effect on life insurance policies.
Many policies were sold and the premiums calculated on assumptions about what the insurance company would earn on its investments over the life of the policies (whether "permanent" life or "universal" or "variable"). In effect, the past premiums' expected earnings over the policy's duration were expected to supplement (or even replace) future premium payments. Because insurance companies' investment portfolios are subject to the same financial market results as are the general public's, the condition of many insurance policies is now not what was anticipated.
The implications to you from this investment performance will depend initially on the type of policy and the purpose for which it was purchased. That is, if the policy is one that was intended to be in force for most of your life, with level premiums or the termination of premium payments after a number of years, the result may be (a) increased premium amounts, (b) payment of the existing premium amount for a much longer period of time, or (c) a lapse of the policy. If the policy is a term policy, it is protected for the period selected, but at the end of the policy term, replacement with a similar policy might be prohibitively expensive, definitely not what was contemplated.
Without knowing the present condition of your particular policy or policies, it is not possible to determine what should be done, if anything.
The first thing to do is to ask your agent to get an "in-force illustration" of each of your policies. Then ask the agent to explain the implications. If you are not satisfied with the explanation or if you have no agent, we may be able to help you to evaluate the viability of the insurance, or, and more likely, we would recommend an independent insurance expert be retained for this purpose.
If you are acting as the trustee of an insurance trust, then you have a fiduciary obligation to look into this matter. In fact, as a matter of routine, as trustee, you should be requesting an in-force illustration every year.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
