Treat Insurance Policies Like the Money They Represent, Not Just Like Paper

Working recently with a client who is a widow, I asked why she had a financial planner, she replied, “Because I don’t want to run out of money” Her sister Joan, on the other hand, didn’t need one. She’d already run out of money.

In Joan’s case, the problem came out of the blue. It was completely unexpected and completely avoidable. Here’s the back story:

Joan’s husband had a $1,500,000 life insurance policy to keep her safe and secure. Like most people, they took it for granted that the policy would always be there. The couple was unaware the policy contained conditional guarantees that needed to be checked on now and then.

Not knowing that over 80% of all existing life insurance policies never pay a beneficiary, the written policy stayed in the safe deposit box and grew dusty. If only someone had recommended that, since the policy had not been reviewed since it was purchased, an objective checkup was in order!

Even five years before the letter from the insurance company informed them that the policy was no longer viable, a review would not only have identified that the policy was off course, but also what could be done to fix it.

Joan was widowed at age 54. The policy lapsed when she was 52. Had that $1.5M still been there for her as intended, she wouldn’t have run out of money and would have benefited greatly from the services of a good financial advisor.

It truly didn’t have to end this way. Insurance policies should not be treated like the paper that they are, but for the money they represent. Have them reviewed at least every five years.

The world will be a better place when all those beneficiaries are truly safe.

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