Dear Friends and Colleagues,
For many Americans in the year 2020, the only “certainty” being experienced on a day-to-day basis has been uncertainty.
Questions – both big and small – that we hadn’t previously considered have been thrust to the forefront in the midst of a global pandemic with seemingly no end in sight.
Simple questions (Am I washing my hands enough? Does my favorite cafe deliver on Grubhub?) have given way to more complex, even scary ones.
Is my employment at risk?
Are my friends and loved ones safe and healthy?
Are our older-age and at-risk relatives that have tested positive for Covid-19 going to recover?
While questioning one’s physical and financial well-being is at the core of most initial life insurance planning dialogues, the reality is that far too often, these discussions are put off until it is too late. Looking introspectively at one’s mortality can be unsettling. We have seen prospective insureds delay the completion of an insurance exam, only to see their coverage postponed or rejected entirely due to an interim change in health. If there has been a silver lining borne out of this incredibly difficult time, it is that we have seen an uptick in the number of clients who are finally willing to sit down and ask themselves these difficult questions, thus allowing themselves to mitigate inherent risks such as insufficient estate liquidity, improper disposition of assets, and excessive transfer costs through the implementation of a diversified life insurance portfolio.
The insurance industry itself is at an inflection point. As carriers attempt to properly assess and manage risk during this pandemic, antiquated, expensive methods to medically underwrite a policyholder have had to change. In the age of social distancing, expecting a prospective insured to be examined by a stranger in their home or place of business is no longer viable. This has forced life insurance carriers to adapt, seemingly overnight. Costly paramedical examinations, expensive lab fees for blood and urinalysis, and mobile EKG testing have all but been eliminated by certain insurance carriers for smaller life insurance policies and several carriers will use their new streamlined policy issue process for policies as large as $5 Million. Increased automation and a reliance on analytics has allowed the evolution of an underwriting process that used to cost an insurance carrier hundreds of dollars just to review a single case on an informal basis. Electronic medical records acquisition (Human API) has provided further time and cost savings.
Out of necessity, carriers have also evolved their application practices to address the increase in remote/online interactions with clients. The life insurance industry has historically relied on pen and paper applications, with in-person interviews and face-to-face policy delivery as the norm. Online applications, DocuSign signatures, and electronic policy delivery have transformed a process that once took weeks into a process that can be completed in several hours. Just recently, one of our clients received an insurance approval at “best class” rates in less than 12 hours with an investment-grade life insurance carrier without having to complete a physical examination.
Not only is the procurement of some life insurance policies easier than ever, but the value of life insurance as a stable, non-correlated (mortality-based; not tied to larger fluctuations in the traditional markets) asset might not again reach the heights of what is currently available in today’s marketplace. Insurance carriers continue to face difficulties in maintaining profitability amid persistent low-interest rates, which have hindered yield for their general account assets. Products with extended no-lapse guarantee provisions have been uniquely affected, with carriers either capping the amount of premiums they are willing to accept or re-pricing/removing such guarantees entirely. Competitively-priced life insurance options still exist though and helping our clients navigate this complex product landscape is a core competency of PRW’s Estate & Wealth Transfer Planning Team.
Often considered the least actively managed asset in one’s portfolio, life insurance’s status as a “held away asset” is truly unfortunate given its intricacies and overall impact on the success of one’s financial planning goals. We at PRW look forward to the opportunity to review your existing insurance holdings and provide our insight into how to achieve a rate of return on current premium expenditures consistent with your goals and objectives, as well as help determine if your overall coverage line is sufficient to achieve a proper level of risk mitigation.
Thaddeus J. Dziuba III, CLU®, ChFC®
Director – Advanced Planning
PRW WEALTH MANAGEMENT LLC
Clarity for the Present ♦ Vision for the Future
1 Pine Hill Drive, Suite 502
Quincy, MA 02169-7400
PRW Wealth Management LLC is a registered investment advisor (“RIA”) with the U.S. Securities and Exchange Commission (“SEC”). Investment Advisor Representatives offer financial advice through PRW Wealth Management, LLC. Registered Representatives offer securities through Lion Street Financial, LLC; member FINRA/SIPC. PRW Wealth Management, LLC and Lion Street Financial, LLC are not affiliated. PRW Wealth Management, LLC and Lion Street Financial, LLC do not provide legal or tax advice and are not Certified Public Accounting (CPA) firms. Trading instructions sent via email may not be honored. Please contact my office at (617)745-0900 for all buy/sell orders. Please be advised that communications regarding trades in your account are for informational purposes only. You should continue to rely on confirmations and statements received from the custodian(s) of your assets.