5 Ways to Proactively Manage a Portfolio

February 14, 2022

Portfolio Management

Every year, an average of over $600 Billion* in life insurance death benefit lapses or is surrendered. These lapses can be intended or unintended. In either case, the insurance company collected a premium on a policy on which they will never need to pay out a death benefit.

Equally concerning, on average, 69% of life insurance policies have not had a performance review in the past five years.** These are policies where an insurance company is likely collecting either too much or too little premium; in either case, the INSURANCE COMPANY WINS! To help tip the odds back in a policyholder's favor, here are five portfolio management activities that are critical to help ensure policies perform as intended.

Five Proactive Portfolio Management Activities to Start the Year Off Right

1. Review Policy Annual Statements.

Take time each year to review policy statements. Look at such points as:

  • What company is the carrier on the policy? Every company is different, and it is important to know what that means for a policy's longevity. For example, some companies are known to be repeat offenders when it comes to changing the "deal," i.e., raising the price.
  • Has an insured's health improved after taking the policy out? An underwriting review may be necessary.
  • Look for hidden and expensive policy loans with high interest rates.
2. Get Updated illustrations

On a routine basis, it is a best practice to get inforce illustrations for permanent life Insurance policies to understand how the policy is performing and is likely to perform in the future. Non-Guaranteed elements can and do change in policies from time to time. Comparing a current illustration to the “as sold” (aka original plan illustration) is the best way to know if a policy is on track. Believe it or not, this is important for guaranteed policies as well. If the policy is guaranteed, what can change you might ask? The answer is: premium payment timing issues or insurance company error are two of the prevalent problems an illustration review can help with. Now is also a good time to collect the “as sold” illustration from the insurance company if you don’t have it in your files.

3. Do a longevity study.

Buying and holding life insurance is about proper planning and not about cutting corners or guessing. There are actuary specialists that review a prospective policy owner’s medical records to provide a life expectancy (“LE”) report. An LE report provides an estimate of how long someone may live based on actuarial tables and one’s medical history. These LE reports provide valuable insight for planning, and how much premium to pay on a policy (among many other factors) by helping philanthropic companies to better understand the longevity expectancy of their insureds.

4. Consider Selling the Policy for Cash

Policies purchased years ago may no longer fit current needs; tax and estate law changes, sale or acquisition of a business, cash flow needs, and personal health changes are just some examples. Many do not know about this alternative to abandoning the policy and allowing it to lapse. A sophisticated market of institutional buyers has developed, and they are paying cash to the policy owner for the policy. Today is a SELLERS market.

5. Does the insurance still fit with the plan?

The theme of this post is the importance of reviewing policies in the context of changing circumstances. This is not only true for the actual policies but also the planning that goes with them. Is the ownership still correct? Is the split-dollar arrangement competitive in today’s low-interest rate environment? Is the death benefit still a reasonable amount? Are there alternative ways to fund the policy? And many more questions should be answered to ensure the policies still fit the portfolio's.


The above are great “do it yourself” management tools. Nevertheless, in the most significant and complex situations, it may be best to get professional advice on policy management. Buying life insurance is not a one-time event. Policies, like other investment assets, need to be reviewed, maintained, managed, and monitored. A properly managed policy or a portfolio of policies can increase the return on one’s premium investment, and more importantly, decrease the likelihood of a total loss of this asset.

Legacy Giving stands ready to help you get professional advice on how to properly manage portfolios of life insurance. COVID, low-interest rates, and inflation can all have an impact on the portfolio. Don’t let the insurance company win, call Legacy Giving today!


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