CASE STUDY #8:

Why understanding life insurance policies is important.

A client asked me to review his life insurance policies, some of which he had purchased more than 20 years earlier.  I reviewed them and explained how some policies which he thought were permanent were actually policies that would end when he reached age 85.  In addition, the substantial cash values in those policies would disappear in the process.  As a result, I advised the client to transfer the cash value of some of his insurance policies to a variable annuity on a tax free basis.  Inside a variable annuity, these funds could be invested and become a source of retirement income in the future.  His present insurance requirement, which is now small considering that his children are grown up, can be met with cheaper term insurance.  In doing this review, I also noticed that one of his insurance policies had a savings account associated with it in which excess premiums had been deposited over the years.  The client was totally unaware of this account.  We called the insurance company together, ascertained the existence of the savings account and my client asked for and received a check in the mail for more than $11,000 a week later.

Legal Disclosure:  Variable annuities are suitable for long term investing, particularly for retirement.  Guarantees or insurance company ratings are based on the claims paying ability of the issuing insurance company.  There are fees and charges associated with variable annuities including mortality and expense charges, administrative fees and annual contract fees.  Withdrawals of earnings from a variable annuity will be subject to Federal income and, possibly, other taxes.  Surrender charges may apply to early withdrawals from a variable annuity.