The Crucial Conversation During Life Insurance Awareness Month

September is Life Insurance Awareness Month—but what does that really mean? While many campaigns focus on the fact that Americans are underinsured, this is only part of the conversation. According to a 2020 LIMRA study, only 54% of Americans have life insurance, and 27% have non-portable group life insurance through their employer. Highlighting underinsurance is crucial, but there’s more to consider.

Many people buy life insurance, file the policy away, and forget about it. Whether purchased online or through an agent who doesn’t proactively review it, the policy might no longer meet current needs. Life changes quickly, and protection requirements from five
or ten years ago may have evolved. Important questions to ask include: Is the policy still the right one? Is there a chance to improve existing coverage? Is the policy performing as expected? These are critical considerations for Life Insurance Awareness Month.

Major life changes—such as marriages, divorces, births, income shifts, wealth accumulation, or deaths—can affect the amount of life insurance needed. A policy
bought years ago may no longer provide adequate coverage or the correct term. Additionally, are the current beneficiary designations still relevant after recent life changes?

Three factors determine life insurance premiums: age, smoker status, and rate class. These can change over time. While age inevitably increases—and with it, premiums—other factors can reduce costs. For instance, former smokers may apply for a status
change on permanent policies or underwrite a new term policy. Those who lose weight, lower blood pressure, or improve cholesterol can re-apply for a better rate class. Even those initially rated substandard due to serious medical conditions may now qualify for
better terms. Improvements in smoker status or rate class can lead to lower premiums. Furthermore, those who are now uninsurable but have term coverage may convert it to permanent coverage if their policy allows.

For permanent life insurance policyholders, annual performance reviews are essential. Whole life policies feature guaranteed cash values and fixed premiums, but dividends—often projected to pay future premiums or increase coverage—are not guaranteed. Dividends reflect a return of excess premiums and depend on the insurance company’s mortality experience, investment returns, and expense management. A policy review,
including an in-force ledger with updated dividend projections, will show how the policy is performing.

Fixed and Variable Universal Life policies have account values from which insurance costs and other charges are deducted. Account value growth depends on premiums paid, interest earned (for fixed UL policies), and investment returns (for variable UL policies). The duration of premium payments is tied to the performance of the account value. A policy review, with an in-force ledger and updated projections, will clarify whether the policy meets expectations.

As you can see, Life Insurance Awareness Month should emphasize not only obtaining coverage but also regularly reviewing existing policies. Neglecting a policy after purchase could lead to inadequate coverage, higher-than-necessary premiums, or poor performance.

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