Has it been a while since you last looked at your insurance portfolio? Are you a little sketchy in your recollection of all the coverage you have and why you have it? Are you uncertain as to whether or not your portfolio reflects your current situation? If this is the case, this might be the ideal time to have an audit of your insurance policies.

Circumstances can change over time and making sure your protection keeps pace is a worthwhile exercise to do with your financial advisor.

A comprehensive audit should review the following:

FIRST; IMPORTANT: If you are doing this audit on the request of an advisor different then your regular advisor, especially if he is a new advisor who is only licensed as a financial security advisor for less then 5 years, make sure that he is doing the audit having your best interest in mind, make some research about his reputation, the best way to find out about someone’s reputation is by asking people in his industry and profession, if you ask enough people in his profession, not those that he suggest you to ask, you will usually get a good sense of his real reputation.

In financial services you need someone you can trust…. It is all about reputation & experience… not presentation…. nor convincing talk…  Everyone can crunch numbers to make them look the best and/or explain numbers and underlying facts in a way that may favor his personal benefit.

If an advisor bashes your current policies and ask you to replace them for something better he or his associate can offer, in most cases he does not have good intentions to your best interest but rather his profit on the replacement policy he hopes to replace it with, at the expense of your best interest and benefit, because in the majority of circumstances the worst old policy that is in place, is better then the best new policy.

There are many reasons to the above notion, some of them are, health issues that you may not remember which may have happened to you since your current policy was put in place, and if not mentioned in a new application it may eventually cause a that new policy to be null and void and of no value at time of death.

Insurance policy clauses and regulations have recently changed to be stricter and in some circumstances less tax saving favorable for policies placed since these new regulations became law, older policies are grandfathered with the benefits of the regulations that were in the law at the time the policies were put in force.

Pure cost of insurance is usually higher with every year of age since your current policy was placed and there are other things to look at that may work against your best interest to cancel a current policy for the sake of buying a new policy with an advisor who bashes your current policy and promises a world of benefits with a new policy he recommends.

Because this has happened too much in the past with new advisors convincing clients to cancel policies and replacing them with new ones that seemed much better, (this is especially done by these advisors, when there was nice cash value in the current policy making it an easy sale for them by having a good source of cash from the cancelled policy to fund the new policy they recommend,) convincing the client that it is to their best interest with much greater returns and benefits, but then when it was too late for the client to recover & re-instate the old policy, it turned out that the cancellation and replacement was a huge mistake causing great loss and suffering to the client and his hairs.

Therefore, the Quebec government through the “AMF” “Autorité des marchés financiers” made strict rules on how canceling a current policy and replacing it with a new one must be done, where the advisor must fill out a policy replacement form with the reasoning behind his doing so and he must provide it to you to read it and to sign it as proof that you were allowed to read it and the advisor must give you proof that he submitted copies of it to the insurance company of your current policy and to the insurance company of the new policy he offers you and to the AMF.

It is strongly recommended that in any case of being offered a new policy followed by a cancellation of a current policy that you verify with the AMF if they received a copy of the policy replacement form.

Be aware, that some advisors in order to avoid an AMF review on their practice to make sure that the replacement is indeed in the clients best interest, they avoid having to do the replacement form (which they must submit to the AMF and both insurance companies) they ask the client to sign first a form that makes them the advisor on record for the current old policy which in essence transfers the current old policies away from the clients current trusted advisor taking away from the current advisor the ability to be notified in case of cancellation which would trigger a call and possibly an eye opener explanation to the client of what is really being done to him, by doing this, the new advisor is now safe to do a new policy and then they only cancel the old policy a few months later without doing the replacement form keeping the advisor below the radar of the AMF, the insurance companies and of your regular advisor, by doing so they effectively take away from you all the safeguards that the government has put in place to protect you from such advisors and such policy replacements, to make you aware that what is being done is not good practice and in most cases not in your best interest .

A huge red flag for you should be when such an advisor badmouths or bashes your other experienced advisor, portraying him as someone who sold the policy that gives more commission or anything else he may say about him to make you feel that your current advisor was there only for his personal benefit and not for your best benefit…

BE AWARE: The main reason for this bashing, is to make sure that you get so upset at your current advisor that you do not want to talk to him anymore and so you do not call him to consult and get the other side of the story, the real information on what is true about your current policy and the new policy being offered and what not, and so the new advisor is now free to do what he wants for his personal benefit without fearing having your current advisor pinpoint this new advisors lies and real intend and the real truth about the policies because he made sure to make you so upset at your current advisor that you do not want to talk to him suddenly anymore.

This is beside the well known reality in business that if someone needs to bash someone else in order to make a sale and isn’t good enough to make a sale because who he is himself and the value he brings to the table to add to what is already in place even without cancelling it, then there must be something rotten within him.

It is also good to know that it is against the law to badmouth another advisor, the above is one of the reasons to this law, and so if this advisor starts his relationship with you by breaking the law, how can you trust him not to break the law and ethics against you when it will be to his better interest.

So when someone offers you a new policy to replace a current policy,  “be extremely suspicious”, even more so if he asks you in the process to sign over to him or to one of his associates to become the advisor on your current policy and if he also bashes and badmouths your advisor who sold you the current policy, it is time to call the AMF and find out who really is this new advisor and what is really his intentions here and to advise them of his behavior and what he was advising you to do.

NOW BACK TO THE AUDIT.

A comprehensive audit should review the following:
• Is the total death benefit of your life insurance appropriate to your needs? A current capital needs analysis can help to determine this.

• If your current coverage is renewable term insurance should the policy be re-written before it renews at a substantial increase? Premiums for new coverage can be significantly lower than the renewal premium of an existing policy.

• Is your need for life insurance permanent? If that is the case, you should ensure you have at least some of your needs covered by a permanent plan.

• Are you nearing the end of the conversion period on your term policy? If yes, this may be the time to consider converting to permanent insurance.

• Is your disability protection in place consistent with your current income? If you have changed jobs does new group coverage impact your personal plan?

• Are the beneficiary designations still valid for your current situation? Has there been a re-marriage that may require changing the beneficiary or ownership of the current policy?

In addition, the following are important to note:
• If your policy is a Universal Life policy with cash value are the investment options still appropriate to market conditions and/or your risk tolerance?

• If the policy is a Whole Life policy are the dividends adequate to now fund the premium should you wish to take a premium holiday?

• If your policy was assigned to a lender as collateral for a loan and that loan has been repaid make sure the assignment has been removed.

• Does your existing policy qualify for a reduction in premium?

• If you have stopped smoking you may qualify to have the premiums reduced to those of a non-smoker.

• If your policy was issued with a substandard extra premium and your health has improved you may qualify to have the rating removed.

• If your policy was rated as a result of participation in hazardous activities, e.g. flying, mountain climbing, heli-skiing this rating can be removed if you no longer are active in these activities.

If the current policy is for business purposes the following should also be reviewed:
• If the policy was to fund a Shareholders’ Agreement or Partnership Agreement, does the amount and type of coverage still satisfy the terms of the agreement?

• Are the ownership and beneficiary provisions of the policy still valid for Capital Dividend Account planning?

Time has a way of flying by, and combined with our busy lives, sometimes we do not keep current with important details such as our insurance planning. Reviewing your coverage on a regular basis is recommended and if it has been some time since you last did this, an Insurance Audit could prove very beneficial.