That Life Insurance in Your Trust—How’s it Doing?

That Life Insurance in Your Trust—How’s it Doing?

By: Paul Katz, Founder of Life Auditors, Inc.

Life insurance performance

If you have cash value life insurance parked within a trust, do you know how it’s performing? Don’t you think you should?

Lately we’ve fielded lots of requests to audit life insurance performance from people with policies held within a trust. They’re concerned about risk management. You should be, too—it’s your (and your children’s) future at stake. But you may not have a clear idea of how your insurance is performing. Here’s why.

You bought a policy based on an illustration.

When you purchased your policy, you were shown an illustration to demonstrate how it was designed to function. But an illustration is only an example, based on multiple assumptions. And assumptions can be wrong.

I’ve often warned against buying insurance based on an illustration, but the problem isn’t just buying. Years later, are you still counting on the performance promised by the illustration?

That can be a major problem. The reality is, a high percentage of policies don’t perform anywhere close to the original projections of the illustration. And a high percentage of policy owners don’t know it.

Some very frightening realities.

So you thought you owned a policy with long-term protection, but what if it’s underfunded? Surprise! You might have to dramatically increase your premiums to keep the policy from imploding.

That frightening reality is most common with the Variable Universal Life and Indexed Universal Life policies that have gotten so popular. These policies are too connected to market performance, and too volatile, to provide the stable risk management life insurance is intended for.

But even more conventional policies are subject to fluctuations in value and return. To avoid unhappy surprises, you need to monitor their performance closely.

But what about your annual report?

If your trust pays the premiums, the insurance companies remit annual statements to the trust and fiduciary bodies, who may not forward them to you. You should demand they do so.

But even the annual report may not give you a clear picture. In most cases, annual reports don’t show long term projections. They won’t alert you to the adverse rates of return that directly reflect the actual performance of the policy.

What’s more, insurance companies have changed their compensation models, so there’s no real impetus for your agent to provide that analysis.

You need an impartial audit.

So, back to our original question—how are the life insurance policies in your trust performing?

It’s important you know, and the only way to get an accurate picture of that performance is through an impartial review or audit.


Paul Katz is the founder of LifeAuditors. He has more than 40 years of experience delivering exactly that kind of confidential, unclouded financial assessment. He sells no products, has no alliances with financial services firms, and manages no accounts. He can help you be more proactive in your personal finances, because he has no stake. If you want to know more, visit him at