Once you’ve purchased insurance and the contract is in your hands, do you review it? Completing an insurance audit is a final and crucial step in securing coverage. It ensures you have a thorough understanding of the contract obligations and that they are actually in force.
An audit will:
- Check that any assignment was removed from the policies, if applicable
- Verify that you can use the cash value of your policy to pay for future premiums
- Check if the policy was properly drawn up: i.e. owner, beneficiary and premium payor. A taxable situation could be waiting around the corner.
- Disability contracts are tricky to evaluate; pay extra attention to the “definitions” under contractual obligations:
- Own/Regular/Any Occupation
- Residual/Partial coverage
- Waiting Period
- Accumulated days to satisfy waiting period, etc.
An audit will assess whether your business should pay for disability contracts and deduct the premiums as a business expense. It will check your will to ensure there are no beneficiary conflicts or unintended tax consequences.
Did you know that your existing policy may qualify for a reduction of premiums or rating if there has been a relevant situational change? Here are some examples of where you could qualify for reduced premiums:
- You have stopped smoking for one year,
- You have improved health, or
- You no longer participate in hazardous sports.
An insurance audit can also help you determine if better premiums could be obtained for the same coverage. Healthy clients may find that they qualify for “preferred” underwriting at reduced premiums. Moreover, new programs may have become available that you should be considering.