Archives For Audit

life insurance imageIn my role as a Consultant with DDS Financial I have been conducting Life Insurance Audits, now a routine part of the firms practice. There have been a number of mistakes that the Audit process has brought to light and that we have since corrected. There are 3 most commonly made mistakes that I wanted to highlight so that you may be spurred to take action and engage in a Life Insurance Audit.

The Wrong Amount of Insurance

Insurance Agents are often accused of overselling or encouraging more coverage than people feel that they need. So it begs the question, what is the right amount of Life Insurance? There is a simple answer to a question that seems to bewilder many advisors; insure something for what it is worth. So as to not debate the value of a human life we should consider the Economic Value that someone has to the ones that they love. There are calculators that can assist in this measure, but for a good rule of thumb consider:

  • A person between ages 25 and 45 should have 20 to 30 times their income.
  • A person between ages 45 and 55 should have 15 times their income.
  • A person between ages 55 to 60 should own 10 times their income.
  • Someone in retirement should have an amount equal to their assets.


Many of the individuals that I have seen lately have missed this in a major way. There are basically two broad categories in the style or type of Life Insurance that exist.

  • Term – As the name indicates, this insures you for a term or period of time and will then expire without value at the end of the term.
  • Permanent – As the name indicates, this insures you for your entire life. It lasts as long as you do.

Again to not be accused of oversimplifying there are many nuances to each of these that should be considered. One of the newest and most attractive features are living benefits that pay for Long Term Care coverage should it be needed during life.

It seems that the lure of a low cost term insurance has caused many to not consider the ramifications of entering into retirement without life insurance coverage. The ramifications typically result in a lower retirement income or withdrawal rate from retirement plans…. Not fun and often can’t be reversed if you wait to late! At the very least going through life with term insurance only can result in a loss of security and financial flexibility.

Beneficiary Designation

The mistakes that are made with Beneficiary Designations are subtle but can potentially have major ramifications. Insurance Agents are often in the role of a salesperson and not that of an advisor or planner. This sometimes causes a lack of coordination between beneficiary designations and wills and or trusts. In full disclosure, I am not an attorney and yours should be consulted when reviewing your beneficiary designations. The most common mistake that I see here is when a married person names their spouse as the primary beneficiary or a parent/grandparent names a minor/young adult. You may say, “What’s wrong with that?” Potentially nothing, but properly structured testamentary trusts with the surviving spouse/child as the beneficiary gives greater protection for he/she actually getting the proceeds that were intended for them. This proper wording can provide a layer of protection against litigation, maybe even future spouses etc. Bottom line is that you should pay close attention to your beneficiary designations!

These 3 Mistakes in Life Insurance: 1) the wrong amount of coverage. 2) the wrong type of coverage and 3) improper beneficiaries were the three that were most commonly found problems in our recent Audits. There were many other errors and oversights that surfaced.

Take the time to have your policies reviewed so that you have a greater peace of mind. Contact me to set up a free consultation.

Annual Retirement Limits

November 1, 2013

2014 Retirement Limits

This information was provided by Money Education.


Please feel free to contact me with any questions regarding how this information impacts your personal planning.

Audit, Embrace It!

July 18, 2012

An audit is typically a word that makes most cringe, maybe not so different than when a person hears about a root canal. refers to an audit as an official examination of an account, building etc. that evaluates or improves its appropriateness, safety or efficiency.  So why is it that most fear this process that can create good results? I would suggest that it is most often done to someone instead of being chosen by them, follow that logic? For example if the IRS contacts you and says, “Congratulations your tax returns are being audited”; not such a good  feeling right? I wanted to suggest that we shift the dynamic of the audit so that we choose it, instead of it choosing us.


Our firm routinely audits all different types of financial documents for our clients. In most cases we find numerous inefficiencies and errors. This process gives us alongside of our client an opportunity to address
the particular situation in a controlled environment where we can improve or fix the problems. One of the most common areas that we see results is when performing Life Insurance Audits. Face it, most feel similar to the root canal example above when it comes to discussing their life insurance. So that mentality often allows for years to pass without reviewing and updating these policies. In fact, 65% of Life Insurance Audits performed by Ash Brokerage reveal the potential for improvement. Catalyst Wealth Management advisor, Christopher D. Pullaro, CPA, CFP recognizes the following as the most common areas that can be improved:

  • * Underwriting Class or your health rating from when the policy was issued
  • * Overall performance of the policy
  • * Beneficiaries are not coordinated with Wills or Trusts
  • * No Disability provisions
  • * No Long Term Care Provisions


Most clients, and even advisors, unfortunately treat life insurance as a Buy and Hold strategy. I would suggest that it should be a Buy and Monitor part of a portfolio. With medical advances and greater longevity, new policy pricing is improving rapidly. Insurance carrier profit margins, however, are being squeezed because of historically low bond portfolio yields. This is creating different levels of pressure for insurance company’s ratings and performance. So with all of these ever changing variables when should this audit process take place? Here are some guidelines to follow:

Every Year

  • * Review coverage amounts to determine if the coverage amounts are at maximum levels as it relates  to the insured economic value.
  • * Review in-force illustrations (re-projections) under various interest rate assumptions.
  • * Review all carrier ratings and financials.


Every three to five years:

  • * Conduct a full portfolio audit.
  • * Collect in-force illustrations and compare them to the products and pricing currently being offered.
  • * Compare new products to those held in trust, evaluating performance and guarantees.
  • * Scrutinize the design, including the tax and legal structure, and the premium payment method.
  • * Estimate the value of contracts in the secondary market and factor those results into decisions.


So what’s stopping you from doing the right thing? Make financial and insurance audits are part of your process!