Life Insurance Archives - Page 3 of 4

Financial Underwriting: Helping Clients Understand Why Carriers Ask for Proof

September 26, 2026August 31, 2021 by Tim Fuller

Happy family of four laughing together on the couch, representing life insurance protection

Clients are often surprised, and sometimes irritated, when a carrier asks for financial details before approving a larger life insurance policy. A quick explanation of why those requests exist can set expectations, reduce friction and keep the case moving.

Key takeaways

Life insurance is unlike most purchases: the carrier’s potential obligation is many times the premium it collects.
Financial underwriting keeps coverage in line with a genuine economic need so the insured isn’t worth more dead than alive.
Preparing clients up front and responding quickly to requests are the best ways to avoid delays.

A carrier isn’t selling radishes. Once a policy is issued, it may owe a benefit many times greater than the premium it collects.

Why life insurance isn’t like other purchases

Clients sometimes assume a carrier should sell as much coverage as they want, the way a store will sell its whole inventory. The difference is what happens after the sale. When a policy goes into force, the client only has a non-binding obligation to keep paying premiums, while the carrier is committed to a death benefit that can be hundreds or thousands of times larger than a year’s premium. That imbalance is especially sharp with low-cost term coverage.

What financial underwriting protects against

Insurance pools work only if carriers underwrite correctly. Part of that is not issuing more coverage than a person’s financial situation supports. Overinsurance can create a motive that increases risk. So carriers ask why the coverage is needed and whether the amount fits the client’s income, net worth and obligations. For guidelines on typical limits, see our post on financial underwriting and income multiples.

Setting client expectations

People share financial information for mortgages, car loans and credit cards all the time. Life insurance is no different. Let clients know early that they may be asked for:

A financial supplement or questionnaire
Income verification or tax returns for larger amounts
A statement from a CPA or other third-party advisor on very large cases
Business financials for key person or buy-sell coverage

Resistance usually just delays the case and can raise questions for the underwriter.

How SRS helps

Our Underwriting Team will flag likely financial requirements up front, estimate how much coverage carriers are likely to allow and help you work through justification issues if they come up. Contact us before you submit your next large case.

Frequently asked questions

Why do life insurance companies ask for financial information?

Carriers need to confirm the amount of coverage is justified by the applicant’s income, net worth and obligations. This keeps coverage tied to a real economic need and supports sound underwriting.

What documents may be required for financial underwriting?

Depending on the amount, carriers may ask for a financial supplement, tax returns, income verification, business financial statements or a letter from a CPA or other advisor.

How can advisors avoid delays in financial underwriting?

Tell clients early what may be requested, gather documents before submission, and respond quickly to underwriter requests. Working with your BGA to anticipate requirements also helps.

50+ Years in Business60+ Top-Rated Carriers★★★★★ Rated by Advisors

Reviewed by Tim Fuller on 2026-09-26

Tim Fuller

President, SRS Inc.

Tim leads SRS Inc., a full-service IMO (Independent Marketing Organization) and BGA (Brokerage General Agency), connecting independent financial professionals with life, annuity, disability income, and long-term care solutions from 60+ carrier partners.

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Indexed UL Loan Options: Fixed vs. Variable Loans for Retirement Income

September 26, 2026August 30, 2021 by Tim Fuller

Indexed universal life gets a lot of attention for how it accumulates cash value. How that value is taken out matters just as much. Understanding the loan options inside an IUL helps advisors set realistic expectations and choose the approach that fits the client.

Key takeaways

Most IUL policies offer fixed loans, variable (indexed) loans, or both.
Fixed loans have a known interest rate, and many policies offer wash or zero-net-cost loans after a set number of years.
Variable loans can create positive arbitrage when crediting exceeds the loan rate, but negative arbitrage can quickly erode income.

An illustration showing positive loan arbitrage looks great, until crediting falls below the loan rate and income has to shrink.

Accumulation is only half the story

IUL credits interest based on the performance of a chosen index, subject to caps or participation rates, with a floor that protects against losses from negative index years. That makes for a strong accumulation story. But most clients buying IUL for supplemental income will eventually take policy loans, and the loan type they choose can change results significantly. For background on the strategy, see IUL as a supplemental retirement strategy.

Fixed loans

With a fixed loan, the policy charges a stated interest rate on the outstanding balance, and the loaned amount is typically moved out of the index account. The cost is predictable. Many products also offer a preferred or wash loan after a certain number of policy years, where the rate charged equals the rate credited on the loaned value, for a net cost at or near zero.

Variable (indexed) loans

With a variable loan, the loaned value stays in the index account and continues to earn index credits, while loan interest accrues at a variable rate. When index credits exceed the loan rate, the client benefits from positive arbitrage, and illustrations can look very attractive.

The risk is negative arbitrage. In years when crediting is low or zero, loan interest still accrues, and the gap can compound. Income may need to be reduced to keep the policy from lapsing.

Choosing and explaining the right option

Either option can be appropriate depending on the client’s risk tolerance and whether they plan to pay loan interest as it accrues. What matters is that the client understands the trade-off before income starts. Choosing variable loans only because they illustrate better sets up a hard conversation later. Contact our Life Sales Team to compare loan provisions across carriers and illustrate conservatively.

Frequently asked questions

What is the difference between fixed and variable loans in IUL?

A fixed loan charges a stated interest rate and usually removes the loaned value from index crediting. A variable loan charges a variable rate while the loaned value keeps earning index credits, which can help or hurt depending on performance.

What is a wash loan in an IUL?

A wash or zero-net-cost loan is one where the interest charged equals the interest credited on the loaned value, often available after a set number of policy years.

What is negative arbitrage on an IUL loan?

It happens when the loan interest rate exceeds the rate credited to the policy. The shortfall can compound over time and reduce the income the policy can support.

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Reviewed by Tim Fuller on 2026-09-26

Tim Fuller

President, SRS Inc.

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Indexed Universal Life Features: Guarantees, Crediting Strategies and LTC Riders

September 26, 2026August 23, 2021 by Tim Fuller

When markets are volatile, advisors look for life insurance that offers growth potential without direct market risk. Indexed universal life (IUL) combines a death benefit with index-linked interest credits and a floor that protects against losses. Here’s a practical look at the features that separate one IUL design from another.

Key takeaways

IUL credits interest based on index performance, subject to a cap, with a floor that protects cash value from market losses.
Some designs blend several indexes or use participation rates above 100%, so crediting details matter when comparing products.
Death benefit guarantees and optional long-term care riders make IUL a flexible fit for clients roughly 35 to 55.

The cap lets clients capture more interest in up markets, while the floor protects them when markets decline.

How IUL crediting works

An IUL is a fixed life insurance product. It does not invest directly in the stock market. Instead, interest is credited based on the movement of one or more market indexes, within limits:

Cap rate: the maximum interest the policy can be credited in a period.
Floor: the minimum credit, often 0%, so a down year doesn’t reduce cash value through negative returns.
Participation rate: the share of index gain used in the calculation. Some carriers offer rates above 100%, subject to the cap.

Caps and participation rates vary by carrier and can change over time, so always illustrate with current rates.

Blended and averaging strategies

Some IUL products use crediting strategies designed to smooth volatility. One carrier’s design, for example, blends the S&P 500, the NASDAQ-100 and the Dow Jones Industrial Average, weighting the best-performing index most heavily, and uses monthly averaging to help protect credits during choppy markets.

These strategies can help clients who value steadier results. The trade-off is usually a lower cap or a different participation structure, so compare them side by side.

Guarantees, underwriting and riders

Beyond crediting, look at the features that affect the whole planning picture:

Death benefit guarantees. Some policies offer a base no-lapse guarantee for a set period (for example, 20 years, often shorter for older issue ages) with an optional rider to extend it.
Underwriting options. Some carriers offer simplified or guaranteed issue for corporate-owned or corporate-sponsored cases.
Long-term care riders. Many IULs offer an LTC rider for an added cost. Names, terms and state availability vary. See our overview of the long-term care rider for how these work.

Which clients IUL fits best

IUL is often a good fit for clients who:

Want life insurance with guarantees plus growth potential
Prefer steadier accumulation during volatile markets
Need flexible death benefit options
Want to plan for possible long-term care costs
Are roughly 35 to 55 years old, with time for cash value to build

Frequently asked questions

Is indexed universal life a stock market investment?

No. IUL is a fixed life insurance product. Interest credits are based on index performance, but the policy does not directly participate in any stock or equity investment.

What is a participation rate in IUL?

It is the percentage of the index gain used to calculate the interest credit. A 140% rate, offered by some carriers, would credit 140% of the index return, still subject to the cap.

Can I add long-term care benefits to an IUL?

Many carriers offer an LTC or chronic illness rider for an additional cost. Terms, names and availability vary by carrier and state.

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Reviewed by Tim Fuller on 2026-09-26

Tim Fuller

President, SRS Inc.

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Lower Life Insurance Premiums With an Installment Death Benefit Option

September 26, 2026August 9, 2021 by Tim Fuller

Most life insurance pays the death benefit as a single lump sum. A few carriers now let the policy owner choose a guaranteed income stream instead, and reward that choice with lower premiums. It’s a useful tool when underwriting or budget puts the right amount of coverage out of reach.

Key takeaways

Some carriers let owners elect a guaranteed monthly or annual income stream death benefit on term and UL policies.
The longer the payout period, the larger the premium discount, which can offset a rating or tight budget.
Payouts can be customized, such as an anniversary payment to a spouse or annual gifts to a grandchild.

The option lets clients control how the benefit is paid while lowering the cost of coverage today.

How an installment payout option works

Under an income provider or installment option, the policy owner selects a guaranteed annual or monthly income stream to be paid to one or more beneficiaries instead of a lump sum. Because the carrier pays the benefit over time, it can offer graded premium discounts based on how long the payout lasts.

The option is available from a limited number of carriers on certain term and universal life products. Confirm current availability before building it into a proposal.

When to use it

An installment option is especially helpful when:

An underwriting rating pushes the premium above what the client will pay
The client needs more coverage than their budget allows
The client worries a beneficiary may spend a lump sum too quickly

It can help clients get the amount of coverage they actually need. For help sizing that amount, see our article on life insurance income multiples.

Personalizing the payout

Owners can structure payments to reflect what matters to them. A surviving spouse might receive a payment every wedding anniversary, or a grandchild might receive a birthday gift each year for a set number of years. This personal touch often resonates with clients and adds meaning to the policy.

Two benefits for your client

The option gives clients peace of mind that their family will be cared for the way they intended, and lower premiums that leave more money available while they’re living. If you have a client in mind, contact us and we’ll run comparisons with and without the installment option.

Frequently asked questions

Does choosing an income stream death benefit really lower premiums?

With carriers that offer it, yes. Premium discounts are graded by the length of the payout period, with longer payouts generally producing larger discounts.

Can the beneficiary change the payout to a lump sum later?

Usually the owner’s election controls how the benefit is paid, which is part of what makes the discount possible. Check each carrier’s contract terms.

Which policies offer an installment death benefit option?

A limited number of carriers offer it on selected term and universal life products. Contact us to confirm current availability.

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Reviewed by Tim Fuller on 2026-09-26

Tim Fuller

President, SRS Inc.

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Naming a Minor as Life Insurance Beneficiary: Using a UTMA Designation

September 26, 2026July 13, 2021 by Tim Fuller

Minors can’t legally own a life insurance policy or take possession of a death benefit. If a child is named directly, a court may have to appoint a guardian, adding delay and expense. For many families, a Uniform Transfers to Minors Act (UTMA) designation is the simplest solution.

Key takeaways

Minors can’t legally receive life insurance proceeds, so a child should never be named outright.
A UTMA designation names a custodian to manage proceeds for the child and works like a simple trust.
At the age of majority the child receives everything outright, so a formal trust may be better for larger amounts.

The beneficiary designation is the most important part of a life insurance policy, yet the application gives it the least space.

How a UTMA designation works

A UTMA designation is created in the beneficiary designation itself. It works like a “poor person’s trust” when a formal trust is too costly or complicated. A custodian is appointed to manage the policy proceeds for the child according to the directives in the state’s UTMA.

Details to get right

Name a successor custodian. The custodian may die before the child reaches adulthood.
Follow state law. The wording must comply with the governing state’s UTMA, and the age of majority differs by state.
Check with the carrier. Confirm the wording with the carrier’s claims department.
One designation per child. Each minor beneficiary needs a full, separate designation.
Plan for contingent minors. Contingent beneficiaries who are minors need the same care.

A UTMA designation almost always needs a separate page attached to the application.

The main limitation: control ends at majority

When the child reaches the age of majority, the custodian must turn over the proceeds outright. Unlike a trust, a UTMA can’t delay control well into adulthood. For larger amounts, or when parents want distributions staged over time, a formal trust is usually better. See our guide to trust types for options.

Make beneficiary reviews part of your service

Births, deaths, divorces and remarriages all change who should be named and how. Reviewing designations regularly, especially when children are involved, protects the family and builds trust with your clients. Contact us with questions or for help with a case involving minors.

Frequently asked questions

Can I name my minor child as life insurance beneficiary?

You can, but a minor can’t legally receive the proceeds. A court may need to appoint a guardian. A UTMA custodian designation or a trust avoids that.

What happens when the child reaches adulthood under UTMA?

The custodian must turn the remaining proceeds over to the child outright at the age of majority set by state law.

Is a UTMA or a trust better for a minor beneficiary?

UTMA is simple and inexpensive. A trust costs more but allows the parents to control how and when money is distributed, which is often better for larger amounts.

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Reviewed by Tim Fuller on 2026-09-26

Tim Fuller

President, SRS Inc.

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Term Conversion Reviews: Following Up on Your Term Life Sales

September 26, 2026June 28, 2021 by Tim Fuller

Term insurance is often sold as the lowest-cost way to cover a need for a set period. Then it’s forgotten until the level period ends and the premium jumps. A simple conversion review process keeps clients protected and creates natural opportunities for permanent coverage.

Key takeaways

Most term policies let clients convert to permanent coverage without new underwriting, usually up to a set age.
Conversion premiums are based on attained age, so waiting makes the permanent policy more expensive.
Level term periods often end before the client dies, so conversion may be the only way to keep coverage if health changes.

With life expectancy in the mid-80s, the level term period will often run out before the client does.

Why term clients need follow-up

The idea of “buy term and invest the difference” works only if the difference is actually invested. More often, clients pay the term premium and spend the savings elsewhere. Years later, the level period ends, the premium rises sharply and the coverage lapses just as the client’s health and age make new coverage harder to get.

How term conversion works

A conversion option lets the client exchange term coverage for a permanent policy without additional underwriting. Key points:

Conversion is usually allowed until a certain age, commonly 65, 70 or 75, or until the end of a set conversion period.
The premium is based on the insured’s attained age at conversion, so earlier conversions generally cost less.
Conversion is especially valuable if the client’s health has changed since the policy was issued.

Conversion rules vary by carrier and product, including which permanent products are eligible.

Build a review process

Set a regular review for every term client, and flag clients approaching conversion deadlines. Even when converting isn’t right yet, the conversation often uncovers new needs or leads to referrals. Some clients may also benefit from newer product features; see our article on carrier upgrade programs.

How SRS helps

We can confirm whether a client’s term policy has a conversion option, check deadlines and eligible products, and provide marketing support to turn those reviews into permanent sales. Contact us with a list of term clients you’d like reviewed.

Frequently asked questions

What is a term conversion option?

It lets a policyholder change term coverage to a permanent policy without new medical underwriting, within the carrier’s time and age limits.

When should a client convert term insurance?

Generally as early as it makes sense, since premiums are based on attained age. Conversion is especially valuable if health has declined.

Is there a deadline for converting term life insurance?

Yes. Most policies allow conversion until a certain age, often 65, 70 or 75, or until the end of a set conversion period. Check the specific contract.

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Reviewed by Tim Fuller on 2026-09-26

Tim Fuller

President, SRS Inc.

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Life Events That Should Trigger a Life Insurance Coverage Review

September 26, 2026June 21, 2021 by Tim Fuller

Clients’ lives change every year, but they rarely stop to think about life insurance when they do. A new home, a new baby or a promotion changes what they need, and it falls to the advisor to notice. A simple review process tied to life events keeps clients properly covered and opens new conversations.

Key takeaways

Buying a home, having a child, marriage, divorce and promotions all commonly change a client’s coverage needs.
Some carriers let recently insured clients add coverage at the same underwriting class for a limited time.
Reviews can also uncover older policies with cash value that could buy more guaranteed death benefit through a 1035 exchange.

When life changes, most people think about their day-to-day life, not about how much life insurance they need.

Life events that change coverage needs

Buying a home. A new mortgage raises the amount a family would need to stay in place.
A birth or adoption. More dependents and more years of support.
Marriage or divorce. New obligations, and beneficiary designations that may need updating.
A promotion or raise. More income to replace. See our article on income multiples for sizing coverage.
Starting or buying a business. New debts and key person needs.
A death in the family or new caregiving role.

Adding coverage at the same rate class

Clients who bought coverage recently sometimes want more. One carrier we work with lets clients add a new policy at the same underwriting class as a recently placed policy. The amount available depends on how long ago the coverage was placed and the approved rating. Contact us to check whether a client may qualify, and confirm current program availability.

Reviewing existing coverage for value

A review is also a chance to make sure a client’s current coverage is still cost-effective. A client with substantial cash value who only needs death benefit protection may be able to use a 1035 exchange into a new policy, paying the same premium for a higher guaranteed death benefit. Carrier upgrade programs are another option to explore.

Make reviews a system

The key is having a system: ask about life changes at every meeting, send annual review reminders and track key dates. Our Policy Review Kit includes sample approach letters and talking points. Contact us for a copy or for help with any policy review.

Frequently asked questions

How often should clients review their life insurance?

At least every few years and after any major life event, such as marriage, divorce, a birth, a home purchase or a significant income change.

Can a client add coverage without new underwriting?

Sometimes. Some carriers allow recently insured clients to add coverage at the same rate class within limits. Riders such as guaranteed insurability may also allow increases.

What is a 1035 exchange?

A tax-free exchange of one life insurance policy for another under Section 1035 of the tax code, which can let clients move cash value into a more suitable policy.

50+ Years in Business60+ Top-Rated Carriers★★★★★ Rated by Advisors

Reviewed by Tim Fuller on 2026-09-26

Tim Fuller

President, SRS Inc.

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How Much Life Insurance Will Carriers Issue on a Non-Working Spouse?

September 26, 2026June 8, 2021 by Tim Fuller

Before a case goes through medical underwriting, it pays to know how much coverage a carrier will actually issue. That’s especially true for a non-working spouse, where financial underwriting rules vary widely. On one recent case, the same request drew offers ranging from $1 million to $5 million.

Key takeaways

Carriers generally require at least as much coverage on the working spouse as on the non-working spouse, but their limits beyond that differ sharply.
On one case, five carriers offered anywhere from $1 million to the full $5 million requested for the same non-working spouse.
Confirming financial limits before taking applications saves time and avoids awkward conversations with clients.

Same client, same request: one carrier offered $1 million, two offered the full $5 million. The spreadsheet doesn’t tell the whole story.

The case

A physician earning $500,000 a year already had $5 million of coverage in force on himself. He wanted $5 million on his wife, who did not work outside the home. If he lost her, he planned to stop working and stay home with their children. She had $1.8 million in force that would be replaced.

The need was real and clearly explained. The question was which carriers would agree.

Five carriers, five different answers

Before any medical underwriting, we asked carriers how much they would consider on the non-working spouse. The range was striking:

Carrier A: $1,000,000. It felt she was already over-insured.
Carrier B: $1,500,000. A low reinsurance limit made anything larger hard to justify.
Carrier C: $2,500,000. A strong carrier willing to match 100% of the working spouse’s coverage, but only up to $2.5 million.
Carrier D: $5,000,000. No additional questions.
Carrier E: $5,000,000. No additional questions.

Had the application gone to Carrier A or B first, the client would have waited through underwriting only to be offered a fraction of what he needed.

Why carriers differ

Financial underwriting guidelines for non-earning family members reflect each carrier’s philosophy, reinsurance arrangements and retention. Common factors include:

The amount in force and applied for on the working spouse
Household income and net worth
The stated purpose of the coverage, such as childcare and lost income if the surviving spouse stops working
Existing coverage being replaced

Our article on financial underwriting covers how carriers justify large face amounts more generally.

Shop the limit before the medical

For larger requests on a non-working spouse, or any family member who isn’t the primary earner, confirm the financial limit first. It’s one more reason price alone shouldn’t decide where a case goes.

Send us the details and our team will do the legwork, identify carriers that will support the amount, and explain other reasons one carrier may be a better fit than another.

Frequently asked questions

How much life insurance can a stay-at-home spouse get?

It depends on the carrier. Most require at least as much coverage on the working spouse, and some cap the non-working spouse at a lower amount or percentage. On one case, offers ranged from $1 million to $5 million.

Why would a carrier offer less than the working spouse’s coverage?

Carriers weigh reinsurance limits, retention and their own view of the insurable need. Some consider a non-working spouse over-insured beyond a certain amount.

Should I check financial limits before submitting an application?

Yes. A quick informal inquiry about financial limits can prevent weeks of underwriting at a carrier that won’t issue the amount the client needs.

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Reviewed by Tim Fuller on 2026-09-26

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President, SRS Inc.

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How Much Life Insurance Is Enough? 4 Ways to Calculate the Need

September 26, 2026May 10, 2021 by Tim Fuller

Figuring out the right amount of life insurance is still a mystery for many clients, and many households remain underinsured. A careful survivor needs analysis is rare, yet it’s the most reliable way to protect a family. Here are four classic methods and when each is useful.

Key takeaways

Income multiples are fast but ignore family size, expenses and stage of life.
Capital needs and human life value methods tend to overstate the need for many clients.
A comprehensive needs analysis built from a detailed fact finder gives the most accurate answer and gets clients invested in the result.

When the assumptions come from information clients provided, they feel ownership of the result.

1. Multiple-of-earnings method

This method sets coverage at a multiple of annual income, often somewhere between four and eight times salary. It’s quick and easy, but the least reliable, because it overlooks family size, living expenses, debt and stage of life. Our article on income multiples covers how carriers use multiples in underwriting.

2. Capital needs analysis

This method calculates the capital needed, at an assumed rate of return, to replace the insured’s income without ever spending principal. The full amount passes to heirs. It maximizes the ultimate estate but generally overstates the insurance needed to replace lost income.

3. Human life value

Human life value measures the present value of the income the insured would have earned for dependents, sometimes adjusted for inflation and mortality. Because it assumes steadily rising pay and lifestyle, it can overstate the need compared with a family’s current standard of living.

4. Comprehensive needs analysis

This is the most complete approach. It adds up:

Immediate cash needs and final expenses
Mortgage and debt payoff
Ongoing income replacement
College funding

It then accounts for inflation, time value of money, taxes, existing savings, existing coverage and Social Security survivor benefits. The inputs come from a thorough fact finder. Categories can include family needs, business needs, buy-sell planning, estate liquidity and retirement. Not every question applies to every client, but working through them surfaces needs clients may have overlooked.

Frequently asked questions

What is the simplest way to estimate life insurance needs?

Multiplying income by a factor, commonly four to eight times salary. It’s fast, but a full needs analysis is more accurate because it considers debts, expenses, goals and existing resources.

What is human life value?

The present value of the future income an insured would have provided to dependents. It’s often used for maximum coverage limits but can overstate what a family needs to maintain its current lifestyle.

What should a life insurance needs analysis include?

Final expenses, debt and mortgage payoff, income replacement, education funding, inflation, taxes, existing savings and coverage, and Social Security survivor benefits.

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Reviewed by Tim Fuller on 2026-09-26

Tim Fuller

President, SRS Inc.

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Valuing an In-Force Life Insurance Policy for Tax Purposes

September 26, 2026April 27, 2021 by Tim Fuller

When a life insurance policy changes hands, someone has to put a value on it, and the IRS cares a great deal about that number. Yet there is no single, simple rule for valuing an in-force policy. The good news for advisors: determining value isn’t your job, but you can make the process much easier.

Key takeaways

Policy value matters whenever ownership changes: rollouts from a business, distributions from a qualified plan, gifts and sales.
In most of these transfers, both parties benefit from a low value, which is exactly why the IRS scrutinizes them.
Advisors shouldn’t render a value opinion; request the carrier’s Form 712 and related values and give them to the client’s CPA, attorney or appraiser.

It is not the insurance advisor’s responsibility to determine a policy’s value, nor should you try.

When policy valuation matters

Fair market value is generally the price a willing buyer and willing seller would agree on, neither under pressure and both knowing the relevant facts. Life insurance transfers rarely look like that. Common situations include:

Business to employee: an employer rolls a key person policy out to a retiring executive. The employer may be glad to undervalue it so the employee reports less income.
Qualified plan distributions: the plan trustee doesn’t care about the value, but the participant who must report it as income, possibly with a 10% early distribution penalty, prefers it low.
Gifts: the donor is already in a giving mindset, so a lower value simply means a smaller taxable gift.

Because the parties’ interests often line up rather than conflict, the IRS takes a close look.

Why there’s no easy answer

Congress, the IRS and the courts haven’t produced one clear framework. Instead, taxpayers face a patchwork of rules that vary with the type of transfer, the type of policy and interpretation of the facts. Different contexts may point to different measures of value.

What advisors should do

Rendering a valuation opinion is outside an insurance advisor’s professional role. What you can do is request the carrier’s Form 712 or a similar valuation statement. You may receive several figures, such as:

Interpolated terminal reserve (the most common)
Accumulated cash value and cash surrender value
PERC (premiums, earnings, reasonable charges) value
Premiums paid
Tax and statutory reserves

Pass these to the client’s attorney, CPA or qualified appraiser to support their valuation. That’s more help than most advisors provide. Our article on gifting strategies covers one situation where valuation often comes up.

Frequently asked questions

What is Form 712?

A life insurance statement issued by the carrier that reports policy values. It’s used for estate and gift tax returns and is often a starting point for valuing a policy that is transferred.

What is interpolated terminal reserve?

An actuarial reserve value, adjusted for the point in the policy year and unearned premium, commonly reported on Form 712 as one measure of a policy’s value.

Should the insurance agent determine the policy’s value?

No. Advisors should provide carrier-reported values and let the client’s tax professional or appraiser determine the value used for tax reporting.

50+ Years in Business60+ Top-Rated Carriers★★★★★ Rated by Advisors

Reviewed by Tim Fuller on 2026-09-26

Tim Fuller

President, SRS Inc.

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Financial Underwriting: Helping Clients Understand Why Carriers Ask for Proof

Why life insurance isn’t like other purchases

What financial underwriting protects against

Setting client expectations

How SRS helps

Frequently asked questions

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Accumulation is only half the story

Fixed loans

Variable (indexed) loans

Choosing and explaining the right option

Frequently asked questions

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