What is a Life Insurance Check Up?  

A Life Insurance Checkup is a service to help consumers get the highest and best use from their life insurance premium dollars and cash values.  Mike Cave of Cave Financial has experience and insight that allow him to help others in this niche of personal finance that may be skewed by conflict of interest.  
 
What questions does a Life Insurance Checkup answer?

How strong is your insurance company?  Do you have the right type: term or cash-value?  Do you have the appropriate amount of insurance in light of other assets, liabilities, family circumstances, and after considering pre-retirement death benefits, Social Security Survivor benefits, the possibility of the family downsizing at the death of the bread winner, inheritance, etc.?

Are you overpaying? Evaluate current policies. If term policies, make sure they’re the most competitive available in light of your current health. Also be sure they will last the appropriate length of time in light of liabilities (mortgage pay off, children maturing).
 
Calculate the true internal rate of return on cash value policies and compare them to alternatives in the market place- a better policy, paying down debt, a Roth IRA.
Evaluate universal life policies to be sure they will not expire before you do.  
 
Here is what Cave Financial brings to the table:

• Experience- Mike’s dad was a life insurance agent so Mike got an early start working at his office during high school.  Mike’s term paper in finance class in business school in 1976 was “Term versus Whole Life Insurance”.  
• The ability to mathematically evaluate a cash-value policy.  The rate of return within a cash-value policy is usually a mystery.  Because you really have a mixture of pure insurance with investment, you should not accept nominal returns expressed by insurers at face value.  Mike has collaborated with actuaries and understands how policies are put together.  He knows how to calculate the true internal rate of return within cash-value policies.  This insight allows him to decisively recommend which policies to keep and which can be improved.
• Objectivity - Proverbs 28:21 says, “To show partiality is not good, because for a piece of bread a man will transgress.”  It is undeniable that commission-based compensation tempts one to give biased advice.  Mike is totally independent and receives no commissions, helping assure unbiased thinking.

In summary, in an industry with an army of agents advancing its agenda, the Life Insurance Checkup is an experienced voice exclusively for the welfare of the client.  

How much does a Checkup cost?

Typically a few hundred dollars depending on the complexity of your case, time involved, and savings realized.   However the savings always offsets the fee within 18 months maximum, or your fee is returned.  (The average recovery time is less than six months.)   The testimonies below confirm the value of an Insurance Checkup!
 
What’s the Biggest Obstacle to a Life Insurance Check up?

People don’t appreciate how much they can save; but they do know they can save the cost of a Checkup. Many opt for the known savings, which is unfortunate because it costs them dearly over a lifetime.                
 
Paying a fee for financial advice is something that 99 out of 100 Americans have never done. It takes a level of sophistication to appreciate its value.  People are responders, not initiators: we are more apt to be sold a product that’s not best for us, than proactively seek guidance, despite Scripture commending the latter.  (Proverbs 11:14, 15:22, 20:18, 23:23, 24:6)   

The Problem (that creates the need for the Life Insurance Checkup)
 
Americans tend to have misplaced priorities in financial planning: we feel (or have been made to feel) uncomfortable without insuring everything, while we feel too comfortable carrying debt for decades.  The opposite would be better.
 
Let me make an audacious statement (but hang in there with me):  “American families, as a whole, would be better off dropping every form of insurance and using these resources to pay off every form of debt.” Immediately your mind races: But what if I were in a car wreck, my house burned down, etc.  Fear looms large in our minds, in fact larger than the probabilities warrant.  Maybe it’s due to our frail nature, the media, etc.  But what topples most American families is too much debt, or maybe layoffs; not early death.  
 
Let’s highlight another truism: “Most people pay more into insurance than they get out of it.” An insurance company is merely a financial intermediary, meaning a middle man.  They don’t have a money tree, but can only payout what they collect…in fact less than what they collect, after paying the agent, their overhead, stockholders, etc.  Friction shaves off much of what comes in the door before it goes out to beneficiaries.  
 
For this reason Larry Burkett used to make two summary remarks on insurance: 1) “The cheapest form of insurance is self insurance.”  2) “Don’t insure that which you can afford to pay for yourself.”  While I’m not for dropping all insurance (I’ve delivered millions to beneficiaries), I do see abuses in the market-place… all the time.
 
Still wondering about that audacious statement?  Remember that America’s Sub Prime Mortgage Crisis was not caused by too little insurance but by too much debt.  Debt topples families, companies, and nations- yet our fears hold us in bondage to destructive patterns of spending resources on insurance that should go elsewhere.  It’s an imbalance- the opposite of what’s needed for sound planning.  
  
Consider the following: By the time you pay necessary living expenses, only a small amount is available for financial planning’s many competing needs: building the emergency fund, repaying debts, contingencies (death, disability, etc.), , , funding old-age needs, etc.  Choices must be made. Here are some observations about this process:
1)    Every dollar direct toward one contingency is one less for another.  This is the nature of economics- “the distribution of limited resources”.
2)    This produces a tension that needs balance. You can’t do it all perfectly because of limited resources.
3)    Advisors cannot definitively prescribe the right balance because we do not know how the future will unfold.  If you die young, life insurance will seem to have been best; but if laid off, the emergency fund.  
4)    Of the many uses of your limited financial planning dollars, the wheels that get oiled are often those that squeak the loudest; thus insurance distributed by commissioned agents often prevails. This means that other legitimate needs are often neglected, e.g. debt repayment, emergency fund.  This imbalance is the opposite of what we want; it’s the difference between a good and poor plan.
 
Consider the following: By the time you pay necessary living expenses, only a small amount is available for financial planning’s many competing needs: building the emergency fund, repaying debts, contingencies (death, disability, etc.), , , funding old-age needs, etc.  Choices must be made. Here are some observations about this process:
1)    Every dollar directed toward one use is one less for another.  This is the nature of economics: “the distribution of limited resources”.
2)    This produces a tension that needs balance. You can’t do it all ideally because of limited resources.
3)    Usually the wheel that squeaks the loudest gets oiled first; thus insurance with an army of commissioned advocates gains a disproportionately large amount of those few available financial planning dollars.
4)    This often means that other better uses go neglected, e.g. debt repayment, emergency fund, the Roth.  This imbalance makes the difference between a good financial plan and a poor one; whether you retire strong or weak.
 
The primary responsibility of the agent is to garner your money into their company.  Being sure your financial plan is balanced is not.  In fact the more they can tug you off balance towards one of the many competing financial priorities (theirs), the more they are paid.  Yet these commissioned spokesmen are the number one source of insurance counsel.  This has created tens of thousands of imbalances which could benefit from an unbiased Life Insurance Checkup.
 
The Life Insurance Checkup has benefited Sound Mind Investing (SMI) staff members.

SMI subscribers know Mark Biller and Vicki Mosher.  They were all helped.  I cite them because they are smart financial people, but still benefited from this service.  Might you?
 
Testimony of Mark Biller of SMI
“I had an AIG term life insurance policy. …Long story short, here's what I did. First, I had long-time SMI insurance guru Mike Cave look over my insurance situation. He found me two very good alternative life insurance carriers … I'll actually save about 13% on my premium while extending the term of the policy by 25% and getting with a much more stable insurer. That's win-win-win.… Mike is obviously quite good at finding good deals that save you money as well. And who doesn't like that?... Note that SMI doesn't receive a penny for promoting this service. We simply do it because we've grown to trust Mike's advice on insurance matters. We particularly like the objectivity of Mike's fee-based approach in these reviews - he's not making money by selling you a policy. That type of objectivity is tough to find in an insurance sales situation, and we think it's valuable.  Mike has helped both Austin and me with our individual insurance situations, and we think there's a good chance he'll be able to help you.”  SMI Weblog, 10-24-08
 
Testimonies of SMI subscribers- unabridged.  (The essence of these were abbreviated above, so you may want to skip this, but if you want more details, here they are.)
 
“When SMI recommended using Mike to evaluate life insurance needs in Oct 07, I took them up on their advice. Mike helped me and did a stand up job. You won't find people who evaluate insurance for a fee and make recommendations they don't receive fees from so I think Mike Cave is a great recommendation.”  Mark C., airline pilot, Charleston, SC

“I contacted Mike after reading about the importance of a life insurance checkup in SMI. Mike helped my wife and I consider our term, whole life, and disability insurance as it relates to our overall financial condition. The changes Mike recommended resulted in our family saving over $500 a month in premiums. We were so pleased with the manner in which Mike helped us determine what is important to us and to make changes accordingly.”  Paul C. and wife, cabinet maker, Asheville, NC

“When my husband and I were trying to figure out if we had enough insurance and what kinds we should have, we contacted Mike because we had seen information about him in a previous SMI article.  Mike helped us take a look at not only what and how much insurance we needed but how that related to our overall financial situation and our financial goals. He was incredibly patient with all my questions and we learned a lot about what we had and what we needed through the process.  He analyzed our current policies (we had term and whole life with the same company) and helped us find a more cost effective option for the term, while keeping the whole life.  I appreciated having advice from someone that could look at the overall picture objectively because they weren't trying to sell me a product at the same time.” Mark and Liesl M, CFO, accountant, Atlanta, GA
 
In November, 2007 I contacted Michael Cave regarding some life policies with substantial cash values.  Another advisor had suggested I cash them in to invest in the stock market.  I am conservative and Mike recognized these to be quality policies, but needing some adjustments.  He did a very good job of assessing our needs and contacting the company to collect the pertinent data (dividend additions that could be surrendered without incurring taxable gains, etc.).  We reduced some policies, and paid off some high interest loans that ended substantial interest outlays.  These policies pay an attractive internal tax-deferred yield (which Mike calculated) and now I regard them as a very important part of my investment portfolio.  Mike gave us advice that even our agent had not offered and we have saved his fee back many times already through interest saved.  It was evident he had no sales agenda and this made him easy to work with; he also knew exactly what to do.  I was very pleased with his professional approach and advice received.  Roger S.  retired business owner, Washington
 
“As part of my personal financial review, I was looking for cost savings and considering life insurance. I got Mike Cave’s name and number through SMI and contacted him to help me with my insurance questions. My insurance coverage included five whole life policies, two term policies, and insurance through my employer. After clarifying the Social Security Survivorship benefits and survivorship benefits through my retirement at work, and also seeing how my other assets fit together, Mike advised me I was over-insured. His first recommendation zeroed in on the low internal return of the WL policies and he suggested I drop them—which I did. The result was an $1800 per year savings plus a $25k cash-in value which I was able to reinvest. Then, after a quick evaluation of the two term policies, Mike determined which one was a keeper and which one could go. Not only did Mike make good recommendations on the term coverage, but he was able to make the one I kept even better by reducing a rider on my wife. By tweaking the good term and dropping the expensive one, Mike saved me an additional $1300 per year. One thing that struck me was how much less insurance Mike suggested as compared to my other advisor. Bottom line, Mike’s fee in comparison to my savings may have been one of the best investment decisions I’ve made. Thanks for all the stellar advice.”  Mike G, airline pilot, Illinois

"Many thanks for the independent review concerning family and company life insurance policies with substantial cash values accumulated over many years.  In September 2008, having read a book by a financial advisor who categorically opposed cash-value policies, I was considering cashing them out.  Your advice changed my mind.  Your calculations of the internal rate of return helped me to see they were worth keeping and I now consider them part of the fixed-income portion of my total investments with a 6.5% tax-deferred yield.  I’m glad I got your advice before acting, for it probably saved an expensive mistake.  Your fee was money well spent.  Your explanations were clear and I am now a believer in fee-based insurance advice.  Your advice and counsel will be sought again.” Charlton V.  Business owner- Georgia