Year-end planning often focuses on income taxes, charitable giving, retirement plans, and investment portfolios. For families and business owners with substantial or complex life insurance coverage, it is also an appropriate time to review whether existing policies still support the objectives for which they were originally purchased.
Life insurance can play several different roles in a broader financial plan. It may provide family protection, create liquidity for estate obligations, fund business succession arrangements, protect a company against the loss of a key person, or support long-term wealth transfer planning.
But the presence of a life insurance policy does not mean the planning is complete. Policy performance, premiums, loans, ownership, beneficiary designations, trust administration, business values, and financing arrangements can all change over time.
This year-end life insurance checklist provides a framework for identifying those changes and determining whether action should be taken before the beginning of another year.
A Life Insurance Review Is About More Than the Death Benefit
A policy may still provide the same stated death benefit while the assumptions supporting it have changed. Premium requirements, policy values, loans, guarantees, ownership, beneficiaries, and the purpose of the coverage should all be considered as part of a comprehensive review.
1. Confirm That Coverage Still Matches Your Planning Objectives
Begin with the reason the coverage exists.
A policy purchased years ago may have been designed around a very different balance sheet, family structure, business value, or estate plan. Significant changes in any of those areas can affect both the amount and structure of life insurance that may be appropriate.
Consider whether there have been changes in:
- Net worth or the composition of your assets
- Family circumstances or intended beneficiaries
- Business ownership or valuation
- Estate planning documents or trusts
- Debt or other financial obligations
- Liquidity needs
- The original purpose of the life insurance
The objective is not necessarily to purchase more coverage. In some situations, existing coverage may still be appropriate. In others, the amount, ownership, policy type, or funding strategy may need to change.
2. Review Current Policy Performance and In-Force Illustrations
Permanent life insurance should be reviewed periodically rather than judged solely by the illustration provided when the policy was purchased.
Depending on the type of policy, actual results may be affected by credited interest rates, dividends, index crediting, investment performance, policy charges, cost-of-insurance rates, premium timing, withdrawals, and loans.
An updated in-force illustration can help show how the policy is currently projected to perform under its existing assumptions.
Questions to consider include:
- Is the policy still projected to remain in force for the intended period?
- Are current premiums sufficient to support the policy?
- How do current policy values compare with prior expectations?
- Have guarantees or non-guaranteed assumptions changed?
- Would different assumptions materially change the projected outcome?
A formal life insurance policy review can be particularly important for older permanent policies or coverage that has not been evaluated for several years.
3. Review Premium Requirements and Policy Funding
Year-end is also a useful time to confirm that premiums have been paid as intended and that the current funding strategy remains appropriate.
Permanent life insurance does not have a universal annual contribution limit or year-end funding deadline comparable to a qualified retirement account. The amount and timing of premiums depend on the individual contract, the policy's design, and applicable tax rules.
Before changing premium levels, consider:
- The policy's current and projected funding requirements
- Whether additional premiums would improve policy durability
- Whether reducing or stopping premiums could affect guarantees or projected longevity
- Whether additional funding could cause the policy to become a Modified Endowment Contract (MEC)
Premium decisions should be based on current policy information rather than an assumption that more funding is always better or that premiums can safely be reduced simply because the policy has accumulated cash value.
4. Evaluate Policy Loans and Other Outstanding Obligations
Policy loans can materially affect the long-term performance of permanent life insurance.
A year-end review should identify the outstanding loan balance, applicable interest rate, how interest is being paid or accrued, and how the loan affects the policy's projected values and death benefit.
Pay particular attention to policies in which loan balances have grown substantially relative to available cash value. Loans generally accrue interest and can reduce both policy values and the death benefit. If a policy with a significant outstanding loan later lapses or is surrendered, taxable income may result depending on the policy's basis, tax status, and other circumstances.
The appropriate response is not necessarily to repay every policy loan. The objective is to understand the obligation and incorporate it into the policy's ongoing management.
5. Review Ownership and Beneficiary Designations
Policy ownership and beneficiary designations should be reviewed whenever there has been a significant change in family, business, or estate planning circumstances.
Questions to ask include:
Who Owns the Policy?
Confirm whether the current owner—an individual, business, or trust—still aligns with the purpose of the coverage and the broader planning structure.
Who Receives the Benefit?
Review primary and contingent beneficiary designations and determine whether they still reflect the policyowner's intentions.
Have Circumstances Changed?
Marriage, divorce, births, deaths, business transactions, and changes to an estate plan can all affect existing policy arrangements.
Does the Structure Still Work?
Ownership and beneficiary arrangements can have legal, tax, and estate planning consequences that should be coordinated with the appropriate advisors.
Beneficiary designations deserve particular attention because they generally control who receives policy proceeds. Our guide to life insurance beneficiary designations discusses several of the issues that should be considered.
6. Coordinate ILIT Funding and Trust Administration
If an Irrevocable Life Insurance Trust (ILIT) owns a policy, year-end review should include both the insurance contract and the administration of the trust.
Depending on how the trust is structured, this may include reviewing:
- Premium amounts and upcoming premium due dates
- Contributions or other funding provided to the trust
- Trustee records
- Beneficiary withdrawal rights and related notices when applicable
- Whether trust assets are sufficient to meet anticipated policy obligations
For 2026, the federal annual gift-tax exclusion is $19,000 per donee. However, the annual exclusion generally applies to qualifying present-interest gifts; a transfer to a trust should not be assumed to qualify simply because the amount transferred is below the annual exclusion.
Trust administration should be coordinated with the client's estate planning attorney and tax advisor. The insurance review should complement that process rather than substitute for it.
7. Review Estate and Gift Planning
For families with substantial estates, life insurance should be evaluated in the context of the broader estate plan rather than in isolation.
The federal basic exclusion amount for estate and gift tax purposes is $15 million per individual for 2026, while the annual gift-tax exclusion remains $19,000 per recipient. These amounts are relevant reference points, but tax thresholds alone should not determine whether life insurance is appropriate.
Estate planning considerations may include:
- Whether the estate has sufficient liquidity to meet anticipated obligations
- Whether significant assets are concentrated in a business, real estate, or other illiquid holdings
- How ownership of existing life insurance coordinates with trusts and other estate planning documents
- Whether lifetime gifts have changed the family's balance sheet or liquidity needs
- Whether the intended allocation among heirs has changed
For families with significant illiquid assets, estate liquidity planning can be especially important because the value of an estate and the cash available to meet its obligations are not necessarily the same.
8. Review Business-Owned and Business-Related Coverage
Business owners should separately evaluate policies connected to the company or its succession plan.
That review may include:
- Buy-sell funding: Does the death benefit still correspond reasonably with the current business value and the terms of the agreement?
- Key person coverage: Have the people whose loss would materially affect the business changed?
- Executive benefit arrangements: Are employer-sponsored life insurance arrangements still aligned with compensation and retention objectives?
- Business-owned policies: Are ownership, beneficiary designations, premiums, and policy performance being monitored appropriately?
A business that has grown substantially since coverage was purchased may have insurance amounts or arrangements that no longer correspond with its current economics.
Our guides to buy-sell planning and key person life insurance address those strategies in greater detail.
9. Reevaluate Premium Financing Arrangements
Premium financing requires ongoing management because the insurance policy and the financing arrangement can both change over time.
A year-end review should consider:
- The current loan balance and borrowing rate
- Interest payments or accrual
- Collateral requirements and available collateral
- Current policy values and performance
- The relationship between borrowing costs and policy assumptions
- The expected duration of the financing
- The strategy for repaying or exiting the loan
A financing arrangement that was reasonable when established should not be assumed to remain appropriate indefinitely. Changes in interest rates, collateral values, policy performance, or the client's financial circumstances can materially change the economics.
For clients with financed coverage, the premium financing strategy should therefore be reviewed alongside the underlying policy.
10. Coordinate With Your Advisory Team and Document Next Steps
Many life insurance decisions intersect with tax, estate, legal, investment, and business planning. Year-end provides an opportunity to identify where those areas need to be coordinated.
Depending on the circumstances, the review may involve the client's CPA, estate planning attorney, financial advisor, business counsel, trustee, and life insurance advisor.
Before concluding the review, document:
- Changes that should be made immediately
- Items that require input from another advisor
- Updated in-force illustrations or policy information that should be requested
- Premium or loan actions scheduled for the coming year
- Trust or beneficiary matters requiring follow-up
- A date for the next policy review
The goal is not simply to complete a checklist. It is to make sure the life insurance remains coordinated with the planning it is intended to support.
A Year-End Review Can Reveal Problems Before They Become Difficult to Solve
Life insurance is often purchased to address objectives that extend for decades, while the circumstances surrounding the policy can change much more quickly.
Regular review can identify a policy that is no longer performing as expected, a loan that is becoming increasingly difficult to manage, an outdated beneficiary designation, a trust funding issue, insufficient business coverage, or a financing arrangement whose economics have changed.
Not every review results in a change. Sometimes the appropriate conclusion is that the existing policy and structure continue to work as intended. The important point is that the conclusion is based on current information rather than assumptions made years earlier.
