On a scale of 1 to 5, with 1 indicating a low degree of understanding and 5 a high degree of understanding, survey respondents rated their ability to adjust insurance terms to align with changing circumstances at 3.7. This indicates most respondents feel they understand the flexibility or rigidness of their coverage. However, this seems to conflict with the survey findings that show 85 percent own term insurance, 44 percent own whole life and 6 percent own no-lapse guarantee coverage—all lacking the flexibility of other product types. The least understood insurance purposes include: leveraging existing assets in generation-skipping trusts; using insurance for business continuity/buy-sell situations; and using insurance as an alternative investment strategy.

Family offices clearly value life insurance as a vehicle for achieving many financial goals, especially funding estate taxes, creating liquidity and preserving buying power. It further indicates that family offices understand the need to properly manage an existing life insurance portfolio and have become more active in doing so. But family offices must also reevaluate the way they approach and manage life insurance and apply the same depth of quantification and due diligence used in determining the appropriateness of other investments.

Michael J. Brink, CLU, is executive vice president and Thomas R. Love, FLMI, CLU, is vice president of case design and technology for Nease, Lagana, Eden & Culley, a life insurance advisory firm.