Policy audit is a structured, in-depth review of an existing life insurance contract to evaluate its performance, suitability and alignment with the client's current goals. A proper policy audit goes beyond glancing at the annual statement and instead analyzes premiums paid, cash value growth, cost of insurance trends, policy charges, loan activity, dividend performance and projected duration under updated interest or index assumptions. It also examines ownership, beneficiary designations, riders, policy type and insurer financial strength. Policy audits are especially important for older universal life or variable universal life policies issued during higher-rate environments, where today's lower crediting rates may cause underperformance relative to original illustrations. The objective is to determine whether the policy remains healthy as designed, needs funding adjustments or presents a risk of future lapse, and whether alternates might better serve the client's protection or accumulation objectives.

In practice, policy audits are often initiated by advisors, trustees, CPAs or attorneys as part of comprehensive financial or estate planning reviews. The advisor gathers in-force illustrations, annual statements, original policies and any amendments, then requests updated projections at current, guaranteed and stress-case assumptions. During client meetings, the advisor explains findings in plain language-highlighting whether the current premium is adequate, whether guarantees are at risk, or whether loans are approaching levels that could cause lapse. The audit may reveal opportunities to increase funding, reduce face amount, rewrite to a newer product, execute a 1035 exchange, or redesign ownership and beneficiaries for estate or business planning. For fiduciaries responsible for trust-owned or corporate-owned policies, documented policy audits show prudent oversight and can help meet regulatory and legal standards for monitoring insurance assets over time.