- Has the annual outlay for life insurance policies become burdensome with age?
- Has the underperformance of current life insurance policies due to low interest rates and longer life expectancies caused an increase in premium payments that is too burdensome? .
In the past you had two options: (1) Surrender the policy for its cash value, or (2) request the "reduced paid-up" non-forfeiture offered in the policy. Both of these options are dependent on the policy cash value and in most cases undervalued the policy as a financial asset.
The Role of the Institutional Marketplace
The secondary marketplace can offer the policyholder the
ability to secure funding for the true asset value of the policy
to investors. much like the familiar "Life Settlement" the
secondary marketplace can split the policy interest permitting
opportunities for the individual to maintain the necessary life
insurance coverage for his or her estate.
Institutional capital provides a secure funding source and also
provides the highest degree of consumer protection. at no point
is a client's policy of the personal information associated with
the policy ever in accessed by any individual investor.
Examples of Insurance Optimization in Practice:
Insured: Male age 74 / Female age 68
Policy: $20,000,000 Second to Die Universal Life
Cash Value: $775,000
For estate planning purposes the clients purchased a $20 million second to die
policy three years earlier. Their estate needs changed and only $10 million of
coverage was now needed. The on-forfeiture option of "reduced paid-up" in the
policy would have provided for $3,750,000 of life insurance coverage. The policy
was valued for "life settlement" and the highest offer was $2 million.
This policy was offered to institutional investors for Insurance Optimization
and the clients secured a $5.5 million paid-up benefit plus $600,000 in a cash
settlement. the clients used the $600,000 to purchase a new policy in the face
amount of $4.5 million, providing them with total coverage of $10 million.
Insured: Male age 67
Policy: $5,500,000 Universal Life
Cash Value: $1,320,000
The client received a premium notice from the life insurance
company which had doubled his premium outlay from $120,000 per
year to $240,000 per year. The client hadn't any financial
tolerance for a premium increase.
The policy would have provided for a "reduced paid-up" of $3.6
million of insurance coverage or the client could have sold the
policy for $1,650,000 in a life settlement.
Electing to pursue a plan of Optimization the client was able to
place his policy in the institutional marketplace and secure
total life insurance coverage of $5.8 million for the same
annual outlay of $120,000.
