Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Life Health > Life Insurance

Look what we found!

Your article was successfully shared with the contacts you provided.

Life settlements can bring found money! Here are two recent cases that show how life settlements brought unexpected value to policies that were about to be lapsed or surrendered:

Case #1:

Who says term insurance has no surrender value?

A $2.5 million term policy, on a 63-year-old male, was reaching the end of its premium guarantee and conversion period. The client could not afford the premium to convert the entire policy and was no longer healthy enough to qualify for new term insurance. In a term conversion life settlement, the policy owner sold half the death benefit, $1.25 million, for $60,300. The proceeds were used by the insured to help pay for the first few premiums to convert the remaining $1.25 million of coverage to a new universal life policy. Yes, it’s true — a life settlement can actually help someone keep more life insurance in force for their beneficiaries.

Case #2:

When estate taxes are no longer a problem

A $1 million survivorship universal life policy had been purchased for estate taxes. The insured was an 82-year-old male, and his spouse was now deceased. The reason the policy was purchased, to help pay the estate tax, was no longer relevant, and there was no other need for the policy. As a result, the insured decided to surrender the policy to enhance his retirement income. The cash surrender value was approximately $91,000. Before putting through the surrender request, his advisor suggested they try a life settlement. As a result, the policy owner received $330,000 — more than two and a half times the cash surrender value! The insured’s retirement was enhanced well beyond his expectations.

If these were your clients, isn’t this the kind of result you would have wanted for them? Isn’t it your responsibility to try? It can’t hurt to ask; it can only hurt not to.

For more from Robin S. Weinberger and Peter N. Katz, see:

Clarity for life settlement taxation falls off the cliff

Plenty of life settlement opportunities, post fiscal cliff

How to spot a life settlement opportunity


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.