When clients decide to lapse or surrender a policy, you owe it to them to investigate the alternative of a life settlement.

A lot has recently been written about the increased amount of money flowing into the settlement market.  Hopefully, this publicity will get the attention of producers and advisors who have clients about to lapse or surrender a policy.  The additional settlement value can make a meaningful difference in people’s lives. 

Here are a few cases that we recently worked on:

$2,450,000 survivorship UL policy on a male 77 and a female 76.  Due to a reduced need for insurance to pay estate taxes and a need for the cash that was going toward premium payments, the clients were going to surrender their policy for $354,153.  Their agent suggested trying a settlement, but wasn’t optimistic because he believed there wasn’t much of a market for survivorship policies. 

Because buyers now have a better understanding of survivorship mortality, survivorship policies enjoy greater value on the market than in previous years. Result: the client received an offer of $555,670. 

That’s $200,000-plus more than would have been received had they surrendered the policy!  To boot, three companies were competing against each other for the policy; in the past, we’d be lucky to have one fund interested in a survivorship policy. 

$2,000,000 UL policy on a female 87.  The client was quite unhappy with the performance of her policy.  She was disappointed that the current cash surrender value was only $85,271, much less than illustrated when the policy was purchased. And she couldn’t afford the increased premium that would be required to continue the policy.

Before surrendering the contract, her agent came to us and we secured for the client an offer of $350,000.  She was delighted because it was a lot closer in amount to the original cash value projections from 14 years ago.

Three $500,000 term polices on a male 70, totaling $1,500,000.  All three policies were coming to the end of the term conversion period and the client was planning to let these policies lapse.  Purchased to provide key man coverage to cover business loans, the policies were longer needed. 

The agent suggested selling them in the secondary market as “anything was better than nothing!”  The client received $56,280 and was thrilled—as was the agent who earned commissions on the term conversions that were required for the life settlement.

$1,350,000 survivorship UL policy. The husband was deceased and the wife was 92.  The policy was going to lapse without value and the client could not afford the premiums that were about to skyrocket due to her advanced age. 

Doing a settlement for very old clients requires extra special consideration.  But the projected premiums made keeping the policy simply impossible.  We got the client a net offer of $255,000, a welcome surprise and important money to help maintain her lifestyle.  

Once the decision has been made to lapse or surrender a policy, you owe it to your clients to investigate the alternative of a life settlement.  Remember, it can’t hurt to try — it can only hurt not to!