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July 16, 2015 at 02:26 PM
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.
