THE SITUATION
Emily Graham1 and her husband Charles (now deceased) purchased a $4 million 
universal life insurance policy in 1995 for estate planning purposes. Emily, now age 79, was referred by her accountant to a ValMark Advisor for a comprehensive life insurance review. The review uncovered the fact that Transamerica* was increasing the cost of insurance on the policy. In order for Emily to maintain the policy through her life expectancy, her planned premium would increase from $44,000 to $106,000. Emily couldn’t afford the increased premiums and no longer needed the policy for estate planning purposes.
Four Options
The ValMark Advisor provided Emily and her accountant with four options: surrender the policy, reduce the death benefit, pay the increased premiums, or the fourth option— sell the policy. Instead of surrendering the policy, Emily took the Advisor’s recommendation and decided to pursue selling the policy through a life settlement. Emily’s life expectancy was between 77 and 113 months.
THE OUTCOME
ValMark’s life settlement team worked with multiple providers through a professional bidding process and negotiated a settlement offer which resulted in a total gross offer of $1,521,000 or
2.5 X the cash surrender value (before commissions and expenses2).
SUMMARY POLICY
POLICY TYPE: Universal Life
DEATH BENEFIT: $4,000,000
CASH SURRENDER VALUE: $640,602
ANNUAL PREMIUMS: $106,420 to Age 100
LIFE SETTLEMENT OFFER: $1,521,000 GROSS3
THE TAKEAWAY
A growing number of insurance carriers, including Transamerica*, are increasing the cost of insurance on in-force blocks of business. In most states insurance carriers are not required to tell
owners of life insurance policies that they have the option to sell their policy in lieu of lapsing or surrendering their policy.3 It is the responsibility of the advisor to educate clients regarding the life settlement option. Consider a life settlement as an alternative to lapsing or surrendering the policy.
Disclosures
2 The gross offer will be reduced by commissions and expenses related to the sale.
3 Insurancenewsnet.com, The New Face of Life Settlements.
Each client’s experience varies, and there is no guarantee that a life settlement will generate an offer greater than the current cash surrender value. In such cases, the client can always surrender their policy to the carrier if the coverage is no longer needed. This material is intended for informational purposes only and should not be construed as legal or tax advice or investment recommendations. Consult a qualified attorney, tax advisor, investment professional or insurance agent about the issues discussed herein. Securities offered through ValMark Securities, Inc. Member FINRA/SIPC.