WITHOUT YOU, YOUR CLIENTS ARE BADLY EXPOSED
Is a client of yours better off when you don't responsibly engage them about selling a life insurance policy they no longer want or need — one that might unlock significant liquidity?
If a client lapses a policy that turns out to have had real value to a buyer — and you never raised the option — how do you defend that? And if you did engage a broker, how do you defend an opaque process, a 30%+ fee, or a single buyer under no pressure to compete?
Without your engagement, clients are left with only sub-optimal outcomes. They can lapse the policy, surrender it, or sell it — and a sale usually means one of two flawed paths: going directly to a single buyer with no competitive pressure to bid the policy's true value, or working through a broker who is unlikely to find that value in the first place and then takes a high commission on whatever number it does produce. Either way, your client leaves real money on the table.
We're here to help you deliver the best outcome for your client, whether the right answer is to maintain the policy or sell it.
Below are a few real examples — losses that regular review of a client's life insurance holdings would have caught and likely prevented, and, in some cases, been the foundation of substantial upside.
YOUR ADVOCACY IS CRITICAL.
Without you, clients will experience meaningful losses and missed opportunities.
Real client losses and missed opportunities
Case Studies
$600,000 missed opportunity
Policy: $10,000,000 GUL
Insured: 73 year old healthy male
$10 billion RIA
The insurance team at a large RIA engaged us regarding a 10 year-old $10,000,000 GUL that the 73 year-old policy owner and insured no longer wanted to maintain and on which he was running the cash value down to cover premiums.
Unfortunately, although the policy remained in force, the funding approach that the owner had taken resulted in a lapse of the guarantee of the policy six months earlier, but neither the owner nor the advisor was aware. Had the policy been maintained ($75,000 premiums), the policy was likely worth at least $600,000.
$400,000 missed opportunity
Policy: $2,000,000 UL
Insured: 83 year old healthy male
Large national wirehouse
The advisor, at a large wirehouse firm, responded to an outreach from us to discuss his 83 year-old retired dentist client's joint life $2,000,000 policy. An analysis of the policy determined that it was likely worth $400,000, but the advisor had permitted the policy, which had no surrender value, to lapse just a month earlier.
We helped the advisor, who was also the writing agent on the policy, to engage the carrier to determine if the policy could be reinstated, but, unfortunately, that was no longer an option.
$300,000 excess fees
Policy: $9,000,000 UL
Insured: 74/73 year old healthy male and female
Lage national BGA
The producer with a large BGA had recently helped his clients, a couple in their mid-70's, to sell $9,000,000 across three policies as they had determined that they had more insurance than they needed and wanted to distribute the proceeds to their children. "I just wanted to do the right thing and help a client."
After a "torturous, unbelievably confusing" four-month process, the policies sold for $1,200,000, netting his clients $800,000 - $300,000 less ($150,000 for each of their adult children) than they would have with our fee structure.
$6,000,000 lower settlement value
Policy: $25,000,000 GUL
Insured: 88/87 year old healthy male and female
$190 billion RIA
The head of insurance at a large, national RIA engaged us about a $25,000,000 guaranteed UL owned by a 63 year-old client on his parents, both in their mid-80s. The advisor was assessing various options for the policy as the owner was facing what had become something of a prolonged liquidity crunch and the $400,000 premium was under consideration.
We assessed the good news that the policy was likely worth >$2,000,000 to the market, but, the bad news was that had the minimum guaranteed payment been made the previous year (we could see in our analysis of the shadow accounts that it had not been made); if it had been made and maintained the guarantee, the policy would likely have been worth $8,000,000. So, had a dialogue about options for the policy taken place earlier, the client could at least have been able to make an informed decision as to how or whether to maintain the policy, to include testing the market before not making the minimum premium due.
HNW/UHNW CLIENTS IN DANGER FROM POORLY MONITORED INSURANCE
IMPERILED TRUST OWNED LIFE INSURANCE
A recent study shows in just how precarious a position many trust-owned policies are - at least partly because they are so poorly monitored as the owner's needs and means evolve with time and life events.
-
43% are projected to lapse prior to maturity
-
37% are projected to lapse before the insured’s life expectancy
-
49% of no-lapse guarantee (NLG) provisions have been compromised
We are seeing this regularly, especially among older insureds who have lived much longer than they had expected and the funding in those later years becomes unpalatable, even among UHNW and the choice to fund with higher premiums is measured against remaining liquidity - which is enhanced with a sale of the policy.
