Many fiduciary wealth advisors are unaware that 90% of cash value life insurance is lapsed or surrendered before ever paying a death benefit, even after significant capital paid in to maintain the policy. Why so high a lapse rate? Because the longer an insured lives, the less financial sense a cash value policy makes. And we're now seeing what will likely be a tsunami of policies owned by people in their 80's and even 90's who simply cannot afford the policies, as years of low interest rates result in skyrocketing premiums to keep the policies in force.
While the implications of rising premiums are less dire for affluent, HNW, and UHNW policy owners, the financial math is the same...the policies make less and less sense to maintain for insured past 70 years old.
Proactive wealth advisors should be engaging their clients about such policies to ensure that in the event that clients no longer wish to maintain those increasingly expensive, declining return policies, they can, instead, monetize them to the significant benefit of the policy owner and of the advisor, having delivered a significant value-add service AND growth AUM.
Below is a link to a September 2018 Wall Street Journal article that details the coming wave of older UL/VUL policies whose owners are experiencing exploding premiums, borne of a long decline in interest rates.
Universal Life Insurance, a 1980s Sensation, Has Backfired
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Brief, simple posts to provide wealth advisors and HNW policy owners additional insight as to how to most efficiently and cost effectively - and how to avoid common pitfalls and less-than-professional intermediaries - undertake the sale of an unwanted or surplus life insurance policy.