WHO AND WHEN TO ENGAGE, WHAT TO LOOK FOR
Clients stand to benefit greatly, even if you simply know what they own and its purpose, and how it changes as they age.
Preferred to fund different strategy for Trust after death of husband on 2nd to die policy
Divorce - rather than maintaining policy, settle and split proceeds
Change in beneficiaries obviated need for death benefit
Preferred liquidity of a sale to SV of a policy that owner no longer wanted to maintain
Unpalatable increase in premiums, policy no longer "worth it"
Opportunistic windfall, borne of health diagnosis and unwanted policy (term conversion)
Illiquid trust that owner could not/would not fund more
Adjusting large life insurance portfolio & prefer proceeds of sale to SV
Charitable Trust that donor no longer wished to fund/still healthy & lived much longer than anticipated
Corporate-Owned Key Man on departed CEO; policy obviously no longer necessary, but of value
Buy/Sell policy after sale of business of no value to insured/owner's estate
Proceeds to fund repayment of poorly performing premium finance loan to avoid collateral call
Key Man policy on owner after sale of business with subsequent health diagnosis that created value in policy
With growth of other assets in the estate, owners simply no longer wanted policy for beneficiaries
Term conversion opportunity for windfall
Knowing what to look for - or even just about the existence of policies, life events and milestones in your clients’ lives, or estate changes that may impact the utility of a policy - and applying basic processes to regularly engage those clients about them as part of the broader financial planning process, you can ensure that clients;
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Maintain only those policies that cost effectively contribute to broader objectives and/or responsibly,
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Can deliberatively explore a change to a different policy to most cost-effectively maximize the utility of a policy that serves a protection, business planning, or estate planning objective, and
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In those instances that maintaining a policy no longer makes sense (or if the protection or planning need is no longer relevant or cost effectively achievable), consider a sale with an understanding that it might actually have value for your client.
Examples of our 10 most recent cases — and each seller's reason for deciding to sell — are scrolling here.
A sale is an outcome of planning, not a product to pitch.
Most opportunities surface in the reviews you already do on at least an annual basis. When a policy no longer serves the client's financial, business, or estate plan, these are signals, other than a client simply declaring that they no longer wish to maintain a policy, that you are uniquely positioned to identify before the option is no longer available to your client.
01
The purpose has changed
The estate is now under the exemption, the business was sold, a partner left a buy-sell, or the beneficiaries no longer need the death benefit.
Recent Case
Founder and CEO of company with retained Key Man policy after the sale of the business.
02
A life event
The first death on a second-to-die policy, a divorce, a change in the trust’s funding strategy, or a change in health, which can raise the policy’s value.
Recent Case
A divorce compelled the full split of marital property, including the life insurance, which neither party wished to maintain.
03
Funding pressure
Rising premiums on older UL, a trust that can’t or won’t keep funding, or a premium finance loan that’s under water.
Recent Case
An illiquid trust with a $3M UL policy that had $0 cash value and no ability to further fund the Trust.
04
A preference for liquidity
The client would rather have the capital now: for another strategy, to rebalance, or to make a gift.
Recent Case
The wife of the insured diagnosed with cancer did not want to "bet against" her husband, preferring a $700K sale of the $2M term policy.
IDENTIFIABLE UNIVERSE OF POLICIES THAT WORK
Insured 72+ (younger, if health of the insured is less than standard for age - the youngest we have ever done is 51), $500K+ face, UL/VUL or convertible term. We can place smaller policies, but fewer bidders participate in those auctions.
Before any lapse or surrender, check the market. Sales average about 10x cash value.
