Overinsured Retiree Sells $800,000 Policy for 8 Times Cash Surrender Value

Financial and insurance professionals are all too familiar with situations where retired clients are paying hefty premiums on life insurance coverage they no longer need.

In some instances, these seniors own multiple policies that were purchased many years ago for income replacement during their working years. But what happens when the level of coverage is out of alignment with their current needs?
For seniors who feel they need to downsize their coverage, it’s time to talk with an insurance advisor who has experience handling life settlement transactions. When the situation involves excess coverage consisting of multiple life insurance policies, the insurance advisor can offer creative strategies that may include selling a policy in the secondary market (i.e. life settlement).    

Downsizing Excess Coverage Brings Cash Windfall 8 Times CSV

The term downsizing doesn’t just apply to retired seniors in the process of cleaning out the attic or moving to a smaller home. The following case summary illustrates how an insurance advisor was able to help his overinsured client ‘downsize and rightsize’ his life insurance coverage by selling an unwanted policy to pay the premiums on the others.

Life Settlement Case:

Insured:                      76 year old male
Policy Value:                $800,000
Premiums:                   $36,000/yr.
CSV:                            $21,000
Lowest Bid:                  $80,000
Highest Bid:                 $165,000
Cash Settlement:         $165,000

The client owned a total of $2.8 million in life insurance coverage purchased during his working years. The premiums to maintain all three policies had escalated over the years and the client had reached the conclusion that his coverage was in excess of his current needs.

He sat down with his insurance advisor to discuss the options. Initially, the client was leaning toward accepting the carrier’s cash surrender value of $21,000. However, the advisor explained that based on his age and the size of the policy, it would be to his benefit to explore a life settlement since the amount would likely be multiple times the policy’s CSV.

The client agreed to move forward and Asset Life Settlements (ALS) was asked to negotiate with multiple buyers in the secondary market to obtain the highest offer.

ALS submitted the case to 14 potential buyers and negotiated offers from a total of 8 buyers. The offers ranged on the low end from $80,000, to the highest offer of $165,000, which the client was thrilled to accept.

After selling the policy, the insured was able to use the cash windfall to pay the premiums for the other two policies for a number of years.

Take Away

The client was grateful for his agent’s creative guidance and his expertise involving life settlement transactions. In addition to eliminating burdensome premiums for the excess coverage, the proceeds from the life settlements freed up cash flow and provided relief from premium payments on the two existing policies.

Agents have an opportunity to help clients avoid expensive mistakes by sitting down with clients over the age of 65 to discuss whether it’s time to ‘downsize and rightsize’ their current life insurance coverage. Accepting the cash surrender value is not always the best choice. When the decision is made to sell a policy, ALS has the expertise to negotiate the highest possible offer for your client’s policy. We also offer agents one of the market’s most generous compensation splits for life settlement transactions.

If you have a possible life settlement case, feel free to contact us at 1-855-768-9085 for an immediate appraisal, or use our online calculator.