Sample Case Study: Policy Rescue
Senior Settlement
Case Study #3
"Policy Rescue"
Male age 81, with reasonable health history; Female 78 with some minor heath issues. Clients maintained a Survivorship life insurance policy for estate planning purposes. Annual policy review revealed the policy was underfunded and would lapse in 5 years.
|
Death Benefit |
|
$500,000 |
|
Premium |
|
$600 monthly |
|
Surrender Value |
|
$0 |
|
Policy Date |
|
3 years old |
|
Death Benefit |
|
$500,000 (new policy issued since old policy was sold) |
|
Premium |
|
$600 monthly ($40,000 from the sale of old policy was used to "buy down" the premium on replacement policy) |
|
Surrender Value |
|
$32,000 (approximate CSV in first policy year) |
|
Policy Date |
|
2000 |
|
Cash Settlement |
|
$97,500 ($57,500 for personal use) |
The Senior Settlement option was the only viable alternative in this case. Their old policy went from a $0 surrender value to a $97,500 cash settlement. The settlement allowed them to obtain a new policy with the same premium as the old policy, with $57,500 for personal use. The new policy stayed inforce until joint age 95.
Since no two transactions are ever identical, individual results may vary.
The purchase price of Senior Settlements will vary depending on the institutional buyer, health history of the client and other variables that may be present at the time of sale.
Replacement insurance premiums will vary depending on the insurance company selected and health history of the client.
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