A client came in recently with a problem. He had purchased a life insurance policy nearly twenty years ago, had paid premiums based on a level that was recommended by his insurance advisor, and thought that he would have coverage for life. The problem is, he had purchased a flexible premium universal life policy that had “underperformed”. These policies are tied to a company declared interest rate, and that rate determines the cash value of the policy. Interest rates have been decreasing until recently, so many of these policies find themselves requiring more premium than was originally projected.

My client is 81 years old and lives on a fixed income, not a very substantial one. He would be hard pressed to come up with the additional funds necessary to keep the policy in force. Unfortunately his wife, who would have been his primary beneficiary, passed away a few years ago. At this point, he could have let the policy lapse and avoid and further premium payments. That would have been a very unsatisfactory result, since he had paid premiums for the last several years.

How about some good news! We were able to sell the policy, via a life settlement, for more than he paid in premiums since buying the policy. A life settlement is a transaction that involves an investment group purchasing coverage that is no longer needed (or affordable) for retention until benefits are paid.

Before junking coverage,whether it is term insurance or cash value coverage, investigate the possibility of a life settlement. There are a number of reputable firms engaged in this market, are we seeing surprising results for those clients whose situations are conductive to the profitable sale of an asset which is no longer needed or affordable.