Have you seen “What Would You Do”? It’s a new show on TV that places actors in controversial situations and then films the reactions of the random people around them. It is shocking to see how ordinary people can ignore or walk away from the opportunity to help others. (Editor’s note: Bill Coffin, editor of National Underwriter, recently turned up on the show. Check out his blog about the experience.) How similar this feels to when you hear of companies that forbid their producers from helping their clients with a life settlement.
Here’s a story that contains some fairly common elements, only this was a real person, and not an actor. A 73-year-old lady went to see her insurance agent to get information about the $1,000,000 universal life policy she had taken out 18 years ago, when her husband had a stroke. She was a school teacher at the time and now had the additional responsibility of caring for her husband, who could no longer work. The sale was made so that if she predeceased him, there would be money to hire someone to take care of him. If she outlived him, there would be significant cash value that could be used to supplement her retirement.
After her husband died, she expected to cash in her policy for $212,000, as shown on the original illustration. Her agent had to give her the uncomfortable explanation that, due to significantly lower interest rates than had been projected, her policy was only worth $52,000. The lady was, of course, extremely upset because she was counting on using the money for herself. Her health had deteriorated, and she needed additional funds for medical expenses, housekeeping services and general living expenses.
The agent felt bad, but, fortunately, his associate in the next office had overheard the conversation and had an idea. He had just attended a seminar that we had given on life settlements and suggested that this could be the right situation for such a transaction.
Prior to starting the life settlement process, we learned that the lady had two children, so we offered the suggestion that, perhaps, the children could help out. She was adamant, however, that she did not want to take money from her children. So we took her through the life settlement process and were able to get her an offer of $188,000 for her policy. Needless to say, she was thrilled and immediately accepted the offer. Her agent was both relieved and thrilled as well.
If this was your grandmother, how would you feel if her agent represented a company that forbid agents from helping clients with a life settlement as an alternative to the lapse of surrender of a policy? $52,000 or $188,000 — what would you do?