After a trust-owned policy lost its guarantee and faced lapse 26 years earlier than planned, our policy management team helped evaluate strategic options and uncover value through the life settlement process.
Case At A Glance
The Situation
Susan and Ed, ages 66 and 80, had a $3.4M trust-owned survivorship universal life policy that was originally guaranteed to provide coverage to age 100. The policy was intended to support long-term planning and preserve meaningful protection for the couple’s beneficiaries.*
But over time, the premiums were not paid as originally designed.
As a result, the policy’s guarantee was no longer secure, and the couple faced a much different outcome than expected.
What Went Wrong
The policy was in danger of lapsing prior to life expectancy — 26 years earlier than originally guaranteed.
The guarantee was no longer in effect or available, and Ed’s health had become impaired since the policy was issued. At the same time, the increased premium needed to keep the policy going was no longer affordable for the couple.
What began as a funding issue became a larger planning concern: the clients were at risk of losing meaningful policy value.
What Was At Risk
Guaranteed To Age 100 → Lapse Risk 26 Years Early
A $3.4M Policy Was In Danger Of Losing Its Intended Value
The clients had a high probability of outliving the coverage, and the policy’s cash surrender value was not significant. Without a deeper review, the policy could have lapsed or been surrendered for far less than its potential market value.
This is where policy management can help uncover options that may not be visible from the policy statement alone.
The Resolution
Our team reviewed the situation and recommended four options designed to maximize the value of the policy. Because the cash surrender value was not significant, our life settlement advocacy partner evaluated whether the policy could create greater value in the secondary market.
The life settlement process ultimately provided 6x the surrender value.
Instead of allowing the policy to lapse or accepting limited surrender value, the clients were able to access a more favorable outcome based on the policy’s market potential.
The Takeaway
A policy lapse does not always mean the only options are to pay more, surrender the policy, or walk away.
In this case, active review helped identify a better path. By evaluating the policy structure, guarantee status, health considerations, premium requirements, and potential market value, our team helped turn a lapse-risk scenario into a measurable financial opportunity.
Policies under stress should be reviewed before decisions are made.
Is A Policy Lapse Hiding A Better Option?
Aurum helps trustees, attorneys, CPAs, and other financial advisors identify policy risks, evaluate available options, and uncover hidden value before coverage is lost or surrendered too early.
*Client name has been changed to protect confidentiality.
*This example is provided for illustrative purposes only and is not intended to represent the experience of all clients. Individual results will vary, and past outcomes are not indicative of future results.
Valmark Securities supervises all life settlements like a security transaction and its’ registered representatives act as brokers on the transaction and may receive a fee from the purchaser. Once a policy is transferred, the policy owner has no control over subsequent transfers and may be required to disclosure additional information later. If a continued need for coverage exists, the policy owner should consider the availability, adequacy, and cost of the comparable coverage. A life settlement transaction may require an extended period to complete and result in higher costs and fees due to their complexity. Policy owners considering the need for cash should consider other less costly alternatives. A life settlement may affect the insured’s ability to obtain insurance in the future and the seller’s eligibility for certain public assistance programs. When an individual decides to sell their policy, they must provide complete access to their medical history, and other personal information.