(Hugh Sawyer | Photo courtesy of Rosell Wealth Management)
As someone who advises successful people on their assets, it’s always surprising how underrecognized life insurance is as an asset. When they are no longer wanted or needed, life insurance policies can have a tremendous impact on one’s overall retirement plan. Would you like to learn about a retirement strategy that most people, including advisors, are not aware of? I have guided many Central Oregonians through a successful retirement over the past two decades and I have seen how this strategy has the potential to change the financial future for retirees.
Like many in the area, I am a small business owner and I love international travel. When I heard Hugh’s story, his passion for adventure and his commitment to building a business in an emerging country inspired me. I hope it does the same for you.
Getting What You Deserve: An advantageous alternative to lapsing or surrendering a life insurance policy. As a child, Hugh would always flip through the pages of his parents’ National Geographic magazines and lust after the idea of traveling to exotic places such as Africa and South America. After graduating from Cal Poly San Luis Obispo in California’s Central Coast, Hugh, like so many graduates, had absolutely no idea what he wanted to do in life. Applying to the Peace Corps felt like a natural next move and made more sense for him than joining the armed forces. To no surprise by his family and friends, he was quickly accepted. Within three months, Hugh was stationed in Ciudad Bolívar, the capital of Venezuela’s southeastern Bolívar state. His mission for the next two years was to help construct a waterpipe below the Angostura suspension bridge to make safe drinking water more accessible to villages located outside the city.
Hugh quickly fell in love with the kind people, the majestic mountain scenery and the local cuisine. His two-year stint flew by and when he returned to the United States, he had matured in ways even his parents couldn’t have imagined. Once home, it didn’t take him long to realize how much he missed South American culture.
How could I get paid to return to Venezuela? he wondered. Before long, Hugh decided to start an adventure tour company. With a loan from his parents (which he proudly paid back within one year), his business plan thrived. Jump ahead five years and Hugh had seven full-time staff and a successful reputation. His main clientele was affluent baby boomers who missed the adventure of their youth and were willing to pay a premium for an organized tour that centered around immersion into the native culture, rather than 1,500-thread-count Egyptian cotton sheets at the Ritz Carlton. Hugh was making a handsome living! He felt as if he had won the lottery with an occupation that didn’t require a desk or suit and tie like so many of his friends back in the states.
Fast-forward to February 2020, Hugh celebrated his 59th birthday. He still loved his work so much that retirement wasn’t on his radar. He even chuckled to himself in disbelief that he was of the age to access his IRAs without penalty. Where did the time go? Just weeks after his birthday, Hugh’s world, and the rest of the world, changed in ways no one could fathom. He had never heard of the terms “coronavirus” or “Covid”, but this global pandemic quickly became a reality. The stock market precipitously dropped and so did his company’s months of booked reservations. He held on for months, hoping the virus would subside and international borders would reopen. Then the Delta variant took hold. By the time the Omicron variant appeared, Hugh’s business had dried up to nothing. The bureaucracy of Venezuela and their incredibly rampant inflation of 2,959 percent in 2020 did not help matters. (And we thought the U.S. 40-year-high inflation rate of 8.6 percent was a lot! Think again.) Hugh had no choice but to close his business. As a result, he was forced to file bankruptcy to discharge business loans he was personally responsible for.
Hugh had a $1 million term life insurance policy, which needed to be converted within the next several months. However, he could not afford to pay the annual premium of $17,800 for a permanent policy. Plus, his existing policy, like all term policies, had no cash value. He thought his only choice was to surrender his policy and walk away with nothing. That was, until his financial advisor referred him to our practice. We ran an analysis on all the options Hugh had so he could make an informed decision he was comfortable with. Sadly, during this process, we learned Hugh’s life expectancy was estimated at less than six years due to a prior diagnosis of chronic lower respiratory disease (CLRD), which is a leading cause of death in the United States.
After working with multiple providers, we obtained an offer of $490,000 for Hugh’s $1 million policy. Needless to say, the life insurance payout brought significant relief to Hugh. However, it was important for him to leave a legacy for his girlfriend of many years. We advised Hugh that he could retain $250,000 of his policy and sell the remaining $750,000. He opted for this option and received an offer of $295,000 plus reimbursement of the first quarter’s premium. Hugh’s life settlement — which paid 39 percent of the total death benefit — enabled him to retain part of his insurance, thereby leaving a legacy for his loved one while enjoying his remaining years comfortably and with dignity. Hugh’s situation is just some of the many scenarios in which a life settlement can provide an attractive alternative to lapsing or surrendering part of a policy or all of it. When it works, WOW, what a gift!
Most people believe they have only three options for their now unwanted and unneeded life insurance policies. They include:
- Keep the policy and continue paying the increased premiums.
- Decrease the death benefit of the policy to maintain an affordable premium.
- Let the policy lapse and receive any potential cash value that has accumulated.
What many don’t realize is there is a fourth option that could reap the largest benefits. Your home, automobile, boat, investment portfolio, real estate and business interests are all capital assets. Life insurance policies are also capital assets. Yours may hold more value than you realize. Would you like to learn more about profiting from a life insurance policy that you may no longer want or need? Get a complimentary copy of my recently released book In The Know — Turning Your Unneeded Life Insurance Policy Into Serious Cash by contacting Paris@RosellWealthManagement.com.
David Rosell is president of Rosell Wealth Management in Bend. He is the author of three books including Failure Is Not An Option and In The Know. Find David’s books at local bookstores, Amazon, Audible and the Redmond Airport.
Investment advisory services offered through Valmark Advisers, Inc. an SEC Registered Investment Advisor Securities offered through Valmark Securities, Inc. Member FINRA, SIPC 130 Springside Drive, Ste 300 Akron, Ohio 44333-2431. (800) 765-5201. Rosell Wealth Management is a separate entity from Valmark Securities, Inc. and Valmark Advisers, Inc. 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.
