(Chapter 1 — Nancy Derose | Photo courtesy of Rosell Wealth Management)
After teaching second grade in for years, Nancy DeRose and her husband Charles, who is now deceased, retired to San Rafael, California. Over the next 15 years, Nancy focused on learning about the birds in this new place she now calls home. Birdwatching is a popular hobby for many people; however, Nancy, who refers to herself as a twitcher or birder, takes it to an entirely new level of passion. She’s so serious about birds, I believe she could go head-to-head with most ornithologists.
Not far from her home is one of her favorite places on the planet—Mount Tamalpais State Park, which, as a long-time Marin County local, she refers to as Mt. Tam. Although one can drive nearly to the top, 79-year-old Nancy still prefers to hike in a few miles on this 13-mile loop. Nothing excites her more than getting a photo of a Hutton’s vireo, a wrentit, or a pygmy nuthatch. She’ll then go home and use the shot to paint a watercolor extravaganza.
Nancy’s other passion is her only child — her son, Ron, a successful orthopedist — and her two grandchildren, ages 20 and 17. Next year, she wants to take them all, along with Ron’s wife, on the Royal Clipper. This five-masted tall ship is listed in Guinness World Records as the largest full-rigged sailing ship in the world. Her 42 sails require a crew of 20 to get the 439-foot clipper ship doing 17 knots on sail power alone. Coincidentally, some friends from Bend and I had an opportunity to experience this ship in 2021.
On this trip, Nancy can combine the two most important elements of her life, her loved ones and her beloved birds. She plans to visit the bird sanctuaries of the West Indies while her family soaks up the Caribbean sun. But that’s going to take money.
Nancy would have had enough to pull off the trip, but she found out that her insurance company was increasing the premiums on the $4 million universal life insurance policy that she and Charles had purchased in 1995 for estate planning purposes. It turns out that, for Nancy to maintain the policy through her life expectancy, her planned premium would increase from $44,000 to $106,000. That’s not just a premium hike, that’s more like climbing South, Middle and North Sister in a single day!
While Nancy might have just been able to afford the increased premiums if she scaled back, she certainly would never be able to afford to take her family on this dream vacation. Then she realized that she no longer needed the policy for estate planning purposes. The new tax laws had raised the federal exemption level to more than $12 million. Even if that dropped back down to $5 million in 2026, as it is expected to do, she would be fine. So why pay for an expensive policy she no longer needed?
Instead of simply walking away or surrendering her policy for its cash value, Nancy consulted her accountant, who turned to us for help. We provided the pair with four options: surrender the policy, reduce the death benefit, pay the increased premiums, or the fourth option — sell the policy. Instead of surrendering the policy, Nancy, whose life expectancy at that point was roughly six to ten years, took our recommendation and decided to pursue selling the policy through a life settlement.
Our life settlement team worked with multiple providers through a professional bidding process and negotiated a settlement offer, resulting in a total gross offer of $1,521,000, or two and a half times the cash surrender value. That’s a heck of a lot more than the policy’s $640,602 cash surrender value. And boy, that extra $880,398 she grossed will sure finance one heck of a family/birding holiday.
An all-too-often-unknown option
In most states, insurance carriers are not required to tell the owners of life insurance policies that they have the option to sell their policy instead of lapsing or surrendering it. Therefore, it’s the financial advisor’s responsibility to educate clients regarding the life settlement option. Unfortunately, most insurance agents, financial planners, CPAs, and estate planning attorneys we’ve come across have been unaware of such solutions for unwanted life insurance policies.
According to a 2015 survey by Wealth Management, 40 percent of financial advisors, by their own admission, know little to nothing about life settlements, which helps explain why only 11 percent have ever recommended a life settlement to their clients.
Not surprisingly, studies show that more than 50 percent of seniors had no idea they could sell their policies. Of those, nearly 90 percent who lapsed or surrendered their policies back to insurance carriers would have considered selling the policy had they known that life settlements existed. Luckily, Nancy was introduced to us before she surrendered her policy.
Would you like to learn more about how you could possibly profit 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 Emma@RosellWealthManagement.com.
David Rosell is president of Rosell Wealth Management in Bend. RosellWealthManagement.com. He is the author of three books. Find David’s books at local bookstores, Amazon, Audible as well as 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. Client name has been changed to protect confidentiality. The gross offer will be reduced by commissions and expenses related to the sale. Each client’s experience varies, and there is no guarantee that a life settlement will generate an offer greater than the current cash surrender value.
