Case Studies
Note: These case studies are for illustration purposes only, and is not intended to be an indication of what a particular seller can expect to receive. During the last six months of 2006 settlements by Abacus Settlements, LLC averaged over 20% of the face amount of the policy being sold.
Case Study #1
Using a Life Settlement to Fund a More Cost-Effective Life Insurance Policy
The Policy Holder: An 82-year-old retired business owner
The Problem: He held two life insurance policies with death benefits totaling $6 million.
One policy was valued at $2.5 million and the second was $3.5 million – both of which would
be payable to a trust upon his death. The plan administrator of the trust desired the same death benefit but wished to reduce the annual premiums totaling $494,000.
The Solution: The financial advisor (the same advisor who wrote the two original policies) recommended pursuing a life settlement and then using the proceeds from that settlement to fund a single $6 million policy. The highest life settlement offer totaled $1.8 million, which would be available for rolling into a new policy.
The Result: The client had the same death benefit coverage of $6 million, but the premiums would be reduced to $349,998 – for an annual savings of $144,002 a year.
Case Study #2
Using a Life Settlement to Liquidate a Corporate Buy-Sell Agreement
The Policy Holders: Two elderly sisters who were major company shareholders
The Problem: The company needed an infusion of cash to pay down debt, increase shareholder dividends, and maintain corporate stability in the event of their deaths. The elderly owners held a combined total of $1.5 million in life insurance being used to fund a buy-sell agreement.
• The older sister carried a $500,000 life insurance policy with a cash surrender value of $3,649.
• The younger sister had a $1 million policy with a cash surrender value of $70,631.
The Solution: Their life insurance agent recommended a life settlement on each policy.
The Result: The life settlement proceeds:
• Netted the older sister $193,483 beyond the cash surrender value
• Netted the younger sister $79,369 beyond the cash surrender value
The proceeds from liquidating the buy-sell agreement totaled $347,132 in “found money,”
which was used to address the company’s financial needs.
