When purchasing a life insurance policy, the potential to achieve a higher rate of return than a fixed-rate product has made variable life insurance an increasingly attractive option for consumers over the last two decades. With the option to invest the policy’s cash value in separate accounts (commonly referred to as “sub-accounts”), which function similar to mutual funds, policy owners can participate in gains from [...]
As a TOLI trustee, you have a fiduciary responsibility to ensure that every transaction - either a new policy sale or replacement is not only suitable for your client, but also in your client’s best interest.
An online survey about life insurance found that 33% of life insurance policy owners do not understand how their policy works. (1) I suspect that this number is probably low. Perhaps the other 67% think they know how it works, but I imagine they could get a refresher lesson. Even if a policy owner does understand how it works, do they understand how a decade [...]
Millions of businesses worldwide have drafted or purchased business continuity plans, some have even practiced or simulated implementation of said plans, but few ever dreamed a worldwide pandemic would force these plans into action. The rapid spread of the Covid-19 virus has impacted all of humanity, including thousands of businesses which include fiduciary services. For those who serve as a fiduciary or provide fiduciary support [...]
A TOLI trustee we work with received a request from a grantor tired of gifting to pay premiums on his portfolio of whole life policies. His agent suggested that the three policies be replaced with one policy with a reduced death benefit. The existing portfolio totaled $5.7 million of coverage. The agent proposed transferring the $2.1 million of cash value into a $3 million equity [...]
As the federal estate tax laws changed, the use of new irrevocable life insurance trusts (ILITs) diminished, but the work required to administer existing ILITs went up along with the potential liability attached to the asset class. There are several reasons for this. 1. As a country, we are aging and the population of the average TOLI portfolio is aging too. For example, 25% of [...]
A couple of years ago, Lincoln National was offering some policy holders the opportunity to receive an “Enhanced Cash Surrender Value” if they surrendered their life insurance policies within a specific time frame. A few weeks before this was widely known, we began to receive letters from the carrier, along with a Frequently Asked Questions (FAQ) brochure explaining the offer.The offer is not unlike offers [...]
When we first ventured into the trust-owned life insurance (TOLI) servicing business, our lead product was a policy tracking and trust administration system - later called InsuranceIQ, and it was light years ahead of anything TOLI trustees had at their disposal. At the time, most trustees simply got an in-force ledger every couple of years, along with a rating update for the carrier, placed it [...]
There are three continuing trends with respect to TOLI management in the corporate fiduciary space. If you find yourself managing or overseeing TOLI at a bank or trust company, I’m sure you are seeing some of this play out in your own department. TREND #1 Overdependence on Support Software If used correctly, ILIT support software is great for minimizing potential administrative miscues. Many of [...]
The most common fear for a life insurance trustee is that somehow the ball is dropped and the policy in their care lapses. After all, a trust-owned life insurance (TOLI) trustee, even if they are not sophisticated in all the nuances of life insurance policy management, should at least be able to keep the policy in force. But unintended lapses do happen, and when they [...]
