We are providers of fee-based, proprietary, fiduciary level, actuarial driven, advisory services for the acquisition and management of large life insurance policies or portfolios of policies.
We work with the owners of significant life insurance policies, and their fiduciary advisors, who are using life insurance as part of an overall investment portfolio.
Our highly specialized and focused service converts the deteriorating policies in a life insurance portfolio, the least valuable property, into the most valuable property… with or without the need for new life insurance.
The LIPM Opportunity:
Insurance as a unique form of property with unique property rights
Almost all life insurance is sold as a commodity when in fact it is a complex form of property. When sold as a commodity, there is no awareness of, or emphasis on optimizing the policy’s unique property rights for the benefit of the owner. Instead, once a policy is sold, agents usually do only minimal maintenance such as changing addresses, mode of payment, ownership, beneficiaries, etc., which is analogous to having a landscaping contractor cut the grass around an office building.
We have seen time and again, that once advisors and owners understand life insurance is a complex form of property, they naturally want to have it work at its very best.
This commoditization of life insurance is entrenched because an overly simplistic, 270-year-old industry structure exists in which you pay a premium, receive a death benefit and exercise little, if any control over your property rights. It is the equivalent of buying an office building and then forgetting about it. There is no active management of the property; no one is finding and managing tenants, taking care of physical maintenance, or all the other activities necessary for protecting and growing the value of your investment!
So, as a result, there are all these potentially highly valuable pieces of property falling into disrepair and uselessness. Some are already worthless and many more will become worthless. The good news is the industry has not been sitting on its hands. Over the last 30 years there have been many attempts to build modern forms of life insurance with built-in policy owner property rights. When exercised, these property rights provide the owner with a much greater amount of control and access to critical information. This is where LIPM™ comes in! It provides the ongoing, active, professional management of life insurance using proprietary, actuarially certified processes, independent of insurance company illustrations, required to optimize the return on the invested capital.
Is your life insurance performing?
Our experience shows almost 75% of life insurance policy owners do not actually know what they own. For example, when a person says they own a whole life policy, more than half of the time, they actually own a hybrid with all sorts of potentially dangerous funding levels, especially given the current economic situation. Unless you know for sure, there is a significant likelihood you will keep paying and paying while the death benefit shrinks to almost nothing.
Fundamentally speaking, equity in life insurance property must be assessed to see if it is sufficient to ensure the ultimate death benefit can be paid without an irrationally large deposit of additional capital (cash). This means making sure the highest probability of return must coincide with the highest probability of life expectancy.
Probable life expectancy is critical and it has to be correct. Many polices are based on 50% probability of when most people die, but people with the means and desire to take first-class care of themselves are living much, much longer. We believe to be secure, 75 – 85% probability is required. (By the way, a 50% probability has proven to be inadequate for planning purposes in almost every policy we have rehabilitated. Think about it; would you actually invest millions of dollars with only a 50% chance of winning?)
There are other performance factors to take into account including the probable rate of return on invested capital and the most appropriate mix of policy types to achieve a balanced portfolio. And, in addition to the fundamental equity/expectancy equation, vigilant ongoing management, that responds as your situation evolves over time means the advice we give you today could be completely different from the advice we will give you in five years as market conditions, your health and other factors change.
The objective is to understand all of the property rights within every policy, identify the ones that will help you achieve your goals, and then exercise your rights in a strategic, on-going fashion.
What are you doing about it?
How much value is inaccessible or being lost in these potentially wonderful pieces of life insurance property that have fallen into neglect and decay simply because people do not know what is possible? This is a waste of American capital of tragic proportions. If something is not done, 90% of life insurance owners will be bitterly disappointed, and only 9% - those who die early - will realize an adequate, if not the total expected, death benefit.
Here are some of the questions LIPM™ can help you get answers to:
- What is the rate of return at the planned life expectancy?
- Do we keep paying the premiums?
- Should we pay more or less to improve the performance of this asset? (There are a lot of cases where it makes sense to repay loans against the policy.)
- Should we increase or decrease the face amount to improve performance?
- Would a shift in policy style improve performance?
And, these are the LIPM™ Performance Indicators we use to assess the current and potential value of your life insurance property:
- Funding effectiveness
- Policy alignment (emotional and financial constraints of the client)
- Policy portfolio suitability (multiple policies)
- Policy performance (this includes appropriate life expectancy, a reasonable death benefit at life expectancy, or a reasonable surrender or sale value.)
- Carrier quality
- Expense efficiency
If you are the owner of significant life insurance policies or a fiduciary advisor to such an owner, we can help. Call us to find out how to make life insurance work at its very best.
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