Case study help requested for a 86y young client

[titeye]

My client is 86 yrs young. Prior to requiring a pace maker only a few months ago, she has never been sick or hospitalized since birth. She has a $25,000 UL she has owned for more than 25 yrs. The cash value has been paying the cost of insurance for more than 10 of those years. According to a letter she received from the insurance company recently, the cash value is projected to decline to approximately $1,200 upon maturity in 2030; and therefore, the DB would decline to $1,200.

Yesterday, we called her insurance company to obtain more facts. The cash value is currently $16,574 and earning the minimum guaranteed interest rate of 4.5%. The cost of insurance is currently $79.39 per month for the $8,421 the insurance company has at risk. The COI generally increases by a rate of 8-10% annually.

We have to plan on the client surviving the next 8 years. She understands that If she does nothing, the cost will eat away her cash value and reduce the death benefit to $1,200. No, she does not want that to happen. I am waiting on the insurance company to send a new proposal to guarantee the DB of $25,000.
The amount of premium required will determine whether she can and wants to fund the policy.

Here is what came to my mind:
The policy pays 4.5%. This year's COI represents 5.75% of the $16,574 of cash value. Therefore, the cash value is currently losing 1.25%, which will only get worse. If she cancels the policy and reinvest her cash value, she could grow it to $24,250 in just 3 yrs by adding $150/mo. yielding only 3.75%.
Due to her age and current health status, a final expense policy for the $8,421 shortage does not seem to fit.

I am open to suggestions, alternatives and/or simply comments. Thanks in advance!

 

[Todd King]

You're dealing with a very difficult age. My mind would normally go to a SPWL product, but she won't get it at that age, much less the new pacemaker.

I really have no idea of the best way to help her. She could probably take the cash value and put it in Bitcoin and increase it to 25K in the next few months, but that's a big risk.

 

[fed up]

can she afford the extra premium to get the 25K policy to last until the end? Is the carrier willing to convert to a paid up policy and what would the death benefit be? does she need the money from the policy?

 

[Life Hawk]

Drop the cash value in to an immediate Annuity or CD. Save future funding for daily living and or adding to the value of the annuity or CD. Let the cash (where ever you place it) pay for her passing.

The solution at this late time in the game needs to be a known and no risk one. IMHO

 

[shonceman]

Like @fed up suggested, I’d see if there’s a Reduced Paid Up conversion available. If not, drop the CV into an annuity. Then recommend she get a preneed plan from a funeral home, if she doesn’t have one already.

 

[titeye]

I like all of those suggestions. Thanks!

 

[titeye]

can she afford the extra premium to get the 25K policy to last until the end? Is the carrier willing to convert to a paid up policy and what would the death benefit be? does she need the money from the policy?

Great question! No, she does not. She has another $30k WL policy specifically for burial. This policy was for burial as well, however. She will probably will never need the CV from this policy, but it doesn't make sense to give it away either.

 

[Tahoe Ray]

If you surrender this policy to anything (annuity, cash, CD, whatever) I would definitely recommend looping in the beneficiaries (with her permission of course).

They need to know what's happening as well so if mom drops dead a month after you surrender the policy and they find some info in her paperwork it doesn't land on you that the policy is gone (and yes, the annuity makes up most of the loss but still).

Just an idea but one I'd strongly suggest.