IPB 076: The Consequences of Outliving Your Life Insurance

 

Did you know that it's possible to outlive your permanent life insurance?

That entire sentence is discombobulating. When does permanent not really mean permanent?

Recently, a pending court case was brought to our attention on Joseph Belth's blog (former publisher of the Insurance Forum) that raises some interesting debate. You should really take a few minutes to read the entire blog post if this sort of thing interests you, it's worth a quick read.

The long and short is that a gentleman and his wife (Mr. and Mrs. Lebbin) formed an irrevocable life insurance trust (ILIT). They made their two children the trustees, gifted money to the trust each year and the proceeds were used to purchase two separate survivorship and/or second-to-die universal life policies from Transamerica. Mrs. Lebbin is deceased which leaves Mr. Lebbin as the insured.

All seems normal. However, Mr. Lebbin is approaching his 100th birthday and the policies were designed to endow (mature) at age 100. Thus he will receive the net cash value (of unknown value to us).

Mr. Lebbin would like for Transamerica to extend his maturity beyond 100. Transamerica has decided not to do that.

And so begins the lawsuit.

Listen to the episode to hear what we have to say about it.


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