Sunday, March 16, 2014

Bigger better?

This is interesting:

"An unnamed Silicon Valley billionaire has purchased the world's most valuable life insurance policy."

First, Mazel Tov to the anonymous buyer for his foresight, and to Dovi Frances, the agent who put the deal together. The premiums for the $201 million of coverage apparently run into the "low ... millions of dollars," which is actually a pretty good deal: even $5 or $6 million (what most would consider the high end of the low end), represents a very small fraction of the total amount at risk.

I do take exception to the characterization "most valuable," however: perhaps "the biggest" or "the largest face amount," but "the most valuable policy" is the one that's in-force on the day anyone who's bought a policy dies.

A few other factoids from the article struck me as interesting:

As many folks who have bought life insurance can attest, the underwriting process can involve some pretty invasive medical underwriting (exams, blood work, and the like). But what many folks don't know is that there is often financial underwriting, as well; that is, it's not just whether one is healthy enough to buy the plan, but whether one's financial health justifies the face amount. For a plan with hundreds of millions of dollars at risk, one might imagine both of those processes being, well, painfully invasive.

This also caught my eye:

"The firm has represented the billionaire since he responded to a direct mail solicitation in 2010."

Musta been one heckuva mailer.

Finally, the unnamed policyholder acknowledges purchasing the plan to cover any estate tax liabilities. This is an often overlooked use of life insurance, and further underscores its value: paying a few dollars (or even millions of dollars) for a life insurance policy to cover a large estate tax exposure is also a great tax planning tool.

So, thanks to Mr Frances and his anonymous client for some terrific lessons, whether our own life insurance needs run into the hundreds or millions of dollars (or somewhere in between).
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