Case study: Why changing to a Whole of Life policy was the right choice for this client 

Issue 3, June 2022 | PCS Vision

Client is a 64 year-old female and a highly successful business owner. She has two adult children; the younger son is working in the family business while the elder son works as a professional and is not involved in the family business.

Our client has a net worth of more than USD50M and her overarching wealth management goal is to find a suitable estate-equalization solution which also protects the family’s wealth.

Her elder son is a Green Card holder and therefore subject to worldwide income tax, capital gains tax, and where applicable, gift tax.

The client held an existing Universal Life Insurance (ULI) policy of sum assured USD10M, which was incepted in 2001. In her search for a better solution, the client spoke to a number of insurance brokers and private banks.

• The cash value of the client’s ULI has been dropping due to declining crediting rate, potentially causing the policy to lapse.
• The multiplier of sum assured will definitely decrease as our client’s age advances, which means it's expeditious for her to lock in her insurability at the earliest possible opportunity.
• Client is looking for a suitable solution to protect her family wealth and to address her elder son’s residency status, which attracts worldwide taxes.

After thoroughly understanding our clients’ financial and personal positions, we presented her with three Whole of Life (WoL) options because WoL policies offer guaranteed death benefit without the risk of policy lapse.

• The client opted for Option 3: Whole of Life policy
  
• Sum assured USD16M
• Premium USD8M
• Surrender value of ULI USD1.4M
• Cash outlay USD497K only
• Net sum assured USD10M

1. Our client was able to sign her new policy – with a higher assured sum – leveraging the surrender value of existing ULI and premium financing. Her experience serves as a good reminder to high net worth (HNW) individuals to get insurance coverage while they are still healthy.
2. Insurance policies form a crucial part of HNW individuals’ wealth management strategy and as such, annual reviews are highly recommended.
3. Mercer PCS worked with the client to thoroughly understand our client’s ultimate insurance objectives, and we present considered options that meet those objectives as well as suit the beneficiaries’ needs. Our clients can then make informed choices.
4. Our solutions are always the result of a highly collaborative approach when working with insurance providers and private banks.