HOW ITM’S REMEDIATION TEAM HELPED RECOVER $400,000 IN EXCESS PREMIUMS
BACKGROUND:
When managing Trust-Owned Life Insurance (TOLI) policies, trustees sometimes need to pursue remediation to address policy issues. These issues can arise from a range of factors, such as a Cost of Insurance (COI) increase, a grantor deciding to stop funding a policy, or the need to replace a policy with a more efficient option. Occasionally, errors made by a trustee also require corrective action.
With nearly 47% of TOLI policies needing remediation each year, it’s essential to know how and when to act. This case study offers insight into a real-world example of policy remediation and how ITM helped achieve an outcome that benefited both the trustee and the insured parties.
The trust in question owned a survivorship guaranteed universal life insurance policy issued in 2004. The policy had a death benefit of $10 million, with a short-pay premium designed. For the first ten years, the annual premium was $100,000. After year 10, no additional premiums were planned. After the initial policy review was completed by ITM, the remediation team reached out to the trustee to discuss the situation.
THE CHALLENGE:
A problem arose when the insurance carrier continued charging $100,000 in premiums annually, even after the last premium was paid in year ten. This resulted in the insured paying excess premiums in policy years 11 through 14, totaling $400,000 above what was originally planned and owed.
The insureds had been told that the total premiums would amount to approximately $1,000,000 over the life of the policy. However, by 2018, they had paid $1,400,000 due to the carrier continuing to send premium notices for the $100,000 annual premium. The discrepancy was due to the carrier’s failure to update the billed premium per the policy contract.
The trustee, with ITM’s assistance, demanded remediation from the insurance carrier to recover the excess payments.
THE RESULTS:
With ITM’s assistance, the trustee successfully secured a $400,000 remediation for the insureds. ITM’s initial policy review was critical in identifying the discrepancy, uncovering the carrier’s failure to adhere to the agreed premium schedule. The remediation team’s expertise ensured a clear strategy was developed to address the overpayment, guiding the trustee through the recovery process.
To accommodate the return of excess premiums paid, the carrier adjusted how the policy’s values were managed. The adjustments ensured that the death benefit was effectively increased by the same amount as the withdrawal, preserving the overall value of the policy without reducing the total death benefit.
Read more about this case study and how ITM’s remediation team helps trustees and their clients manage trust-owned life insurance policies.
