Recently retained by a client to go after a large surance company after one of their “investment advisers” sold her a “flexible premium multi-funded life insurance policy”. The premiums for these products can be very, very expensive. One of the ways they market them is to assure prospective clients that you can “suspend” payments and the premium will be taken out of the accumulated principal. All fine and good. But what isn’t explained to the client is a) that the product can’t be cashed out for many years and b) early withdrawl often results in enormous penalty costs.
So the scenario goes like this – buyer purchases product. Makes premium payments for years, then due to some unforseen cirumstance, has to suspend payments. They are taken out of the accumulated value. After some period of time the client sees the value of the investment dwindle substantially and tries to cash out. Only then does he or she learn that cash-out isn’t permitted until year 15. And if an early withdrawal is made, an enormous penalty will be assessed. So the client often ends up with next to nothing.
Client who just retained me had made hefty monthly premium payments for years. When her husband retired and money tightened up, they suspended payments for a year or two. Ultimately decided they wanted to cash it out and found out they couldn’t do so until year 15. And if they did cash it out, half the cash value would be eaten in penalties….
Ironically, the insurance company is the same exact company who sold the same exact product to some elderly clients of mine about 10 years ago. Ironically, it is even the same “investment adviser”. Looking forward to seeing him again…

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