Carole Fiedler, a financial adviser in Sausalito, Calif.,
helps people sell their term policies.

September 27, 1998

Death Benefits, Now for the Living
©1998 The New York Times


By JOSEPH B. TREASTER


Watching the premiums soar on his $100,000 life insurance policy as he advanced through his 70s, Leonard Oxenberg wondered why he was still making the payments.

He no longer needed the coverage -- his son was grown, and his wife had a good job. And there were many other ways that Oxenberg, a retired advertising executive would have liked to be spending the $5,000, soon to be $6,000, that he was paying in annual premiums.

But he felt stuck: If he just walked away from his term life policy, he would get nothing -- as happens to many of the 6 million Americans who drop insurance each year. And after paying premiums for 15 years, that would be hard to take.

Then Oxenberg found a solution: He could sell his unwanted life insurance to one of the investment [viatical] companies that, for years, had been buying policies from people with AIDS and other terminal diseases. Searching for fresh markets, the companies have started offering to buy life insurance of all kinds -- not only term, but also whole-life and other types -- from relatively healthy older people like Oxenberg.

And so in an era when nothing is so alien as delayed gratification, life insurance -- the ultimate form of delayed gratification -- is being given a new twist: Now, it pays before death. And it is not just helping with expenses in a policyholder's waning days. Life insurance coverage can be turned to a vacation in Europe, a new round of investments, gifts for the children now rather than later, or just some extra spending money. The tradeoff is giving up the big payoff at the end for one's beneficiaries.

The purchase prices can vary greatly. For a $100,000 policy, for example, a terminally ill person with a life expectancy of six months could receive $80,000. But people in their 60s and 70s with, say, 10 to 12 years to live, by actuarial estimates, could receive much less -- perhaps $5,000 to $20,000

Carole Fiedler, who owns a financial company in Sausalito, Calif., that specializes in helping people sell their policies, arranged for the sale of Oxenberg's $100,000 policy. She also brokered the sale of a $4 million policy for a lawyer who was in his mid-70s and in excellent health. He received $235,000, or just under 6 percent, for a term policy with no cash value; as part of the deal, the investors took over his premium payments of $80,000. Another of her clients, William G. Blackman, a retired insurance administrator who is an 80-year-old widower in Palo Alto, Calif., got $20,000 for a $100,000 policy that cost him $6,000 in premiums last year.

With no regulations to worry about, investment companies can disclose what they like and offer any price they like to the relatively healthy. Ms. Fiedler tells of a 74-year-old Texas businessman who was eager to get out from under the $77,000 annual premiums on his $3.8 million term-life policy. One company offered him $10,000. He went to Ms. Fiedler for a second bid and ended up selling the policy [through Fiedler Financial] for $257,000.

These are excepts from "Death Benefits, Now For the Living" written by Joe Treaster for the New York Times, published Sunday, September 27, 1998, front page of the Business Section.