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EXAMPLE - Restructuring your Insurance Portfolio : Client X
Existing policies to be replaced by a new policy
| | | | | A | B | C |
|---|
| Company | Policy number | Annual premium | Life cover | Surrender value | Additional Profit | Total Sales Price |
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| XXX | 111111 | R 0.00 | R 71,676 | R 5,072 | R 0 | R 5,072 |
| XXX | 222222 | R 344.00 | R 81,443 | R 19,871 | R 13,755 | R 33,626 |
| XXX | 333333 | R 551.20 | R 130,202 | R 62,238 | R 5,305 | R 67,543 |
| XXX | 444444 | R 1,660.00 | R 407,213 | R 99,356 | R 71,888 | R 171,244 |
| XXX | 555555 | R 96.00 | R 114,652 | R 44,119 | R 972 | R 45,091 |
| Totals | | R 2,651.20 | R 805,186 | R 230,656 | R 91,920 | R 322,576 |
If these policies have only been surrendered the client would have received only (A) an amount of R230,656 as total surrender value. However these policies were referred for valuation.
These existing policies can be traded for an additional value (B) of R91,920 above the surrender values. This amount is disclosed to the Adviser and Client. Say for example the
negotiated commission charged was R20,957.76 {20% of B(EXCL VAT)} then the client would still receive the Total Surrender value (A) of R230,656 + Additional Value (profit)
of R70,962.24. The Total of R301,618.24 (C - Commission). The total commission of R20,957.76 will shared between the trader and the accredited Adviser, or the Adviser
can negotiate his own commission with the client.
New replacement policy
Insurance
Company |
Life cover |
Monthly premium |
Premium and benefit increase |
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Insurer A | 710,000 | R 966.00 | None |
| | 710,000 | R 644.00 | 5% / 5% Compulsory |
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Insurer B | 710,000 | R 641.00 | 7% / 0% Compulsory |
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Insurer C | 710,000 | R 863.00 | None |
�
| | 710,000 | R 472.00 | Age Rated |
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Insurer D | 710,000 | R 868.00 | None |
| | 710,000 | R 642.00 | 5% / 5% Compulsory |
The total premiums of all the existing policies amounted to R2,651.20 per annum (R220.93 per month).
Quotations to replace the existing policies are illustrated above.
COMMISSION:
The Adviser who referred these cases received the following commission:
- From Trading rather than Surrendering the existing policies R10 478.88 (50% of R20 957.76)
- Commission on new Replacement Life policy R 5 500.00 (New Life Policy)
- Commission on the Investment of the surrender values & profit paid to the client R 6 032.36 (2% of R301 618.24)
Total Commission earned by Adviser R22 011.24
BENEFIT TO THE ADVISER: In this case the Adviser earned more than double the commission than he would have if he only surrendered these existing policies
BENEFIT TO THE CLIENT: In this case the client received an additional 30% over and above the normal surrender value he/she would have received if he/she only surrendered
these existing policies
Please note that it is always in your best interest to retain your policy or investment!
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