1 in 5 term policies in your book might be worth something

I was sitting in a boardroom today with a business owner, his CFO, and two of his kids who run operations for the company.

Home improvement business. The father built it from nothing. He’s in his seventies now. The kids have turned it into something more profitable than he ever could have on his own. But he’s the one who made it work. He’s the entrepreneur. The risk taker.

We were there because of a $3 million term policy coming up for renewal in May. The premium was going from somewhere around $15,000 or $20,000 a year to $120,000.

The family called their advisor a few months ago and said, we’re cancelling this.

What happened next turned a cancelled policy into a $1.4 million tax credit, a shot at $5 or $6 million in new wealth management assets, and an estate planning conversation with a business owner worth $40 million.

And I want to walk you through exactly how it happened. Because there’s a strategy here you can use in your own book. Probably sooner than you think.

The strategy most advisors don’t know exists.

When the advisor came to me about the expiring term, I told him we should take it to a charity we work with that specializes in exactly this.

Here’s how it works.

There are a small number of charities in Canada that will accept unwanted term policies. But they won’t take just anyone. The insured has to be what we call an impaired life. Someone who was healthy when the policy was issued, but whose health has since declined. Maybe they’re rated now. Maybe uninsurable.

The charity takes over ownership of the policy. They issue a tax receipt for the fair market value. Then they convert it to permanent insurance and pay the premiums going forward. When the insured passes away, the charity collects the death benefit.

The math is straightforward. The charity is paying standard conversion rates for someone who, based on current health, is likely to pass away sooner than a standard risk. The gap between what they pay in premiums and what they collect on the death benefit is their return. There’s risk, of course. The person could live longer than expected, and the charity absorbs that. But they do full underwriting before they agree to take a case. They know what they’re getting into.

Now, the clients originally wanted to go to the Ottawa Hospital Foundation and a couple of other well-known charities. None of them were really interested. Some were willing to consider it, but they wanted us to do all the legwork. Wasn’t worth the effort.

The charity we work with does everything. They’ve been a fantastic partner, and we keep finding more opportunities together.

In this case, the charity did full underwriting over a couple of months. Last week, we got the answer. Not only did they agree to take the policy. The tax credit for the corporation came back at $1.4 million.

This family was going to let the policy lapse. Walk away. Pay nothing, get nothing.

Instead, the corporation gets a $1.4 million charitable tax credit. The charity gets a policy they’re happy to hold. And the advisor earns compensation on the conversion to permanent.

When we told the business owner, he said, “This can’t be real.”

I told him, “Let’s just trust the process. Worst case, it’s a little bit of wasted time. Best case, you get a big tax receipt.”

Best case showed up.

What this means for your book.

Here’s the number I want you to remember. The charity we work with estimates that 1 in 5 term policies in any block of business is a candidate for this strategy.

One in five.

Think about your book right now. How many term policies are coming up for renewal where the client is going to cancel? And how many of those clients have had health changes since the policy was issued?

If the answer is more than zero, you might be sitting on opportunities like this one.

The criteria are straightforward. The insured needs to have an impaired life. The policy needs to be convertible. And you need a charity partner that will actually do the work. Most of the big-name charities won’t. They don’t have the infrastructure or the appetite for the risk. But there are partners out there who do this every day, and if you want to know who we work with, reach out. I’m happy to connect you.

One more thing. This doesn’t help the insurance companies. I want to be clear about that. Carriers build lapse rates into their pricing. They expect these policies to fall off the books. If they don’t lapse, it could mean repricing down the line. But that’s a life insurance company problem. Not yours. Your job is to look after your client. If donating a term policy generates a seven-figure tax credit, that’s exactly what you should be doing.

Doors you didn’t know existed.

Now here’s where it gets interesting.

After the CFO and the kids left the room, the business owner stayed. And the conversation changed completely.

He told us he’s worth about $40 million. Still growing. He talked about how he built the company, how he was a risk taker from the start. He told us about his TFSA. He loaded it with gold stocks this year and took it from $100,000 to $700,000.

I said, “You’re the prototypical entrepreneur. Look at what you do with your TFSA. You take massive risk because that’s who you are.”

He talked about his kids. They’ve made the company more profitable than he ever could. But they’re operators. Managers. Optimizers. He built it. They refined it.

Then I asked him, “So what do you want to do with the $30 or $40 million?”

He wasn’t sure. Probably the kids. I mentioned that we’ve helped some clients set up their own private foundation for causes that matter to them, once the family is taken care of.

Then he told us he’s in the process of selling the business to the next generation, and the next tranche coming in is about $5 or $6 million. Maybe within the year.

I asked what he was planning to do with it. He said he’d send it to his portfolio manager at RBC.

So I said, “Have you considered some of the discretionary portfolio management firms? There are some interesting options around private assets. Land, infrastructure, things uncorrelated to the public markets.”

He perked up. For all his risk-taking in the TFSA, his core wealth is more conservative. The idea of diversification outside the markets resonated.

All I said was, “When that money comes in, give us a crack at it. Let us bring in some proposals. Let the portfolio managers present to you.”

He was open to it.

So now we have a shot at $5 or $6 million. Maybe $20 or $30 million as the full business liquidates over time. That’s an opportunity we didn’t have yesterday. We walked in to talk about a term policy.

This is the principle I want you to take away. One solved problem opens three new ones. But only if the client trusts you enough to keep talking after the formal meeting ends. Only if you’re close enough that the conversation shifts from business to real life.

So how did the advisor get here?

I asked him on the way out. How did you build this kind of relationship with this family?

He has the group insurance for the company. But four times a year, he brings in a food truck. Parks it at their office. Burgers and fries for the employees. He pays for the whole thing.

He’s hosting a client appreciation event in a couple of months. Elvis impersonators.

He recently gave the company four tickets to a hockey game. They’re raffling them off to the employees. Some family gets a night out at the game, courtesy of their advisor.

These aren’t massive, expensive gestures. They’re consistent, thoughtful, and human.

And I told him something else. I said, “There were a lot of next-generation business owners in that room today. The kids. Imagine you organized a networking event for all your business owners’ kids. Got them in a room together. You’re the one making the connection.” He’s got 10 or 15 other business owners like this. Big ones. And another tier of mid-sized owners below that. The opportunity is staggering.

Here’s the truth.

The reason we were at that table today, delivering a $1.4 million tax credit, having a conversation about $5 or $6 million in new assets, talking about private foundations and estate planning for a $40 million business owner… that reason is 100% the relationship.

It’s not even close.

It’s the food trucks. The hockey tickets. The Elvis impersonators. The consistent, in-person, generous presence in his clients’ lives. That’s what builds the kind of trust where a business owner stays behind after everyone else leaves and tells you things he doesn’t tell many people.

I’ve spent the last two years building, running, and documenting a system for exactly this. How to plan these events. How to fund them. How to turn them into the kind of relationships that lead to conversations like the one I watched happen today.

I call it the Advisor Event Engine. If you want to see what it looks like, buy it here:

But here’s the takeaway you can act on right now.

Go through your book. Find every term policy coming up for renewal with a client whose health has changed. Call me or reach out, and I’ll connect you with the charity partner who can make this happen.

And then ask yourself this. If the opportunity is sitting in your book right now, what relationship do you need to build so the client actually picks up the phone and tells you about it?

Talk soon,

Andrew