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The Policy Exchange has launched a partial exit option for certain types of life insurance policies, a method aimed at generating cash for ‘asset rich but cash poor’ New Zealanders reaching retirement.
According to the trading platform, accessing cash through asset decumulation – most commonly seen with reverse mortgages or annuity style products – can be a welcome source of money.
In its latest offering, The Policy Exchange will allow life and endowment life insurance policyholders to access funds from their policy prior to maturity, without having to fully exit the policy. Until now, policyholders were only able to access funds if they sold on their policy completely, and many are reluctant to do so after many years of paid premiums. The new options will allow the policyholder to do a partial sell-down, retaining part of their policy while also releasing funds.
“We’ve been operating in the market for approximately 20 years, and we’ve seen a number of policyholders with old-style contracts that aren’t being offered anymore,” founder and managing director Greg Donnison told Insurance Business. “The reasons that people sell down are also changing – namely, they’re looking for retirement options rather than looking to get out of their policy because they’re in financial difficulty.”
“We picked up on the US’s ‘sell some keep some’ approaches to insurance policies, and we’ve seen a real need for retirement cash as the population ages,” he said. “The gradual sell down that we’re offering provides a structured way for people to provide a drilldown of an asset over a period of time, and it’s really geared towards the retirement market.”
Donnison says insurance advisers have responded positively to the new offers, and have appreciated the benefit in allowing clients to access much-needed funds while still retaining some of their life cover. He says there is a lot of flexibility around how much of the policy is retained, and there is also a choice to either receive funds as a lump sum or to reinvest and receive regular payments over time.
“We surveyed a number of advisers and got their feedback around the idea in the first instance, so while this is very new, we’re confident that it will get some good traction in the market,” said Donnison.
