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Katt & Company is a national fee-only life insurance advising firm. The June 2002 Forbes magazine, and a July 16, 2003 Wall Street Journal article, name Peter Katt as one of only four nationally recognized advisors. The Forbes article states that, "…advisers are well worth the money… These savants are working for no one but you…" For references please contact us. Hidden Values "The 1,500,000 cash value used in the exchange for the proposed new policy was short changing the policyowner by about $1,000,000." Civilians viewing planetary objects do not interpret the experience as an astronomer does. An untrained observer may see two planets even though the professional would know there really are three in the area by measuring the unseen planet's gravitational effect on the other two. In a similar way there are important permanent life insurance issues that are not readily apparent. Missing them is done at a policyowners' peril. I was retained to review the proposed replacement of a single-life policy with a second-to-die policy promoted as having lower premiums. The single life policy purchased in 2000 had a cash value of about $1,500,000. The cumulative premiums paid were $3,300,000. After seven years and $3,300,000 premiums paid I calculated this policy's intrinsic value to be around $2,500,000. The $1,500,000 cash value used in the exchange for the proposed new policy was short changing the policyowner by about $1,000,000. This was not seen because second-to-die policies insure a longer period of time, (two lives) and the annual premiums are lower, especially when compared with a single-life policy on the male insured. The policyowner was losing hidden values of around $1,000,000 but also the second-to-die policy isn't a better value than the existing single-life policy. Second-to-die premiums are lower but the number of expected years to pay them is longer to cover two lives that included a younger female in this case. My recommendations were to either keep the single-life policy whose actual funding is $1,000,000 more than can be seen, or to sell the single-life policy in the life settlement market where price paid will be much closer to the intrinsic $2,500,000 value, and use the proceeds from the sale as part of the purchase of the new second-to-die policy. Advisors and consumers don't see such complications
and as a result lose huge sums dealing with life insurance. The only good
news is that they don't ever realize it.
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