This happened in Canada.
A person has a life insurance policy that matures in 2024 (in 9 years) and he has been paying monthly premium since 1996 (for 19 years).
He lost his job and is not able to pay the monthly premium anymore.
The insurance company says that this policy carries no cash value, but upon maturity in 2024, it would have a guaranteed value (Let say $50,000) based on the monthly premium paid compounded by
4.75% annually. So theoretically, this policy has a nominal value of $25,000 today based on
4.75% but is not cashable.
Is there a way to sell this policy to a third party institution?
The corporate bond yield with 8 year duration is about
2.5%. Couldn’t a third party just buy the policy at $25,000, pay premium for the next 9 years (and short sell bond futures) and earn a profit?
It is hard to believe that if this policy was sold to another person for $0 today, and that person continues to pay the premium, that person can receive $50,000 in 2024 (earning
34% annually over 9 years risk free).
If selling this policy is not possible, is there a way to get a loan to pay the monthly premium for the next 9 years?