Serving as trustee for life insurance trusts comes with significant fiduciary duties, and one of the most important is preventing a policy lapse. Trustees often have other roles and responsibilities in addition to being a trustee on one or more policies, which can make it difficult to complete all the follow up with clients that is necessary to ensure that due dates are made and notices are sent in a timely manner.

In this case study, we explore how Life Insurance Trust Company (LITCO) successfully prevented a policy lapse after a TOLI policy was transferred to us from the previous trustee who neglected to inform the client of the transfer and upcoming fees.


LITCO took over as successor trustee for a Trust Owned Life Insurance (TOLI) policy. Unfortunately, the previous trustee failed to notify the grantor about the transfer to LITCO and about upcoming premium due dates. The trust owned two policies, each valued at 10 million dollars, with the premiums due within 30 days of the transfer.

The Challenge:

The grantor received a policy lapse notification from the previous trustee just a week before the due date, leaving a very narrow window of time to prevent the lapse. LITCO received the notice and promptly initiated contact with the grantor using the contact information provided by the previous trustee. However, unknown to us, the contact information was incorrect, leading to multiple unsuccessful attempts to reach the grantor.

The Solution:

Realizing the urgency of the situation, LITCO took proactive measures to prevent the policy lapse. Instead of relying solely on the contact information provided by the previous trustee, we engaged a third-party service to track down the grantor. After exhaustive efforts, our team successfully established contact with the grantor and learned that they wished to continue with the policy.

With the due date approaching, we worked diligently to ensure the payment was made on time. Despite several failed payment attempts, our team managed to connect with the grantor on a Saturday morning, enabling the wire payment to be executed successfully. As a result, the payments were promptly applied to the policies, preventing a policy lapse.

LITCO’s Expertise and Dedication:

As the only company exclusively dedicated to insurance trusts, Life Insurance Trust Company possesses extensive experience in managing TOLI policies. The team at LITCO consists of dedicated professionals who closely monitor premiums and strive to ensure that clients’ policies remain up to date. Thanks to their expertise and commitment, we were able to identify and contact the grantor before the policy lapsed, effectively mitigating the risk of loss.

The Importance of Speed in Policy Management:

When it comes to remedying a policy lapse, time is of the essence. Many policies have a reinstatement period during which the policy can be restored by paying the outstanding premiums only, without the need for underwriting or health-related inquiries. This reinstatement window typically spans 10 to 30 days after the policy lapse, depending on the policy’s issue date and size. By promptly contacting the insurance carrier within this timeframe, trustees can reinstate the policy seamlessly, without causing any disruption to the insured or necessitating further assessments.

Managing life insurance trusts requires attention to detail and proactive measures in preventing a policy lapse. Even responsible trustees may face challenges in this regard. However, through its exclusive focus on insurance trusts and a dedicated team of professionals, Life Insurance Trust Company has successfully prevented many policy lapses such as the one in this case study. Trustee clients can rely on LITCO to safeguard their life insurance policies and ensure their long-term financial security.

If keeping up with due dates and notices is consuming your time, Life Insurance Trust Company provides a simple solution for banks, trust companies, insurance companies, advisors, and attorneys who no longer wish to serve as trustee for some or all their Life Insurance Trusts. Contact us to learn how we can be your strategic partner for new and existing ILITs.