By: Justin Blau
In turnaround and restructuring engagements, time is scarce, liquidity is constrained, and decisions are often made with imperfect information. Professionals move quickly to assess operating performance, working capital, real estate, and saleable assets. Yet one category of value is frequently absent from these conversations—not because it lacks relevance, but because it sits outside the traditional restructuring lens.
Existing, in-force life insurance—whether individually owned, key-person coverage, or corporate-owned policies—is rarely treated as an asset during distress. It is often viewed as personal, long-term, or administratively separate from the balance-sheet realities facing a troubled company or its principals. As a result, these policies are routinely overlooked until they lapse, are surrendered at minimal value, or become difficult to address once bankruptcy proceedings begin.
This omission is not isolated. Long-term persistency research from actuarial and insurance research firms—including Milliman, LIMRA, the Society of Actuaries (SOA), and Conning—shows that the vast majority of life insurance policies ultimately terminate through lapse or surrender rather than paying a death benefit, particularly as policyowners age or economic conditions shift. For example, Milliman’s actuarial analysis of Universal Life policies found that approximately 88% never result in a death benefit claim, while Conning’s industry research consistently reports that roughly $200 billion in face value of senior-owned life insurance is lapsed or surrendered annually. LIMRA and SOA persistency studies further show that termination rates accelerate meaningfully at older ages, even for policies originally designed as permanent coverage. Over time, insurance that once served a clear planning or risk-management purpose can persist on the balance sheet long after its strategic relevance has faded.
(See SOA–LIMRA Universal Life Lapse Study, 2015–2021:
https://content.naic.org/sites/default/files/call_materials/SOA-LIMRA%20Research%20-%202015-2021%20UL%20Lapse%20Study%20%281%29.pdf)
That dynamic is becoming more consequential in the current environment. According to Epiq AACER, total U.S. bankruptcy filings rose 10% year-over-year through the first nine months of 2025, with individual Chapter 7 filings increasing 15%—a signal of accelerating financial distress under increasingly compressed decision timelines.
(https://www.epiqglobal.com/en-us/resource-center/news/year-to-date-individual-chapter-7-filings-increased-15-percent-compared-to-same-period-last-year)
In closely held businesses—particularly those supported by founder guarantees, family ownership, or key-person risk—existing life insurance often appears on balance sheets in meaningful size. Policies may have been purchased years earlier for succession planning, buy-sell agreements, executive retention, or estate purposes. Over time, business conditions change. Premium obligations grow, ownership structures evolve, and the original planning rationale may no longer align with today’s capital needs. When distress emerges, these policies often remain in force—but unexamined.
From a turnaround perspective, the issue is not whether life insurance was intended to serve as a liquidity source. The issue is whether an existing policy has become one by circumstance. For turnaround professionals, expanding the asset review process to include existing insurance assets does not require altering operating strategy or assuming speculative risk. Advisors would never recommend selling machinery, real estate, receivables, or inventory without first running a valuation or appraisal process to determine fair value. Yet when it comes to life insurance, many accept the value shown on an insurer’s annual statement as the asset’s actual worth—without further analysis. Applying the same valuation discipline to insurance assets simply brings consistency to the restructuring process.
Timing matters. Before a bankruptcy filing, policyowners retain flexibility: policies can be evaluated, restructured, or monetized in ways that preserve value and optionality. After filing, that flexibility narrows significantly as ownership questions, beneficiary designations, and creditor interests complicate outcomes. In certain cases, selling a policy through a traditional Chapter 7 or Chapter 11 process may also be an option. Industry research from the Life Insurance Settlement Association (LISA) shows that exploring secondary-market options can yield materially greater value than surrendering policies back to carriers, with the average policy in 2024 selling for approximately 6.5x its cash surrender value. (https://www.lisa.org/article_content.asp?edition=3§ion=4&article=48)
In an environment where restructuring professionals are charged with preserving value under compressed timelines, leaving assets unexamined is itself a decision—and often an expensive one. As turnaround engagements grow more complex, the most effective practitioners will be those who widen—not complicate—the definition of what qualifies as a reviewable asset, preserving optionality and reducing avoidable value leakage for stakeholders.
Author Note: The author works with advisors and turnaround professionals to evaluate existing, in-force life insurance policies, not to sell new coverage.