Matthew DeSantos - LSW’s Senior Vice-President of Distribution and Business Development (himself a former insurance agent) - DOC 792 p27>

(p129-131) - Lapse

Q Are you familiar with something known as a policy lapsing?
A Yes.
Q And what does it mean for a policy to lapse?
A To me it means that it's no longer in force, meaning it's no longer a policy that is viable, is on the books, pays a death benefit. It no longer exists.
Q And no longer has any value?
A Correct.
Q Is it possible for a Paragon or Provider IUL policy to lapse?
A Yes.
Q Can you tell us why a policy could lapse.
A There is a lot of reasons why. Individuals might not be putting in enough premium to cover the cost.  Sometimes people put in very small amounts of premium because they maybe only need the policy for a small period of time. Sometimes things change in a person's life and they no longer need the policy, so you may see them cancel or surrender it or stop paying for it.
Sometimes a situation arises where someone might really need the money, you know, something they didn't anticipate that's in the contract. Maybe it's to cover medical bills or to put a kid through college.
Q I don't want to talk about that.
A Okay.

A Yeah. It doesn't have to be for retirement. It could be for any needs. We don't dictate as a company what you can take money out for. It's your decision to do that.
Q And if you take too much out in the way of loans, could that cause the policy to lapse?
A It could cause it to lapse.
Q For example, if the policy has a $500,000 accumulated value and you take out $500,000 in loans, what will happen to that policy?
A It's going to lapse.
Q Is that true of just Paragon and Provider policies?
A It would be true of any policy with cash value if you took all the cash value out of it generally.
Q Is that true of just the policies that LSW sells?
A No.
Q That's the typical way a policy works?
A You have to keep paying premium in most cases to cover the cost associated with buying an insurance policy.

2014 0423 – DOC 812 – Trial Transcript – Day 10 – Walker v LSW – 194p