Life settlemant....

MIBizInsurance

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How does life settlements work?

Say you have an 87 yr old decent shape (for 87../smile) with a 100k paid up policy.

What would that person receive as an offer? Thinking- 50-60%?

Next, aren't Life companies going to start to disallow these sales in the future for new policies?


How closely is this regulated?

Can see alot of potential abuse from agents to greedy family members/care givers.
 
On a healthy 87yr old with a "fully paid" policy you are looking at about 35-45% of face value (depending on the LE). Most policies are not fully paid. Most of our business comes from convertible term. If you have a client that has a convertible policy that matures in a few years and he does not want to convert it for himself, than he can do a life settlement and get a % of the face instead of nothing. This also does much for the producer. You get the life settlement finders fee, the comm for converting the policy, the residuals for keeping it in force, and the opprotunity to sell a new product to the client that just received a large chunck of cash.

There are two ways that life settlements work, depending on what type of firm you use. Private funders raise capital through investors. An example would be LPHI out of Waco. Their min. investment is about 15,000 to buy a piece of a policy. They then do mostly inhouse analysis and try to get the policy for the least amount possible for a greater return on the back end, but they can have a faster closing time per policy. If you are going to use a private funder make sure that they use external actuaries (21st century or AVS). The second type of firm is a Broker. Brokers use a network of funders (large financial institutions). Depending on the size of the firm, they have different amounts of funders that they work with. Once they receive a policy, the broker does an analysis on it (including pulling med records and ordering LE's). They then shop it to the different funders in an auction like state. A broker can usually get more for the policy than a private funder. One reason is that the broker makes their money on the front end, so the more for the policy they get, the more they make.

Life Settlements are regulated by state. Right now about 26 states have regulations. These regualtions are all completely different. The most restricted state, in my opinion, is OH. Most funders will not look at a case from OH because of this. Over the next few years regulations should become more common and standardized.

Life companies are not fans of life settlemetents, but there is little that they can do about it. The courts have held up that life insurance is considered an asset and can be sold. Most of the larger companies are going to adapt in some way. Many broker/dealers are currently doing do dilligence on life settlement firms. They will pick two or three and require that their agents use them.

To help with the abuse problem, alot of firms are becoming completely transparent. In the final contract, my firm shows how much everyone is getting on the deal. This helps to protect everyone. Now the senior knows up front what comms are being paid to whom and if he is not happy, can still pull out of the deal.

If you have any more questions, let me know.
 
How does an agent 'break into' the life settlement field?

Where is a good place to learn the ins and outs of this product?

Is a LS the same as a viatical settlement?

I see ads for Peachtree and State Street and Maple Leaf. Are these good, honest, above-board companies or are they more like the company known as M--a (I don't want to be sued!)

Al
 
How does an agent 'break into' the life settlement field?

Where is a good place to learn the ins and outs of this product?

Is a LS the same as a viatical settlement?

I see ads for Peachtree and State Street and Maple Leaf. Are these good, honest, above-board companies or are they more like the company known as M--a (I don't want to be sued!)

Al


A LS is not the same as a viatical. A viatical is for a terminally ill person, with a LE of 24 months or less. It is rare that you find someone who is doing viaticals. A life settlement is for a client that has an LE of 2-20 years.

To learn about life settlements, you should check out
LISA | Welcome to the LIFE INSURANCE SETTLEMENT ASSOCIATION
If you read the LISA white pages, you'll have a good grasp on the industry. Also I would be more than happy to email you some information on life settlements.

To break into the industry you need to talk to a broker. Agents go about starting in the life settlement market in three different ways. Some agents only sell investment points for private funders (usually paid 3-5% comm). Other agents incorporate life settlements into their seminars and marketing. They get new clients to sell their old policies and then write them new policies or sell them an anuity. Most agents go through their current book of business and see what clients could benefit from a settlement. I (or most brokers) can do an appraisal to give you an idea of the settlement amount before taking the idea to the client. Also convertible term clients are always a good starting point.

Maple Leaf is a Canadian company. I called their 800 number and it was a lumber company, so take that for what its worth.
Peachtree is one of the industry giants. They are a private funder. If you are thinking about going with a private funder, i would suggest getting an appraisal from a broker also to see the difference.
I believe that my firm is one of the top brokers in the nation, NAF. Being sued should not be an issue. If you are worried about E/O, than we can talk about putting you on our coverage as extra protection for you. When looking at brokers, you want to know how many funders they bid the policies out to. Also you want to make sure you are talking to a more traditional professional and not an independent contractor working out of the trunk of his car.

If you have any other questions, let me know.
 
Life Settlement Advisor:

What's the lowest face amount your bidders will bid on? 100k? 50K? Starting at the 100k face amount, how many bidders do you have that will look at that policy?
 
70-yr old/50k term life with Primeamerica/ fair health...takes meds for heart, hbp, prostate. Can't afford to renew this policy....its a modified term and they offered a 10 yr term...don't believe it's convertib le to wl or ul....any chance here he's a prospect?
 
Life Settlement Advisor:

What's the lowest face amount your bidders will bid on? 100k? 50K? Starting at the 100k face amount, how many bidders do you have that will look at that policy?

Most firms start at $250k or above.
Some (like mine) start at 100k or above
There are two firms (that I know of) that specialize in $25K-500k
 
70-yr old/50k term life with Primeamerica/ fair health...takes meds for heart, hbp, prostate. Can't afford to renew this policy....its a modified term and they offered a 10 yr term...don't believe it's convertib le to wl or ul....any chance here he's a prospect?

While I hate to throw business to other firms, this would be your best bet:


Independent Funding LLC

They handle small policies and have a quick turn around time for them.


If your client still wants coverage, you should think about doing a ten year premium finance case for him.
 
Thank you....I checked their website and filled out a request. However, they're not in Ga yet. Should be interesting.
 
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