- 110
I haven't yet sold any, but I've been exposed to the positives, and I'm thinking about it.
Wonder if anyone would care to expound on the perceived negative(s).
Wonder if anyone would care to expound on the perceived negative(s).
Life Settlements
- Thread starter joeblow
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- life settlement
Negatives:
-Current offers from settlement companies are not as good as they have been in the past due to changes in life expectancy evaluations and other factors
-The insured will have to keep the settlement company updated on their health status over the years. Some people find it morally wrong for another party to be hoping for their death to get a better return on their money and are not comfortable with this.
-Some states require accredited investor status to allow someone to participate in a life settlement (google "accredited investor" to more info). This can be a major obstacle.
-The client may be required to float a quarterly premium while everything is being transferred. On a case with a large face amount, the premium could be quite large.
-The client may be subject to taxation and would need to consult with a CPA
-Lots of hoops to jump through - client might not want to deal with the hassle of all the back-and-forth stuff and extensive paperwork
-Settlement company can pull their offer from the table at any time
-Client may be required to answer questions on any future life insurance applications about whether they've ever participated in a life settlement or are using proceeds from it to buy a new policy.
There's probably more, this is just what I can think of off the top of my head.
-Current offers from settlement companies are not as good as they have been in the past due to changes in life expectancy evaluations and other factors
-The insured will have to keep the settlement company updated on their health status over the years. Some people find it morally wrong for another party to be hoping for their death to get a better return on their money and are not comfortable with this.
-Some states require accredited investor status to allow someone to participate in a life settlement (google "accredited investor" to more info). This can be a major obstacle.
-The client may be required to float a quarterly premium while everything is being transferred. On a case with a large face amount, the premium could be quite large.
-The client may be subject to taxation and would need to consult with a CPA
-Lots of hoops to jump through - client might not want to deal with the hassle of all the back-and-forth stuff and extensive paperwork
-Settlement company can pull their offer from the table at any time
-Client may be required to answer questions on any future life insurance applications about whether they've ever participated in a life settlement or are using proceeds from it to buy a new policy.
There's probably more, this is just what I can think of off the top of my head.
pinky the brain
New Member
- 17
Are you talking about selling life insurance policies with the intent of selling them later to investors, or someone who doesn't want their existing policy getting rid of it? A little clarification might help focus the conversation.
In either case, their future insurability might be affected because most insurers don't want their policies sold off, screwing up their lapse assumptions.
In either case, their future insurability might be affected because most insurers don't want their policies sold off, screwing up their lapse assumptions.
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- #4
- 110
I'm more interested in the perceived negatives of selling "fractional interests" in existing Life Settlements. FWIW, I wouldn't consider a requirement that they only be sold to accredited investors to be much of a negative.
Some states require the insured to be an accredited investor, not the settlement company.
Perception isn't the issue. Even with a fractional share, ultimately the payment of the premiums will boil down to the investor, if the insured miraculously chooses to live. IMHO.
- 149
The bigest negative is that your client is using up their life insurance capacity (the max amount of insurance that someone can buy based on their financial need)
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"Are you talking about selling life insurance policies with the intent of selling them later to investors,...." What? How can you sell your policies later if you have already sold them?
"...or someone who doesn't want their existing policy getting rid of it?"
What? need some clarification of you clarification question?
Lapse assumptions has nothing to do with it. It has more to do with insurable interest. If it can be determined that there are issues with insurable interest then the insurance carriers can get in trouble with the government and if the government removes the tax advantages of life insurance benefits then the sale of policies will significantly decrease. Although this is only a real issue when we are talking about IOLI/STOLI or financed policies witht he intent to sell.
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I'm not sure how what I posted would not be perceived as negatives, but ok...
Yes, but they'd be required to pay their current premium, not the massive premium of a conversion on a large face amount policy. If the face amount is $5 million and they're currently paying $10k/year, having to float a quarterly premium of $45k for a term converted to UL may not be do-able for most people.
Obstacles are always negatives because they make it harder on the client. Make too many things hard on the client and they will just say screw it.
This is easy enough to say, but if the settlement offer is not fantastic, but triggers a tax on the insured that eats up a large portion of the settlement amount, they may not do it. Again, another obstacle making it harder on the insured to get a good deal.
Again, more hassles....clients get frustrated very quickly when you have to call them every other day and meet with them 10 times to get things done.
Yes, but they'd be required to pay their current premium, not the massive premium of a conversion on a large face amount policy. If the face amount is $5 million and they're currently paying $10k/year, having to float a quarterly premium of $45k for a term converted to UL may not be do-able for most people.
Obstacles are always negatives because they make it harder on the client. Make too many things hard on the client and they will just say screw it.
This is easy enough to say, but if the settlement offer is not fantastic, but triggers a tax on the insured that eats up a large portion of the settlement amount, they may not do it. Again, another obstacle making it harder on the insured to get a good deal.
Again, more hassles....clients get frustrated very quickly when you have to call them every other day and meet with them 10 times to get things done.
- 149
I do agree with the paying premiums but that would only aply if you where selling a term policy. I forgot about that...my bad.
I also agree that obstacles can brake a deal. But that is a fact of the life settlement business. That is why i did not consider it negative. You have to set the clients expectation early on that it will a little time intensive and require a lot of information. I guess that is just a matter of opinion.
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