Premium Financed Life Insurance

[Big D]

Thought I should add my 2 cents worth since I have quite a bit of experience in this field.

This is how it works: Let's assume you found a 70 year old man named "Joe" who want's to proceed with this arrangement. Let's also assume we've established Joe can financially qualify for $2mm worth of coverage. You will collect information from Joe on an INFORMAL application. An informal application is a one page fact finder on the history of Joe. Information will include D.O.B, Soc Sec#, Drivers Lic#, Name, Address and Phone Numbers of Doctors, any prescription meds being taken, etc. Joe will also need to sign a HIPPA form.

Medical records of Joe will be pulled and sent to 5 - 6 Life Carriers. The carriers are all "A" rated or better. In fact, they have to be or the lending institutions will not fund the policy.

The carriers will review the Medical Records and either make an INFORMAL offer for insurance or decline coverage all together. In our case let's assume ACME life insurance company offers Joe a "standard" rate class and the premiums are 100k per year.

At that point ACME will run illustrations of scheduled premiums. Those illustrations will be sent to 5 - 10 "Funders" or lending institutions. Those "funders" will order three Life Expectancy (LE) reports to be conducted on Joe.

The "funders" will analyze the LE reports, Premium, and Death Benefit and decide if they want to loan the premiums base on the numbers. Let's now assume we have a "yes" from one of the funders. At this point Joe will have to get a Medical exam and go through the FORMAL application process.

Once this is completed a Trust is created. The Trust owns the Life Insurance Policy, and Joe owns the Trust. Joe designates his own beneficiaries as he would with any Trust. A collateral assignment is put on the policy by the lending institution, so that they will be paid back upon the death of Joe.

If Joe dies in the first two years, his benes will receive the death benefit minus what the lending institution is owed. If not, when the two years is up, he can pay back the lending institution and make future premium payments. He can sell the policy (Life Settlement) or, if it can't be sold, the lending institution will now be the owner and beneficiary of the policy, and Joe will be completely out of the picture.

I should note a couple of things: 1) The lending institutions will generally take 50% of the commission right off the bat. 2) The Life Carriers that participate in this take the "don't ask, don't tell" approach. They won't ever publicly say "We want this business", but they aren't putting the question "Is this policy being financed?" on the application either.

Hopefully this clears up some questions regarding this concept. This can be a wonderful Estate Planning tool if properly designed. It can also be a total disaster if structured improperly.

Be careful when proceeding with these arrangements. You really need to know what you're doing.

PM me if you want more information.

This is about as perfect of an explanation I've read.

The funders that I work with only need two LE.
Also, if the criteria works (71 years of age, and 1MM UL policy & up) then they will fund it- They won't take 50% but more like 30-35% commission up front and zero on the back end when it's sold 2+years later.

I listened to the conference call that this thread was about. They talked about the commission being $10K per $1mm. Nice, but I believe it much better with different groups...Perhaps 70% of target premium....

 

[Pre-Paid Legal]

Call me.

 

[senior-advisor-indiana]

Call his mom. I think you will get more for your money.

 

[lifesettlementadvisor]

This is about as perfect of an explanation I've read.

The funders that I work with only need two LE.
Also, if the criteria works (71 years of age, and 1MM UL policy & up) then they will fund it- They won't take 50% but more like 30-35% commission up front and zero on the back end when it's sold 2+years later.

I listened to the conference call that this thread was about. They talked about the commission being $10K per $1mm. Nice, but I believe it much better with different groups...Perhaps 70% of target premium....

This process gives life settlements the bad name most of you associate it with. Pending legislation will soon put this process out of business. They are trying to make it to where you have to keep a premium financed policy for 5 years before doing a settlement instead of 2. Also there is a process where you can cut the finance company out directly. There are funders taht will purchase certain policies the day they are inforced. The senior usually received 2-5% of face value for this.

 

[James]

I try to educate people on this board about how this process works, and all the sudden I'm the bad guy. I'm matching wits about a Life Insurance process that I'm involved with on a daily basis with someone named "healthagent". Oh well, I tried.

By the way, UL policies pay a residual as well.

People are people, if they don't want to understand they will not. I don't know a carrier that will not except a informal app and health records to give you a idea of what will happen when a "real" app is sent in.

 

[Estreetloans]

Hi All,
I am new to this forum and I was just browsing through some topics. Thought I would add to this one that the forum is so informative. Many of the posts are informative and funny at the same time. I like it here. I will be back.

 

[senior-advisor-indiana]

Awwwwww, that was sweet.

 

[schealthagent]

Any updates on this topic? Healthagent - did you do the 60 minutes thing? I must say that it sounds interesting and worth a shot (minus the whole sounds too good to be true thing) - unless there is a potential downside to the client. I would think that the non recourse loan would prevent this making the only downside the fact that how much insurance they can purchase before the policy is sold would be affected.

I would consider using it as a way to bolster charitable giving - i think this would eliminate the likelihood of negative tax issues. But I would like to speak with someone who has been through the process.

 

[lifesettlementadvisor]

I would consider using it as a way to bolster charitable giving - i think this would eliminate the likelihood of negative tax issues. But I would like to speak with someone who has been through the process.

I run a premium financed charitable giving program. If you would like the literature on it, send me a PM. Once a charity understands the process, they love the idea!

 

[Charpress]

After wading through this thread, I had to go ahead and respond.

I don't think I've ever seen a thread where people were posting at cross-purposes to the extent seen here. Sometimes it's easier for someone new to just read through and get the picture. There are two issues: 1) a "come-on" that is probably a scam, and 2) premium financed life insurance which in itself is not a scam.

The fact that the "come-on" is based on something legitimate is where people are talking at cross purposes. Kind of like "Make a million per year working from your home in real estate" is a scam, but that doesn't make real estate itself a scam.

Anyway, I started to read this thread because I have a particular question about a premium financed case that I have going on, but I'll save it for a new topic.