For the life settlement investor, buying a life settlement solution is not the same across the board. In fact, there are many variations on the life settlements agreement theme, some of which are best avoided. What used to be a traditional market has, since 2004, morphed into a plethora of choices for the investor, requiring many investors to take a refresher course in life settlements.
Before 2004, all of the life settlements market was made up of traditional life settlement arrangements; policies that matured and have existed beyond the two-year contestability period for a life settlement agreement. Now hybrids are driving more sellers into the market andcreating a more complex market. Some of the newer life settlement solutions are:
Premium Financed Life Settlements. These are life insurance policies issued using non-recourse (or hybrid) financing for premium payments during the contestability period. Designed exclusively for sale in the life settlements market, these life settlement agreements are now the dominant life settlement solution in the market. Targeting seniors who may need the extra cash, these life settlement deals offer the policy holder two years of risk-free, premium-free coverage in exchange for a profit on the policy's future sale. Typically, these life insurance policies have less value than the traditional life settlement agreements and may carry interest tax penalties.
Investor Owned Traditional Life Settlements. Institutional investors purchased these policies under the direction of life settlement brokers or providers. Because most investors were supplied with inaccurate life expectancy data for these life settlements, most of these life settlement solutions hold little value.
Investor Owned Premium Financed Life Settlements. With this type of life settlement, the investors provide premium financing for the underlying policies. Like the investor owned traditional life settlements, life expectancy rates with these can also be inaccurate, so the buyer market for these life settlement solutions is dwindling. Thanks to the inaccuracies, many of these policies are worth much less than originally expected and as new projected policy values are calculated, lenders have been forced to foreclose, thus causing buyers to lose their original investments.
Investor and Stranger Owned Life Settlements (STOLI). These life settlement arrangements have done significant damage to the life settlements market and have generated a negative image of life settlements solutions. Blatantly structured for resale, the STOLI products have been the cause of numerous litigious activity. Despite being billed as transparent transactions, most were purchased during the policy's contestability period and were bought and controlled as irrevocable living trusts. Some buyers have even attempted to market such arrangements as traditional life settlements.
Because we specialize in life settlements, we at Opulen Capital can help investors and sellers determine the best life settlement solution for their particular needs. Before investing or selling, ask. One of our life settlement specialists will walk you through the options available to you and help you choose a life settlement solution that fits.
Saturday, June 20, 2009
Some Facts About Selling Settlements
Before you decide to begin a search for companies that buy structured settlements you should consider what is involved in the process. Often, insurance companies offer a structured settlement rather than an immediate pay out of cash. Under a structured insurance settlement, the insurer promises to pay money in regular installments over a period of time. Typically selling your future structured settlement payments will require a legal process.
The insurance company is ordered by a court to pay you or your family over a period of time. Insurance companies typically fund these awards by purchasing annuities. The annuity therefore belongs to that insurance company and not to you, meaning you cannot sell the annuity. You can however sell the rights to receive future payments You can sell this asset on terms that you negotiate with a third-party buyer, or companies that buy structured settlements.
In most cases selling a settlement will require a court review. Simply put a court ordered the payments and therefore a court will have to rule in favor of selling future payments.
The court's legal review examines the person's financial circumstances, and the arguments in favor of selling future annuity payments. You would have to show that your interests would be better served by an immediate lump sum of cash, compared to the inflexible terms of the existing annuity.
The process will seem impossible throughout and it is advised to find a settlement specialist to help through the process. There are benefits to a lump sum payout and there are advantages to extended payments. The individual should decided what is the best approach to take. Laws may vary state by state so proper research is needed before you make a hasty decision.
Life can throw unexpected surprises at you everyday and your needs may have changed since you were awarded the settlement. The court generally had your best interest in mind when the award was made. You would do well to consider all factors before proceeding with your settlement sale
The insurance company is ordered by a court to pay you or your family over a period of time. Insurance companies typically fund these awards by purchasing annuities. The annuity therefore belongs to that insurance company and not to you, meaning you cannot sell the annuity. You can however sell the rights to receive future payments You can sell this asset on terms that you negotiate with a third-party buyer, or companies that buy structured settlements.
In most cases selling a settlement will require a court review. Simply put a court ordered the payments and therefore a court will have to rule in favor of selling future payments.
The court's legal review examines the person's financial circumstances, and the arguments in favor of selling future annuity payments. You would have to show that your interests would be better served by an immediate lump sum of cash, compared to the inflexible terms of the existing annuity.
The process will seem impossible throughout and it is advised to find a settlement specialist to help through the process. There are benefits to a lump sum payout and there are advantages to extended payments. The individual should decided what is the best approach to take. Laws may vary state by state so proper research is needed before you make a hasty decision.
Life can throw unexpected surprises at you everyday and your needs may have changed since you were awarded the settlement. The court generally had your best interest in mind when the award was made. You would do well to consider all factors before proceeding with your settlement sale
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