10-04-2009, 05:08 PM
Has any taken any advances from their life insurance policy? I saw ad in CURE magazine and women cancer mag?To pay current expenses as a stage 4 cancer patient? So I don't have to work so much. I have been able to work but this extra fluid in my brain, and steroids, and full blown diabetes from steroids, ,I am not feeling very good!!!
I don't think it is an "advance" What it is is selling the proceeds/settlement of your life insurance policy to someone else (rather than the beneficiary you would otherwise list--husband, kids, etc) in exchange for them giving you a percentage of the amount now. You and/or your family do not get the rest later.
From Wikipedia--viatical settlement or life settlement(note that they settle for PERCENTAGE and it depends what kind of life insurance you have $135,000
From Wikipedia, the free encyclopedia
It has been suggested that this article or section be merged with Stranger Originated Life Insurance. (Discuss)
A life settlement generally refers to the sale of a life insurance policy by a policyowner for less than the face value of the policy to third party investors. The third party investor(s) plans to profit at death of the insured by collecting more in death benefits that were paid out (e.g., the purchase price, the transactions costs, and premiums). This translates into higher profits the sooner the policy holder dies. A "viatical settlement" is the same as a life settlement except the insured is chronically or terminally ill (as defined by the IRS Code).
Transactions of this type have been available for Americans since 1911. Aids sufferers created a small market in the 1980s when their policies were sought out by speculators. The credit crisis has seen a rise of elderly Americans for whom their life-insurance policy is one of their more valuable assets.
The Economist reports estimates of it being a $18–19 billion market as of June, 2009.
The following was provided by the life settlement industry:
Generally speaking, life settlements are an option for high-net-worth policy owners age 70 or older. Independent estimates report that among this group, over 50% of policies have a market value that exceeds the cash value offered by the carrier. A growing number of experts now believe that informing clients about offering life settlements should fall under the fiduciary duty of a financial adviser. With this being said, those established in the industry are now placing an emphasis on life settlement education for financial professionals so that they can accurately present the life settlement option to all clients who might benefit from it.
1 Criteria and examples
1.1 Financial advisers
1.4 Investors / risk takers
1.5 Other involved parties
2 Life Expectancy Providers
3 Tracking Agents
4 Life Settlement History
4.1 Major Study Findings
5 Viatical settlement
6 See also
8 External links
Criteria and examples
Typical criteria for the owner of a life insurance policy to become an eligible candidate for a life settlement transaction would include:
Policy holders age 70 and older (ages as low as 55 are possible)
$50,000 minimum face amount
Policy active minimum of two years
Low cash surrender value
Premiums less than 8% per annum
Insurance Policy Types
Term (if convertible)
Survivorship (any type)
Joint First to Die
Three typical examples of the characteristics of a Life Settlement Transaction are given below:
Universal Life Insurance
Male Age: 79
Policy Face Amount: $3.5 Million
Cash Value: $185,000
Life Settlement Payment: $970,000
Universal Life Insurance
Female Age: 86
Policy Face Amount: $1 Million
Cash Value: $45,000
Life Settlement Payment: $547,000
Whole Life Insurance
Male Age: 75
Policy Face Amount: $1.5 Million
Cash Value: $72,000
Life Settlement Payment: $455,000
Life settlements are complex financial transactions that are generally conducted on behalf of clients by experienced professional advisers. Some examples of advisers that are becoming increasingly involved in the life settlement arena are:
Certified Senior Advisors/CSAs
Charitable Trust Officers
Life settlement providers serve as the purchaser in a life settlement transaction and are responsible for paying the client a cash sum greater than the policy's cash surrender value. The top providers in the industry fund many transactions each year and hold the seller's policy as a confidential portfolio asset. They are experienced in the analysis and valuation of large-face-amount policies and work directly with advisors to develop transactions that are customized to a client's particular situation. They have in-house compliance departments to carefully review transactions and, most importantly, they are backed by institutional funds.
Life Settlement providers must be licensed in the state where the policy owner resides. Approximately 41 states have regulations in place regarding the sale of life insurance policies to third parties.
Financial advisors who choose not to submit cases directly to a settlement provider may opt to work through a life settlement broker. Life settlement brokers are intermediaries who bring together policyowners who wish to sell a policy and providers seeking to purchase them. Brokers, in exchange for a fee, will shop a policy to multiple providers, much as a real estate broker solicits multiple offers for one’s home. Not all buyers are alike and a life settlement broker will help ensure that cases are sold to reputable buyers who are likely to close without significant difficulties. It is unlikely a financial advisor will achieve the highest possible price without going through an experienced life settlement broker.
While it is the broker's duty to collect bids, it is still incumbent on the advisor to help the client evaluate the offers against a number of criteria including offer price, stability of funding, privacy provisions, net yield after commissions, and more.
Compensation arrangements vary significantly and should be fully disclosed and understood to determine if engaging a broker will benefit the client. In many states, brokers must be licensed to do business in that state.
In regulated states there are material regulations as to procedure, privacy, licensing, disclosure and reporting which must be met and which in some cases carry criminal penalties.
Investors / risk takers
Life settlement investors are known as financing entities because they are providing the capital or financing for life settlement transactions (the purchase of a life insurance policy). Life settlement investors may use their own capital to purchase the policies or may raise the capital from a wide range of investors through a variety of structures. The life settlement provider is the entity that enters into the transaction with the policyowner and pays the policyowner when the life settlement transaction closes. In most cases, the life settlement provider has a written agreement with the life settlement investor to provide the life settlement provider with the funds needed to acquire the policy. In this scenario, the life settlement investor is effectively the ultimate funder of the secondary market transaction. However, in some life settlement transactions, the life settlement provider is also the investor; the provider uses its own capital to purchase the policy for its own portfolio.
Other involved parties
Life Expectancy Providers
Life Expectancy Providers (LEPs) are specialized independent companies that issue life expectancy reports (LERs) that estimate the life expectancy (LE) of an individual (typically the insured individual on whose life a life insurance policy involved in a life settlement is based). Life expectancies are not a prediction of how long an individual will live, but rather are the average survival time amongst a particular risk cohort. Risk cohorts are typically grouped by age, gender, smoking, and relative health/morbidity. LE is a key component in the pricing of a life settlement.
LEPs are typically made up of actuaries and medical underwriters who utilize actuarial models based on published or proprietary mortality (life) tables and medical underwriting based on various debits/credits for various morbidity characteristics similar to the medical underwriting performed by life insurance company underwriters and reinsurance underwriters. Until recently, the most commonly used mortality table was the 2001 Valuation Basic Table (VBT) published by the Society of Actuaries based on data supplied by contributing life insurance carriers. In 2008, the Society of Actuaries published a new table, the 2008 VBT, that is based on 695,000 lives representing $7.4 Trillion  in death benefits which is almost 3 times more lives than the former 2001 VBT. Included with 2008 VBT are relative risk tables (RR Tables) that separate insured lives into various underwriting categories based on the health/morbidity of the insured at the time the policy was issued. Note that no impaired lives are included in any of the RR tables, but rather were designed for companies that subdivide their standard policies into more than one sub-class. Most LEPs have factored in the experience data underlying the 2008 VBT, as well as their own experience data and other factors, as a basis for their mortality tables. This resulted in a significant lengthening of average LEs in the fourth quarter of 2008 for some LEPs. All major LEPs have continued the practice of developing and using proprietary and confidential mortality tables based on extensive medical research and mortality experience. One new LEP has adopted the use of the 2008 VBT RR Tables as a replacement for proprietary multipliers, despite the fact that Relative Risk Factors are in their infancy and not designed for impaired life nor life settlement underwriting.
Tracking agents provide information to investors regarding the whereabouts and mortality status of each insured. Tracking agents use a variety of methods to collect this type of information such as phone, email, mail, and the social security database. Most tracking agents also provide premium management, death claim processing (collecting the death benefit from the insurance company once the insured has expired) and reporting services.
Steps in a transaction
Policyowner consults with an advisor, decides to sell his or her policy.
Policy owner and advisor decide whether to work with broker or to go directly to providers.
Client & advisor submit policy for valuation. Client releases medical information.
If policy meets criteria for a life settlement, providers send offers directly or through a broker.
Client and advisor review offers and client accepts his preferred offer.
Client and advisor complete the provider's closing package, and return essential documents.
Provider places cash payment in escrow and submits change of ownership forms to the insurance carrier.
Paperwork is verified and funds are transferred to the policy seller.
Life Settlement History
Although the secondary market for life insurance is relatively new, the market was more than 100 years in the making. The life settlement market would not have originated without a number of events, judicial rulings, and key individuals.
The Policy as Transferable Property
The Supreme Court case of Grigsby v. Russell (1911) established the policyowner’s right to transfer an insurance policy. Justice Oliver Wendell Holmes noted in his opinion that life insurance possessed all the ordinary characteristics of property, and therefore represented an asset that a policyowner could transfer without limitation. Wrote Holmes, “Life insurance has become in our days one of the best recognized forms of investment and self-compelled saving.” This opinion placed the ownership rights in a life insurance policy on the same legal footing as more traditional investment property such as stocks and bonds. As with these other types of property, a life insurance policy could be transferred to another person at the discretion of the policyowner.
This decision established a life insurance policy as transferable property that contains specific legal rights, including the right to:
Name the policy beneficiary
Change the beneficiary designation (unless subject to restrictions)
Assign the policy as collateral for a loan
Borrow against the policy
Sell the policy to another party
A second milestone occurred in 2001 when The National Association of Insurance Commissioners (NAIC) took a crucial step by releasing the Viatical Settlements Model Act defining guidelines for avoiding fraud and ensuring sound business practices. Around this time, many of the life settlement providers that are prominent today began purchasing policies for their investment portfolio using institutional capital. The arrival of well-funded corporate entities transformed the settlement concept into a regulated wealth management tool for high-net-worth policyowners who no longer needed a given policy. Strong demand for life settlements policies is driving a rapid market expansion that continues today.
Major Study Findings
An academic study that showed some of the potential of the life settlement market was conducted in 2002 by the University of Pennsylvania business school, the Wharton School. The research papers, credited to Neil Doherty and Hal Singer, were released under the title "The Benefits of a Secondary Market For Life Insurance."  This study found, among other things, that life settlement providers paid approximately $340 million to consumers for their underperforming life insurance policies, an opportunity that was not available to them just a few years before.
"We estimate that life settlements, alone, generate surplus benefits in excess of $240 million annually for life insurance policyholders who have exercised their option to sell their policies at a competitive rate." - Wharton Study, pg 6
Another study by Conning & Co. Research, "Life Settlements: Additional Pressure on Life Profits." This study found that senior citizens owned approximately $500 billion worth of life insurance in 2003, of which $100 billion was owned by seniors eligible for life settlements.
A life insurance industry sponsored study by Deloitte Consulting and the University of Connecticut came to negative conclusions regarding the life settlement market. http://www.quatloos.com/uconn_deloitte_life_settlements.pdf
That study was in turn disputed by Singer and Stallard.
In the case of a life expectancy of less than two years the term viatical settlement is used.
HERE IS A VERY INFORMATIVE ARTICLE
Lani is correct...
Do you have other options? You can borrow against your 401K...apply for disability with SS benefits.
I am a tax accountant...you can PM me.
Hugs ~ Ruth
10-05-2009, 06:28 PM
Darita: Yes, I have taken an "ACCELERATED DEATH BENEFIT" from both my individual and group life policies. This is VERY different that a Viatical settlement. I am a 31 year insurance agent, just retired due to this disability a few months back.
Be very cautious about a Viatical settlement. I do not recommend it. See a lawyer if you are entertaining it.
Your policy should have an Accelerated Benefit provision, if not, ask for it to be added (it's no charge) and then make a claim. You can typically get up to 50% of the policy face amount (some offer more). The money is tax free. The sum you take will be deducted from the face amount and your beneficiaries will get the balance. If you have more than one policy, you can claim on all of them. If they are all with the same company, there may be a maxium total amount you can take. If you have a group policy check on that too. Once the claim has been paid, the insurance company will reduce the amount of premium on your policy to reflect the lower policy amount and reissue a policy at the new amount.
I took the maximum available and placed it in CDs to generate an interest check to me each month to supplement my SSDI and LTD. I hope to not use the principal and leave it for my family. But, if I need it, I've got access to it.
I hope you find this helpful and feel free to ask me anything you might want to know as you go along.
I am a fellow brainmetsister and I will be checking in on you. Sending you my warmest thoughts and praying for you to find some relief with your discomfort and finances.
10-06-2009, 01:37 PM
I don't know a lot about the insurance industry, but I would also be wary of a viatical settlement unless you discuss it an attorney.
I work in the financial reporting industry and these types of settlements are frequently "schemes," even if legal ones. A client is targeted based on a disease that might limit their life expectency and can lose out in the long-run.
10-06-2009, 02:33 PM
There was a VERY good discussion on NPR today as to why this is NOT a very good idea...
10-07-2009, 09:27 AM
Rhonda: Please elaborate WHAT isn't a good idea. I do not see what you are referring to in the link. This is an important topic and I want everyone to have correct facts.
10-07-2009, 12:49 PM
Go to the recent shows column and look up 10/6/09 "Wall Street Considers Bundling Life Insurance Policies"
10-07-2009, 04:21 PM
Rhonda: This article you are referring to is VERY different than opting to take an Accelerated Death Benefit from your insurance company. This rider became available in the industry within the last 10 years. The rider is generally a free rider and if your policy is older and does not have the benefit, you can request it be added at no charge now and then make a claim. You are receiving the proceeds of YOUR policy from YOUR insurance company due to the terminal illness provision and any remaining balance will stay in force as long as you pay premiums and will be paid to your designated beneficiaries.
You are NOT selling your policy, you are getting a percentage of your death benefits in advance due to terminal illness. Viaticals were popular prior to the Accelerated Benefit option back in the 80's as the article stated. They are rarely done now and rarely a good option.
The benefits are not taxable since they are death benefits from a life policy. Not true if you take cash value or sell your policy.
Many people do not even know they can do this and I have many private messages from ladies on several of the boards telling me that they successfully obtained needed benefits to help them with disabilitly and that they had no idea until I told them.
I NEVER encourage anyone to SELL a life policy. Always consult an attorney if you are even thinking about it.
Accelerated Death Benefits can be a very good option in the right circumstances. Ask your agent, benefits coordinator at work, your lawyer and your CPA for additional info and guidance.
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