Photo: bentleylifesettlements.com
The basics are simple. Policy owners may want to sell their life insurance policy for money they can use now. A seller can expect to be paid some amount that is a percentage of the death benefit. Understand that the amount the seller will get will be more than the original insurer would pay if the owner just wanted to surrender the policy. Investors purchase the policy. They hope to profit when the insured person passes away. The difference between the actual policy death benefit and the amount they had to invest would be their profit.
In some cases, this can work out to the benefit of the sellers, brokers, and investors involved in the transactions. Typical situations would include cases where individuals or companies hold life insurance policies that they really do not need. Other people may just have more need for the cash now.
But there have been some shady operators in this business. Many scams have been documented and prosecuted. Some of these schemes could involve brokers, policy owners, or investment companies. Just be aware that you should research anybody you intend to do business with.
One famous scam had insurance agents finding terminally ill people and encouraging them to fill out applications where they did not mention that they were sick! These agents wanted to make a quick buck from commissions. The life settlement brokers also wanted a commission. In this case, the investment firm only cared about making money. They did not care about being ethical or even legal. They hoped the insurance company would be fooled so they could collect on these policies quickly. The people who were sick could have been mislead. They could have just needed the money very badly so it was tempting to lie. In any case this type of scheme is very illegal. When the scheme promoters got caught, they ended up having to pay large fines and spend time in jail.
Any transaction that involves fraud carries a huge risk. Understand that life insurance companies have seen it all before. They are very good at picking up on tricks like these.
Other schemes involved innocent investors being promised huge returns with no risk by promoters. Of course, the promoters hoped to collect a percentage off of every transaction. The claims were illegal and misleading. These promoters did get caught this time. They ended up with a large fine and jail time. Many of the investors were innocent, but still lost their money.
Again, I do think that legitimate life settlements can work out to the advantage of the buyers and sellers. The sellers can collect money now that they can use before the insured person passes away. The buyer can make a profit later. Just be sure to check out any people you may want to do business with.
About the Author
Get over 50s life insurance qutoes and information with our free online quote forms. Also learn more about senior life settlements.
No comments:
Post a Comment