Copyright ©2004 Wall Street Instructors, Inc. All rights reserved. No portion of this publication may be reproduced, stored in a retrieval system, or transmitted in any form by any means electronic, mechanical, photocopying, recording or otherwise without prior written permission of Wall Street Instructors, Inc.
Chapter 3: Prospects for Lifetime Settlements
Prospects for Lifetime Settlements
The important points addressed in this lesson are:
Differences between viatical settlements and senior settlements
Motivating factors for policyholders contemplating the sale of their policies
Types of policies acceptable for viatical and senior settlements
NAIC's Model Act requirements on minimum pricing of viatical settlements
Factors affecting the pricing of senior settlements
Individual uses of senior settlements
Business uses of senior settlements
For years insurance companies and their agents have presented myriad reasons for purchasing life insurance -- to protect heirs, pay estate taxes, as a tax-advantaged investment vehicle, to indemnify businesses for the loss of key employees, fund a business succession plan, etc. But with the emergence of a secondary market for life policies, “insurance planning” is no longer a simple euphemism for “insurance purchase”. Now those engaged in financial planning must consider the possibility of selling existing policies as well. As we’ve seen from recent events on Wall Street -- analysts are being held financially liable for making blanket recommendations “to buy “ or “hold” stocks in their clients‘ portfolios, while ignoring the need to “sell” underperforming issues. It is in an insurance agent’s best interest -- as well as policyholders’ -- to consider the possibility of selling insurance policies that no longer meet the client’s needs.