Oct
24
2006
Non-recourse premium financing as an investment – for you!
Author: Byron UdellYou may have heard by now, sophisticated investors have discovered that they can earn much better returns by owning portfolios of life insurance policies on the lives of strangers than they can in other types of investments. So they’ve been promising wealthy seniors millions of dollars of “free life insurance” for two years plus an opportunity to put significant sums of cash in their pockets.
So, if billions of dollars in the form of hedge fund and other investors are chomping at the bit to own life insurance policies on wealthy seniors so that policies can be held until these seniors die, solely as an investment, perhaps they’re on to something!
The death benefits of these same policies, if structured properly in a trust for the insured’s family, can be entirely income tax-free AND estate tax-free. This makes life insurance significantly more valuable and attractive as a financial instrument for the covered individuals and their families than it is for “investors”. What a GREAT investment for individual families! So why aren’t you and your family members taking advantage of this?
If you don’t fully understand why investors are so interested in owning policies on strangers such as yourself and you’re approached by one of these investors, you should take a closer look at using life insurance in your own financial and estate plans before you sell your future insurability rights. You may be surprised at the return on investment it would bring your family.
November 6th, 2006 at 11:08 am
in past readings you have stated that there will be “REGULATIONS” upcoming in regards to NON RECOURSE PREMIUM FINACING. in what time frame ( 2 yrs +/-)do you think this will take place ?
November 6th, 2006 at 3:14 pm
To my knowledge, at least three states have weighed in regarding these transactions, all of them negatively. New York, Utah, and Louisiana. I don’t know if any formal regulations have been enacted, but these states have clearly stated their positions as to how they’d view these transactions.
December 12th, 2006 at 11:25 am
This is of course a fascinating opportunity for both the policy holder and the investor however should the legislators get their way and enforce a 5 year ” no sale” ruling this will kill the product surely and any already taken out will be forced to either be taken back by the policy holder or cancelled ? What is your read on this product as things stand ?
Regards
John Pexton
December 12th, 2006 at 12:25 pm
I couldn’t say what any potential legislation might do to existing deals, as the legislation could take many forms.
Either way, I do not agree that this is an “opportunity” for the policy holder, as I believe that insurance owned by investors on strangers is nauseating, against public policy for good reason, and is potentially dangerous.
The real solution lies in the hands of the insurance companies. The secondary market only exists in it’s current form (along with all these non-recourse schemes) because the carriers have been too short sighted to enter and control the market on their own policies.
December 14th, 2006 at 3:28 pm
I am about to place my first Premium Financed Life policy. I am hearing lots of negative news and I am asking that you please give me your opinion on the matter. In no way, for no amount of money, would I hurt a client.
Thanks
December 18th, 2006 at 4:09 pm
Just a quick question. Now that non-recourse has pretty much gone away, what programs are you offering? would you please e me back?
January 4th, 2008 at 5:35 pm
I have heard the insurance companies are starting to recind policies if they are found to have been sold for this stated purpose. What companies are doing this and how are they checking applications for financing?
January 5th, 2008 at 6:07 pm
I am new to this premium financing business and have clients that fit the mold but am concerned re the negative publicity re nonrecourse policies. If a client should want tsell their policy after a couple of years, I don\’t want them or me to get hurt doing something that was not ethical.
What is involved for the client re recourse policies? Do they have to put up collateral? Are their policies collateral for the loans as well? Any info you can give me will be helpful. If I want to place business, do you broker it? If not who is reliable?
Thanks,
Rod Moss
January 7th, 2008 at 10:11 am
Since we have never been a party to these transactions, I’m not sure which insurance companies have gone to the lengths of rescinding the policies. I can tell you that many companies have stated their official opposition to this practice (for obvious reasons), and many of those have modified their application questions, as well as their inspection reports, and agents’ statements, to weed out these transactions.
February 11th, 2008 at 2:35 pm
I have been approached to purchase a Non Recourse Premium Financing Insurance Policy for Seniors. I am in excellent health and have just had the required physical and have been approved for the policy. I am 77 yrs. old and would like to consider this through Equitable Life Ins. Co. Would you recommend it or what would be the down falls.
February 11th, 2008 at 3:46 pm
Here\’s the short answer. Have you considered the fact that once the policy is transferred to a third party, you will not have any control over who ends up owning it? There is little, if any, regulation in this area and my biggest fear is that, within a few years, you\’ll have a large bounty on your life, in the hands of someone who has no interest in you living, but rather dying. There are numerous other pitfalls to these schemes (Tax Issues, Availability of insurance in the future, etc.), but no matter what anyone tells you about this not being an issue, the fact is, a multi-million dollar incentive for murder IS an issue. Think about it… most murders that take place for money have much less at stake than in these transactions.
I have additional thoughts on this and have been consulted by the media numerous times for comment as well. I\’d be happy to share my experience with you in regard to your specific situation if you call me. I am easy to reach at AccuQuote.com.
March 6th, 2008 at 9:16 pm
Many non-recourse or recourse premium finance programs can be very beneficial to someone who is seeking a large insurance policy who lacks the liquidity to pay for premiums. Some people in the senior market elect to sell, which is within their right, sell their policy and in many cases profit substantially. In cases where they do not profit they can walk away from the policy. For those fortunate enough to qualify it can be very lucrative.
I hope this helps
March 6th, 2008 at 9:22 pm
In addition to the above comments, the only cases involving murder and life insurance have been cases of family members killing their relatives with large policies where they were the beneficiaries. Please google the Menendez brothers.
In terms of taxation: estate tax is not an issue as a trust is used, avoiding probate. Estate Tax 101.
The sale of policies are subject to income tax as is any financial transaction.
Thanks
Sonny Artusa
March 6th, 2008 at 9:22 pm
In addition to the above comments, the only cases involving murder and life insurance have been cases of family members killing their relatives with large policies where they were the beneficiaries. Please google the Menendez brothers.
In terms of taxation: estate tax is not an issue as a trust is used, avoiding probate. Estate Tax 101.
The sale of policies are subject to income tax as is any financial transaction.
Thanks
Sonny Artusa
March 6th, 2008 at 9:23 pm
In addition to the above comments, the only cases involving murder and life insurance have been cases of family members killing their relatives with large policies where they were the beneficiaries. Please google the Menendez brothers.
In terms of taxation: estate tax is not an issue as a trust is used, avoiding probate. Estate Tax 101.
The sale of policies are subject to income tax as is any financial transaction.
Thanks
Sonny Artusa
March 6th, 2008 at 9:30 pm
Not mentioned throughout the blog, life settlements have helped thousands of people who did not need their insurance policies. Its very important to deal with a licensed life settlement broker who knows the market and the accredited funding sources. This is not as simple as buying life or car insurance where online buying is available to anyone with a computer, the life settlement market requires knowledge of an ever changing market.
–Sonny Artusa