SIDE BAR: "Investor Bulletin on Life Settlement" (SEC Investor Alerts and Bulletins)http://www.brokeandbroker.com/index.php?a=blog&id=467 offers some excellent guidance on life settlements. In pertinent part:What is a life settlement?In a "life settlement" transaction, a life insurance policy owner sells his or her policy to an investor in exchange for a lump sum payment. The amount of the payment from the investor to the policy owner is generally less than the death benefit on the policy, but more than its cash surrender value. The dollar amount offered by the investor usually takes into account the insured's life expectancy (age and health) and the terms and conditions of the insurance policy.Why would a policy owner wish to sell a life insurance policy?Due to changed family or other circumstances, a life insurance policy owner may no longer need the insurance provided by the policy. A spouse may have died, children may have grown up, or a company with life insurance on a key officer may have been sold or gone out of business. Other policy owners may have difficulty making premium payments or simply need cash. In such circumstances, many policy owners surrender their policies or let their policies lapse by ceasing to make premium payments. Selling a policy to an investor may be another alternative. Such sales may be made through life settlement brokers who charge commissions. . .. . .Considerations for investors in life settlementsBefore investing in a life settlement, investors may wish to keep the following points in mind.
- The return on a life settlement depends on the insured's life expectancy and the date of the insured's death. As a result, the accuracy of a life expectancy estimate is essential. If the insured dies before his or her estimated life expectancy, the investor may receive a higher return. If the insured lives longer than expected, the investor's return will be lower. If the insured lives long enough or if life expectancy is miscalculated, additional premiums may need to be paid and the cost of the investment could be greater than anticipated. . .
Also consider "Variable Life Settlement Transactions / FINRA Reminds Firms of Their Obligations With Variable Life Settlement Activities" (FINRA Notice to Member 09- )Older Americans might hear about opportunities to sell their existing life insurance for cash in transactions known as life settlements. A life settlement, or senior settlement, as they are sometimes called, involves selling an existing life insurance policy to a third party-a person or an entity other than the company that issued the policy-for more than the policy's cash surrender value, but less than the net death benefit.Life settlements can be a valuable source of liquidity for people who would otherwise surrender their policies or allow them to lapse-or for people whose life insurance needs have changed. But they are not for everyone. Life settlements can have high transaction costs and unintended consequences. And even if you decide a life settlement is generally right for you, it can be hard to tell whether you are getting a fair price.If you are considering selling your life insurance policy to a third party, you can help protect yourself by familiarizing yourself with your existing policy so that you fully understand your options, becoming fully informed about life settlements, shopping around for the best offer, and dealing only with licensed buyers and brokers. We are issuing this Alert to highlight the questions you should ask and the factors to consider before entering into a life settlement. . . .
Executive SummarySales of existing life insurance policies to third parties-referred to as life settlements-have increased in recent years and the trend appears likely to continue. FINRA is concerned about variable life settlements because they involve materially different factors and raise materially different issues than more widely held securities such as stocks or bonds. Additionally, firms'marketing of variable life settlements is directed almost exclusively toward senior investors who, concerned about current economic conditions and retirement, may consider selling their variable life insurance policies without fully appreciating the risks and costs of variable life settlements. . . .Bitcoin Dealer Sentenced to Two Years in Prison and Ordered to Forfeit Ill-Gotten Gains (DOJ Release)14 Defendants in College Admissions Scandal to Plead Guilty / 13 parents and one university athletic coach have agreed to plead guilty to charges of mail fraud and honest services mail fraud (DOJ Release)In the Matter of the Arbitration Between David Lee Garman, Claimant, v. Purdential Equity Group, LLC and Wall Street Access, Respondents (FINRA Arbitration Decision)Jackson County Man Charged with Defrauding Investors in $50 Million Ponzi Scheme (DOJ Release)Proposed Rule Change to Adopt Remaining Legacy NASD and Incorporated NYSE Rules as FINRA Rules (FINRA SR-FINRA-2019-009)