Skip to: site menu | section menu | main content
Q. What is Life Settlements or Transferable Insurance Policy?
A. Life Settlements is the new asset class arena where Transfearable Insurance Policies are bought & sold.
Q. What is a Transferable Insurance Policy?
A. A transferable insurance policy (Life Settlements) is simply the sale of an existing life insurance policy by a terminally ill or elderly person to another party. The price of the policy is negotiated and sold by the owner at a discount to the face amount. The purchaser then collects the full amount of the policy when the insured person is deceased.
Q. Why haven’t I heard of a Transferable Insurance Policy from my financial advisor?
A. A financial advisor’s duty is to represent only the investments available through his/her firm’s inventory. Representing any other investment would be considered “selling away”, and cause for their dismissal. Transferable Insurance Policy investments are only available through authorized licensees.
Q. I’ve been lead to believe that 8-10% is an excellent return (based on stock market returns) and expecting anything higher is considered extremely risky. Is that true?
A. Your belief that returns of 8-10% are “reasonable” and exceptional returns require accepting enormous risk is based on information and material received from companies that offer investments whose success is solely dependent upon the stock market conditions and returns. Banks, corporations, and institutional investors for years (since 1911) have regularly obtained superior yields with more safety than individual through the use of sum certain Transferable Insurance Policy investing.
Q. What is the difference between an investment available through retail channels and an institutional grade product?
A. The only true difference is your knowledge of its availability and the amount of money requirement for investing.
Q. Is the success of a Transferable Insurance Policy investment subject to outside influences, such as terrorism, oil prices, and stock market volatility?
A. NO. The return on investment is considered sum certain. The price of the policy is negotiated and sold by the owner for the purpose of investment at a discount to the face amount. The purchaser then collects the full amount of the policy when the policy matures.
Q. Has there ever been a life insurance company that did not pay in full on a Transferable Insurance Policy investment?
A. NO. Systematic procurement guidelines used in purchasing each policy have been strictly adhered to for without exception. In order to get a creditable rating, Life Companies comply with the various State requirements for maintaining reserves commensurate with their insured liabilities. Thus being a Legal Reserve Life Insurance Company. As an additional hedge all States have a Guaranty Pool, typically from $300,000 to $500,000 just in case there is a shortfall.
Q. Are the Life Insurance companies, whose policies are purchased for investment, subject to regulation and oversight?
A. YES. All insurance carriers are regulated by each States Department of Insurance. All companies are required to participate in a state guarantee fund (in Texas it is known as the Texas Legal Life Reserve) where minimum reserve balances must be maintained through audit similar to FDIC regulations for all banking institutions.
Q. What is meant by a third party “arms length transaction”?
A. An “arms length transaction” means that the company offering the investment does not handle any client money in connection with that investment transaction. Life settlement transactions use a Trust Company as independent escrow agent to facilitate all money transactions. AS custodian of policies, funds and documentation, the Trust Company is empowered to receive and disperse all funds.
Q. Are Trust Companies regulated by any institutional or government agency?
A. YES. Trust companies are regulated by Banking Commisions who audit it’s financial statements, internal procedures, and controls. Trust Companies also comply with the internal Revenue Service (IRS), and U.S. Department of Labor regulations.
Q. Who receives my funds? And who pays me?
A. Your funds are received into a Trust account and deposited into an interest bearing account. The Trust Company pays out proceeds based on the distinct share of the policy, which each purchaser owns.
Q. What paperwork do I receive to document my purchase?
A. The Trust Company will issue closing documents showing your exact ownership participation in multiple policies. Your cover letter will state your exact percentage of ownership and exact dollar amount of return on investment.
Q. Is there a difference between “amount of return on an investment” and the “annual percentage rate”?
A. YES. An amount of return on investment is the difference between the total acquisition cost and the amount received when the policy matures. That amount is stated in dollars and cents. The annual percentage rate is the amount of return over a period of one year.
Q. Can I transfer my IRA funds into a Transferable Insurance Policy investment?
A. YES. 70% of all investments are IRA funds because of their secure nature and superior yields.
Q. What other type of accounts can be transferred into a Transferable Insurance Policy investment?
A. 401 Ks, SEPs, and defined benefit plans, cash accents including CDs, savings and college accounts, Annuities (cashed out), cash value from life Insurance policies (borrowed or surrendered values), real estate equities and margined stock equities.
Q. Are there any fees or charges in connection with a Transferable Insurance Policy investment?
A. NO.
Q. Are there any tax advantages on the earnings from a Transferable Insurance Policy investment?
A. YES. Cash accounts are subject to Long Term Capital Gains tax of 15% on the growth, not personal income tax bracket rates.
Q. What is a viatical settlement, and is there a difference between it and a Transferable Insurance Policy?
A. A viatical is typically a policy owned and being sold for investment by a terminally ill person with a life expectancy of 24 months or less. Typically this is a policy with a small face amount, usually under $100,000, being owned by a person under the age of 50. Viatical settlements are not common for investors with Berkshire Moody.
A Transferable Insurance Policy (Life Settlement Policy) is typically a special purpose policy (either business or estate planning policy) being sold for investment that has served its stated purpose and is no longer of use. Typically these are large face amount policies, usually over $500,000, and being owned by a person over the ago of 70.
Q. Isn’t this investment considered morbid because you are waiting on the demise of the policy holder?
A. NO. People, or Companies, sell the life insurance policies for many different reasons:
Q. Who purchases T.I.P.'s or Life Settlements?
A. Institutions, Large Brokerage Firms, Insurance Companies, Foundations & Charities and individuals invest in T.I.P.'s
Q. What size transactions has Berkshire Moody been involved in?
A. From as little $30,0000 up to $300,000,000.