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Tuesday October 16, 2007 12:00AM | Click here to visit original article.
Yet, it is not easy to get the attention of wealthy people to enter into these transactions, and they usually don't want to take a medical examination or having people prying into their private lives, so the insurance agent must offer substantial bait. This bait usually comes in the form of large amounts of cash paid up-front.
How much cash? On a $10 million policy, the wealthy person might get as much as $500,000 up front just for taking the medical examination and signing the application. They also get "free insurance" for the two year period until the contestability period expires, and the investors feel safe in buying the policy. Half-million bucks for a couple of hours' work? Sweeeeet.
What the wealthy person isn't told is that this money is coming from the commissions paid on the life insurance policy that is sold, and thus amounts to what is called a "rebate" of commissions by the agent. Such rebates are usually illegal, and we've heard that some state insurance commissioners are starting to look into the practice. While rebating is an illegal practice for the agent, it isn't necessarily illegal for the wealthy person. However, if something happens and the policy later fails, the rebating could be great evidence of collusion between the life insurance agent and the wealthy person.
---Source: http://www.quatloos.com/life_settlement-life_settlements.htm
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56 Year Old Male
$1,500,000 Convertible Term Life
$0 Surrender Value
Paid: $360,000
44 Year Old Female
$300,000 Term Life
$0 Surrender Value
Paid: $225,000
68 Year Old Male
$200,000 Convertible Term Life
$0 Surrender Value
Paid: $40,500
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