Elderly should eschew Stranger Originated Life Insurance - The Business Review (Albany):

http://www.pipexpharma.com/links6.htm
Now it’s our parents who coulf be at riskfrom strangers. But instead of canduy or puppies, seniors are being lure d by speculators with offers of a cashlump sum, free life and sometimes even a free cruise — all in returnm for simply getting a life insurance policy and agreeiny to sell it to them two years Harmless? Well, would you want an unknowb party to have an interest in your early demise?
Whilew you may not wish to advise your mom to run screaming, here are 10 thingw you might want to tell her and other seniors about Stranger Originatef Life Insurance policies: • Stranger Originated Life Insurancse (STOLI) policies involve investor groups (likes hedge funds) enticing seniors to obtainj life insurance purely for the purpose of selling it for a substantiakl sum, and transferring the death benefits to the The speculator aims to profit when the insured dies. Once the policy is sold, the investorr group has a financial interest inthe insured’x death — the sooner the insured the more profit is made.
When the policy is sold, the senior typically receivexs a cash lump sum which is less than the face but substantially more than the cash value ofthe policy. Ofteh other gifts such as a free cruisre or car are also offered to lure seniors to Inmost cases, the insured doesn’t even have to pay the The investors arrange for the premium to be After two years, the policuy is transferred to the investor group and the loan doesn’tg need to be paid back. So the insurer rarely, if ever, needs to pay out of • What many seniors don’t Any incentive gift, free insurance, cash lump sum or forgivenessz of the premium finance loan istaxable income.
After transfer, the original policy holders have no control overfuturwe transfers, so are unlikel to know who has a financiap interest in their death. Sometimes, there are multipl persons with an interest in the with many investors located inforeign countries. The two years of free life insurancr might notbe free, as the policgy holder may have to pay tax on the value of the coverage. This periode of free insurance is offered becausw many states havea two-year contestability period after whichh it would be more difficult for the insuranc company to rescind the policy. There is a limit to the total amount of life insurancer that can be purchased byan individual.
What seniorws may not realize is that an individua may use up their insurability by engaging in a STOLIj transaction because the policy remainsein force. An insured may be left out in the cold if a futuree insurance need arises or if the insured becomese uninsurable because of an adversehealth change. Those participating in a STOLI agreement face loss of privac y as they are required to give permissioh for someone to check on their health and This information will be used not only by theoriginalo investors, but also may be used by other personsw who end up having an interestt in the policy.
• If thered is no insurable interest in an insurance policy at the policy is invalid and the transactiojn is a fraud on the lifeinsurance company. By signint on the dotted line, the insured could be implicater in the fraud and subjectf tolegal liability. • Many statesz now have laws or regulations designed to providse consumers with protection againstthese transactions. Some states even put a moratoriunm on the transfer of life insurance death benefits for periodx of up to five So what should we tell our parents to do if someonde approaches them with sucha deal? Just say no.
If you purchase life insurance ingood faith, but find that you no longerr need or want the insurance, you can legally sell your policu and transfer the death benefits to a third partyu at a market price. Such a transaction is callexd alife settlement. This can seem an attractive optiomn if you find that the premiums on your policgy have becomecost prohibitive, or you need to access the equit in your life However, you should remember that you will be taxed on any lump sum you And as the speculator has set the markeyt price to make a profir on your demise, it’s unlikely that you will receive the true valuw of the policy.
Also, as in STOLI a third party has a financia interest in yourearly death, and your if you find you need insurancw in the future, may be If you do need to access the equitu in your life insurance policy, there are othert options. For instance, you may wish to consider a bank loan if you can With a life insurance policy as such a loan works well for all You get cash when you need it without payinvincome tax, the banks get guaranteedx repayment, and your beneficiaries receive the full valud of the policy. Life Settlemenyt transactions are not always abad idea, but you should be awarwe of the facts and other options available to you.
A trustedf financial adviser can help you understandx the details and help you makegood decisions. Strangetr Originated Life Insurance policies, on the othere hand should, always be avoided.