To avoid life settlement risk, not only does it benefit a client to have a reputable Life Settlement Broker, but it benefits the Funder as well.
Believe it or not, one of the biggest risks in life settlements lies with the funder or buyer. Funders typically purchase life insurance policies from clients with a life expectancy of two years or less. The Funders are then responsible for paying the annual premiums on the policy until the demise of the client. The life settlement risk is that the client will live beyond the estimated life expectancy costing the Funder thousands. Another life settlement risk to the funder is a fraudulent life expectancy report in the first place.
There have been noted cases of private or individual investors investing in life settlement scams. For instance, a fraudulent Broker sells a private investor one or more settlements that don’t even exist. An additional scam has been reported wherein private investors were led to believe the only cost was the one time purchase fee. They were not aware they had to continue to pay annual premiums to keep the policy in force. The private investors were then forced to pay the premium or loose their initial investment.
Another life settlement risk for a funder is working with agents that are not licensed. There have been reported cases wherein funders have invested in life settlements that were sold by an unlicensed agent or broker. When the unlicensed agent or broker is discovered, the policy is void, meaning the funder has been paying into an investment that no longer exists.
In short the best way to reduce life settlement risk to a funder, and to anyone for that matter, is to ensure a reputable, experienced, and knowledgeable Broker is handling the settlement transaction.
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