LIFE SETTLEMENT REGULATIONS EXAMPLE

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MALE - Age 80
$7,500,000 Universal Life
  • $345,000 Annual Premium
  • $777,000 Loan Due At Maturity

Life Insurance Settlement Amount of $0

A retiree bought a $7,500,000 policy at a premium finance seminar so he could profit from a life settlement after two years. When an independent third party appraised the policy he discovered it was worth less than the loan payoff. Since the borrower did not receive copies of the executed documents, it is uncertain whether or not the loan is non-recourse. Forthcoming life settlement regulations and best standards of practice will hopefully address these types of transactions soon.

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State Regulatory Documents

Links to State Insurance Department

AL AK AZ AR CA CO CT DE DC FL GA HI ID
IL IN IA KS KY LA ME MD MA MI MN MS MO
MT NE NV NH NJ NM NY NC ND OH OK OR PA
PR RI SC SD TN TX UT VT VA WA WV WI WY

Current Status of Life Settlement Regulations

Various state and federal entities share regulatory oversight over the life settlement industry. As of January of 2009, there were life settlement regulations in forty-two US states and Puerto Rico. Eight states and DC did not have any life settlement law, however, at least six of these unregulated jurisdictions were working toward adopting life settlement regulations. In the meantime, consumers should be especially well informed and cautious in states without life settlement law. Advisors, agents, brokers, providers, and buyers should treat consumers in unregulated states as fairly as those who reside in states that have adopted life settlement regulations.

Sources of Life Settlement Law

Current life settlement law is based primarily on two model life settlement regulations. Some life settlement regulations are based on various models created by the National Association of Insurance Commissioners (NAIC). Other life settlement regulations are based on a 2007 National Conference of Insurance Legislation (NCOIL model. Of the 43 US jurisdictions with some form of life settlement law, thirty are based on an old or current NAIC model. Some have indicated they intend to review their existing life settlement law for possible revisions in favor of the NCOIL model or a more recent NAIC model. The non-NAIC model states have either adopted the 2007 NCOIL model or have created their own life settlement regulations that are unique to their state. Some of the non-NAIC states are also considering life settlement law revisions which include changes to either NAIC or NCOIL based life settlement regulations.

Differences Between NAIC and NCOIL Life Settlement Regulations

Recent changes and proposed changes to life settlement regulations have come about because of an illegal and unethical practice known as STOLI or Stranger Originated Life Insurance. The NAIC and NCOIL agree STOLI should be eliminated. They disagree on the best method for eliminating it. The NAIC favors life settlement regulations that include a five year ban on settling new policies resulting from some transactions. The NCOIL opposes the five year ban because they believe it is contrary to the best interests of some seniors.

More Information about STOLI and Its Impact on Life Settlement Regulations

For a thorough understanding of STOLI and a comparison of how both the NAIC and NCOIL life settlement regulations address it, please visit the STOLI page of Life Insurance Settlement Association (LISA) website. Policysettlement.com is a proud member of LISA and fully supports life settlement regulations that are in the consumer's best interest.