The document discusses life settlements, which involve selling existing life insurance policies for fair market value that often exceeds the insurance company's cash value offer. It highlights the legal framework, financial implications, and the growing acceptance of life settlements as a valuable financial planning tool, especially in light of increasing longevity and the financial needs of seniors. Key points include the potential for life settlements to alleviate unnecessary premium payments and serve as an alternative funding source for long-term care.

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The ABCs
Of Life Settlements
THE LIFELINE PROGRAM®

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² It is the sale of an existing life insurance policy to a third party for fair
market value; it exceeds the cash value offered by the insurance
company.
² Grigsby v. Russell (1911) established a life insurance policy as
private property, which may be assigned at the will of the owner
² In most cases, a life settlement will pay the insured a large percent
of the premiums they have paid in over the years, which is more
than the cash value of the policy.*.
² Currently, 42 of the 50 states (and Puerto Rico) regulate life
settlements, covering more than 90% of the United States
population.
WHAT IS A LIFE INSURANCE SETTLEMENT?

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² A Viatical Settlement is the sale of in-force life insurance
policy to a 3rd party by terminally ill insured
² The insured typically has a life expectancy of 2 years or
less
² Transaction terms are reflective of each states’
definition of a chronic or terminal condition.
VIATICAL VS. LIFE SETTLEMENT

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² Reverse Mortgage is a loan that must be paid back once
the homeowner no longer occupies the home.*
Ø Life Settlement, the sale of personal property;
NOT a Loan. No restrictions or requirements to be
paid back
² Size of Reverse Mortgage loan is determined by borrower’s
age, the interest rate, and home value. Amount may be
capped by FHA loan limit; determined by city/county
Ø Life Settlement, No caps on the amount of money
that can be raised.
The typical age for both Life Settlements and getting a
Reverse Mortgage is 75.
REVERSE MORTGAGE VS. LIFE SETTLEMENT
Reverse Mortgage Stabilization Act of 2013 was amended. Changes went into effect, September 30, 2013

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In 2007, Paul Rutledge, former President of Transamerica Reinsurance,
recognized the long term advantages for both the insurance buying
public and life companies, noting that a life insurance policy is a
financial instrument to be treated like any other asset in a consumer’s
financial plan.
ON MAY 23, 2013, THE TEXAS LEGISLATURE PASSED THE
NATION’S FIRST MEDICAID LIFE SETTLEMENT LAW, giving seniors
the ability to apply proceeds from the sale of their life insurance policy
to long-term care. Using settlements to pay for long-term care could
save states millions of dollars in Medicaid costs per year.
*Sandra Block, January 2013, “Cash From Your Life Insurance, www.Kiplinger.com
LIFE SETTLEMENTS: RESISTANCE – NOW SUPPORT

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LIFE SETTLEMENTS
ARE RECOGNIZED AS A VALUABLE
FINANCIAL PLANNING TOOL BY…

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LARRY GRILL ET AL V. LINCOLN NATIONAL LIFE INSURANCE COMPANY
FAILURE-TO-DISCLOSE
California couple, trustees of the Grills’ estate, filed a lawsuit in California
Federal District alleging that they lost money because an agent of Lincoln
National Life Insurance Co. failed to inform them of the life settlement option.
The Grills’ were struggling to pay premiums on a $7.2 million policy and
were forced to reduce their coverage and face amount to $2 million.
They allege that Lincoln National instructs its agents and independents to
conceal the life settlement option because omitting the information generates
greater profits for the insurance carrier.
HELP YOUR CLIENTS AVOID MISDIRECTION

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² Lifestyle changes make the policy no longer desirable; paying
unnecessary premiums; policy holder is “over-insured” (e.g.,
divorce, bankruptcy).
² Estate changes eliminate the need for a policy (e.g., smaller
estate reduces estate tax to be paid out of death benefits).
² Sale of a business or changes to executive hierarchy (i.e.,
policy was designed to protect company from financial loss).
² LONGEVITY. Liquidity needed to fund long-term care
costs.
PEOPLE SELL FOR MANY REASONS

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A term once used in reference to especially long lived members
of a population.
Now, synonymous with life expectancy.
A recent survey by Pew Research found that 83 percent of
Americans consider their “ideal lifespan” to be 100 years or less.
In addition to quality of life after 100, concerns over longer
lifespans are compounded by the fact that we have less
retirement savings to rely upon.
LONGEVITY: PREPARING FOR A LONGER LIFE
Pew Research Center survey March 21-April 8, 2013: www.pewforum.org/2013/08/06/living-to-120-and beyond.

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There are a wide variety of longevity based financial products,
from life insurance and annuities to life settlements and reverse
mortgages. Life settlements were the first longevity based
financial product of the new generation.
NO ONE WANTS TO OUTLIVE THEIR MONEY, AND LIVING FOREVER
LOSES ITS LUSTER WHEN YOU REALIZE THAT YOU’RE GOING TO
BE SPENDING THE LAST YEARS OF YOUR LIFE STRUGGLING TO
MAKE ENDS MEET.
LONGEVITY CONUNDRUM: WILL RETIREMENT LAST
Conning Research and Consulting, Inc. (2008), Life Settlements, New Challenges to Growth

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² 70% of people at age 65 can expect to pay for some form of
long-term care.
² 69% of people aged 90 or older have a disability.
² 24 million Americans are thrust into the position of full-time caregiver.
² 37% of caregivers quit their job or reduce their hours to care for
someone aged 50 or older.
Longtermcare.gov infographic: It’s Coming, Are You Ready? |
h"p://mkt.medline.com/clinical-­‐blog/files/2013/07/longterm-­‐care_51cc77516d63a_w1800.jpg
US PENSION SYSTEM: It will cost an additional $115 BILLION if the
average US lifespan increases by one year over current projections.
LONG-TERM CARE

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Contrary to the 2010 Conning &
Company Life Settlement report
stating 4 out of 10 seniors let life
insurance policies lapse…
A recent study indicates that
lapsing numbers are more than
50 percent.
SURVEY SAYS: MOST SENIORS LET INSURANCE LAPSE

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² Personal Savings?
² Long-term care insurance?
² Medicaid Spend-Down?
² Other options?
HOW WILL CLIENTS FINANCE THEIR FUTURE?

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Life insurance is a financial tool…a protective blanket.
We bought it to protect our families from financial changes that
they may face upon our demise.
LIFE INSURANCE

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1. Take cash value and cancel their policy.
2. Take a “paid-up” policy for a much smaller amount.
3. Let the cash value pay the premiums for a period of time
and then let the policy lapse.
4. Allow the term policy to expire/lapse without converting the
policy.
MOST OF YOUR CLIENTS
BELIEVE THEY HAVE ONLY FOUR OPTIONS

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ARE CLIENTS PREPARED ‘FINANCIALLY’?
² In 2013 the percentage of Baby Boomers confident in their financial
preparedness for retirement dropped from 44% to 35%.
² Of those calculating a retirement savings goal, 76% are factoring in the
cost of health care.
² One in 10 Boomers prematurely withdrew savings from a retirement plan
during the past year.
² 42% cite economic downturn as a reason for delaying retirement.
² Boomers planning for retirement with the help of a financial
professional are more than twice as likely to be highly confident in
their retirement plans.
http://myirionline.org/docs/default-source/research/boomer-expectations-for-retirement-2014-web-version
It’s time to re-examine financial needs for the long road ahead.

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WHAT’S IN IT FOR PRODUCERS?
*Consult a life settlement professional for state regulations.
² BRING ADDED VALUE TO YOUR CLIENTS: Prevent future unnecessary
premium payments, reduce lapse rates, create new capital to finance
clients’other endeavors.
² STRENGTHEN CLIENT-AGENT RELATIONSHIP: Keeping up to date on
changes in the industry and providing your clientele with complete
information makes you a credible source, taking you from sales
professional to trusted consultant.
² INCREASE ASSETS UNDER MANAGEMENT: Proceeds from a life
settlement are unrestricted*, and can be repurposed to broaden
financial planning strategies and applied to other “commissionable”
products.

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UNDERSTANDING THE POTENTIAL
² The total outstanding dollar
value of life insurance
policies is $27 trillion.1
² It is estimated that 90% of all
life insurance policies lapse.2
² The total market potential for
senior life settlements will
grow from $114 billion in
2014 to more than $140
billion in 2018.3
1. ACLI 2008: 2008 Life Insurers Fact Book
2. Life Insurance Settlement Association: www.thevoiceoftheindustry.com
3. Conning Research & Consulting (2012)
0
50
100
150
200
2014
2015
2016
2017
2018
NET MARKET POTENTIAL
$US BILLIONS FACE VALUE

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*Consult a tax professional with regard to life settlement taxation regulations.*Consult a tax professional with regard to life settlement taxation regulations.
² SENATE BILL S. 2048, introduced by Sen. Robert Casey (D-Penn.) to
clarify the taxation of Life Settlements, is expected to be reintroduced this
year. Until that happens, Revenue Ruling 2009-13 is still in control.
² REVENUE RULING 2009 – 13, The IRS ruled that the basis for a policy
sold by a non-investor (policy holder) is cumulative premiums minus
cumulative cost of insurance (COI) changes.
² RULING DOES NOT DISTINGUISH between life settlements and non-life
settlement transfers of sales and can be confusing for insurers.
² MOST IMPORTANT, FOR INSURED…Instruct your clients to request the
cumulative COI charges from the insurance company. They should not
wait until after the transaction closes.
² MOST IMPORTANT, FOR PRODUCERS…consult your tax professional
to learn more about life settlement taxation.*
Short Answer: Yes, however…
ARE LIFE SETTLEMENT PROCEEDS TAXABLE?

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THE LIFELINE PROGRAM®
² Founded in 1989…We are the oldest, most experienced Life
Settlement provider for more than 24 years – Settled more than $1.7
billion in policies
² Unparalleled industry reputation for quality, thoroughness of
transaction, and transparency
² Providers of customized turnkey solution. Visible or as Invisible as
you need
² Adherence to sound business practices to ensure professional,
private transaction and the proper handling of HIPAA information
² Leading industry resource for the evolved client. First to use social
media and other innovative, interactive tools to educate consumers and
savvy financial professionals on life settlements as an option
² On-site funding entity, Lifeline Capital Management. Proprietary
equity capital enables in-house purchasing
WHO WE ARE…

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WHO WE ARE NOT!
THE LIFELINE PROGRAM®
Lifetime (TV Network): American cable and satellite television channel
Life Alert Emergency Response: Provides services that help elderly
contact emergency services.
Lifeline: Affordable telephone service for income-eligible consumers

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A

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AWARD WINNING & NATIONALLY RECOGNIZED BRANDING*

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CASE STUDIES

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CASE STUDY # 1
PAYOUT TO OWNER: $375,000
INSURED MALE, 80 YEARS OLD
POLICY UNIVERSAL LIFE
YEAR POLICY ISSUED 2008
FACE AMOUNT $2,000,000
CASH VALUE $0
SURRENDER VALUE $0
LIFELINE SETTLEMENT $375,000
RETIRED CORPORATE ATTORNEY WAS OVER-INSURED.
USED PROCEEDS LIFE SETTLEMENT TO CAPITALIZE ON NEW INVESTMENTS
AND VISIT HIS CHILDREN AND THEIR FAMILIES SEVERAL TIMES A YEAR.

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CASE STUDY # 2
PAYOUT TO OWNER: $515,000
INSURED MALE, 73 YEARS OLD
POLICY UNIVERSAL LIFE
YEAR POLICY ISSUED 2003
FACE AMOUNT $2,000,000
CASH VALUE $250,000
SURRENDER VALUE $178,052
LIFELINE SETTLEMENT $515,000
COULDN’T AFFORD TO PAY HIGH PREMIUM; NEARLY $40,000 ANNUALLY
FREE OF PREMIUM BURDEN, INSURED WAS ABLE TO SEEK OUT OTHER
INVESTMENTS THAT WERE BETTER SUITED TO HIS CIRCUMSTANCES.

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CASE STUDY # 3
PAYOUT TO OWNER: $1,440,000
INSURED MALE, 73 YEARS OLD
POLICIES (3) TERM, CONVERTED
TO GUARANTEED
UNIVERSAL LIFE
YEAR POLICY ISSUED 2009
FACE AMOUNT $3,000,000 DEATH BENEFIT
CASH VALUE $7,874
SURRENDER VALUE $0
LIFELINE SETTLEMENT $1,440,000*
*Settlement based on three individual $3 million policies
SUCCESSFUL BUSINESS OWNER WITH THREE TERM POLICIES
WITH MINIMUM CASH VALUE IN HIS POLICIES AND NO SURRENDER VALUE,
THE INSURED USED PROCEEDS FROM LIFE SETTLEMENT TO FUND WIFE’S
CARE AT ALZHEIMERS FACILITY.

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GENERAL PRICING GUIDELINES AND PARAMETERS
On average, entire process can take between 60 and 120 days. Based on Lifeline Program® guidelines.
² Age of insured: 70+
² LE: 24 months – 180 months
• Based on verifiable clinical diagnoses
² Policy face amount: $250K – $10M
• Policies below $250K and above $10M will be reviewed on case-by-case
basis
² Qualified policies include: individual and survivorship universal,
convertible term, whole life, group (must be within conversion
period).
² Must have “A-” or better carrier rating from A.M. Best

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NOW THAT YOU KNOW THE ‘WHAT’ AND ‘WHY’
WHAT’S NEXT?
STEP 1 Run the numbers
STEP 2 Reflect on your potential market
STEP 3 Integrate life settlements into your product mix
STEP 4 Build your own life settlement network

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STEP 1 // RUN THE NUMBERS
Producers can get started with an
estimate of the potential, based on
the current number of clients and
the potentially eligible policies
therein, and by reflecting on the
circumstances of key policyholders.

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STEP 2 // REFLECT ON YOUR POTENTIAL MARKET
Seniors with at least $250,000 in life
insurance coverage are prime
candidates. Recent changes might
make current life insurance policies
unneeded or financially burdensome.
In your next policy review, with your
client, consider a life settlement if the
estimated proceeds outweigh the
need for coverage.

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STEP 3 // INTEGRATE LIFE SETTLEMENTS
INTO YOUR PRODUCT MIX
As with all life insurance
products and services,
producers who decide to learn
more about the life settlement
asset class, increase their
chances of meeting their
business objectives.

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STEP 4 // BUILD YOUR OWN NETWORK
Once you determine that life
settlements are an appropriate
product for your clients, organize
your top-priority client list to
submit applications.
LET’S GET STARTED!
For Producers, life settlements become an important integrated
revenue source. In addition to the trust earned, the process opens
opportunities for other planning products with the same clients. There is
currently limited competition, as most financial professionals are just
awakening to the demographic goldmine of baby boomers and seniors.

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TO LEARN MORE, PLEASE CONTACT
THE LIFELINE PROGRAM
1 800 252 5282