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Life Health > Life Insurance

Life Settlement Group Sets Premium Finance Guidelines

By Staff Writer

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NU Online News Service, April 5, 2005, 6:01 p.m. EDT

A group that represents players in the life insurance policy resale market is putting certain policies off-limits.[@@]

The Life Settlement Institute, Washington, says it supports use of loans to finance some purchases of insurance, such as purchases of life insurance in the business-planning market, but will discourage life settlement companies from buying policies purchased with some new, “non-recourse premium finance programs.”

Those programs may violate insurable interest, usury, life settlement, premium finance, rebating or other insurance and consumer-protection laws, the institute says.

The institute says institute members should not buy policies purchased with loans that have the following characteristics:

- The lender, directly or indirectly, pays the insured or policyowner any amount at time of issuance of the policy to purchase the insured’s unused insurance capacity.

- The lender or any other party will take ownership at policy inception of any portion of the death benefit in excess of the indebtedness.

- The lender or any other party cloaks or otherwise hides its ownership interest at the time of inception of the life insurance policy.

- The policyowner pays the lender at the maturity of the loan more than the principal and interest, in order to keep the policy.

- The lender requires that a policy must be sold in the secondary market to satisfy repayment of the loan.

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