A structured settlement factoring transaction describes the selling of future structured settlement payments (or, more accurately, rights to receive the future structured settlement payments). People who receive structured settlement payments (for example, the payment of personal injury damages over time instead of in a lump sum at settlement) may decide at some point that they need more money in the short term than the periodic payment provides over time. People's reasons are varied but can include unforeseen medical expenses for oneself or a dependent, the need for improved housing or transportation, education expenses and the like. To meet this need, the structured settlement recipient can sell (or, less commonly, encumber) all or part of their future periodic payments for a present lump sum. Structured settlements experienced an explosion in use beginning in the 1980s.[1] The growth is most likely attributable to the favorable federal income tax treatment such settlements receive as a result of the 1982 amendment of the tax code to add § 130.[2] [3] Internal Revenue Code § 130 provides, inter alia, substantial tax incentives to insurance companies that establish “qualified” structured settlements.[4] There are other advantages for the original tort defendant (or casualty insurer) in settling for payments over time, in that they benefit from the time value of money (most demonstrable in the fact that an annuity can be purchased to fund the payment of future periodic payments, and the cost of such annuity is far less than the sum total of all payments to be made over time). Finally, the tort plaintiff also benefits in several ways from a structured settlement, notably in the ability to receive the periodic payments from an annuity that gains investment value over the life of the payments, and the settling plaintiff receives the total payments, including that “inside build-up” value, tax-free.[5]
However, a substantial downside to structured settlements comes from their inherent inflexibility.[6] To take advantage of the tax benefits allotted to defendants who choose to settle cases using structured settlements, the periodic payments must be set up to meet basic requirements [set forth in IRC 130(c)]. Among other things, the payments must be fixed and determinable, and cannot be accelerated, deferred, increased or decreased by the recipient.[7] For many structured settlement recipients, the periodic payment stream is their only asset. Therefore, over time and as recipients’ personal situations change in ways unpredicted at the settlement table, demand for liquidity options rises. To offset the liquidity issue, most structured settlement recipients, as a part of their total settlement, will receive an immediate sum to be invested to meet the needs not best addressed through the use of a structured settlement. Beginning in the late 1980s, a few small financial institutions started to meet this demand and offer new flexibility for structured settlement payees.[8] In April 2009, financial writer Suze Orman wrote in a syndicated column [1] that selling future structured settlement payments "is tempting but it's typically not smart."
Thursday, August 20, 2009
Structured settlement
A structured settlement is a financial or insurance arrangement, including periodic payments, that a claimant accepts to resolve a personal injury tort claim or to compromise a statutory periodic payment obligation. Structured settlements were first utilized in Canada and the United States during the 1970s as an alternative to lump sum settlements. Structured settlements are now part of the statutory tort law of several common law countries including Australia, Canada, England and the United States. Although some uniformity exists, each of these countries has its own definitions, rules and standards for structured settlements. Structured settlements may include income tax and spendthrift requirements as well as benefits. Structured settlement payments are sometimes called “periodic payments.” A structured settlement incorporated into a trial judgment is called a “periodic payment judgment."
Structured settlement factoring transaction
A structured settlement factoring transaction describes the selling of future structured settlement payments (or, more accurately, rights to receive the future structured settlement payments). People who receive structured settlement payments (for example, the payment of personal injury damages over time instead of in a lump sum at settlement) may decide at some point that they need more money in the short term than the periodic payment provides over time. People's reasons are varied but can include unforeseen medical expenses for oneself or a dependent, the need for improved housing or transportation, education expenses and the like. To meet this need, the structured settlement recipient can sell (or, less commonly, encumber) all or part of their future periodic payments for a present lump sum.
Banknotes of the pound sterling
Sterling banknotes are the banknotes in circulation in the British Islands (encompassing the United Kingdom and the British Crown dependencies), denominated in pounds sterling (symbol: £; ISO 4217 currency code GBP). One pound is equivalent to 100 pence.
The pound is the official currency of the United Kingdom and the Crown dependencies of Britain. Three British Overseas Territories also have currencies called pounds which are at par with the pound sterling.
In most countries of the world the issue of banknotes is handled exclusively by a single central bank or government, but in the United Kingdom seven retail banks have the right to print their own banknotes in addition to the Bank of England; Sterling banknote issue is thus not automatically tied in with one national identity or the activity of the state. The arrangements in the UK are unusual but not unique, as a comparable system is used in Hong Kong, where three banks issue their own banknotes in addition to the Hong Kong government.
In the Crown dependencies and Overseas Territories, the dependency or territorial governments are also licensed to issue their own pound sterling banknotes.
The pound is the official currency of the United Kingdom and the Crown dependencies of Britain. Three British Overseas Territories also have currencies called pounds which are at par with the pound sterling.
In most countries of the world the issue of banknotes is handled exclusively by a single central bank or government, but in the United Kingdom seven retail banks have the right to print their own banknotes in addition to the Bank of England; Sterling banknote issue is thus not automatically tied in with one national identity or the activity of the state. The arrangements in the UK are unusual but not unique, as a comparable system is used in Hong Kong, where three banks issue their own banknotes in addition to the Hong Kong government.
In the Crown dependencies and Overseas Territories, the dependency or territorial governments are also licensed to issue their own pound sterling banknotes.
United States dollar
The United States dollar (sign: $; code: USD) is the unit of currency of the United States. The U.S. dollar is normally abbreviated as the dollar sign, $, or as USD or US$ to distinguish it from other dollar-denominated currencies and from others that use the $ symbol. It is divided into 100 cents (200 half-cents prior to 1857).
The U.S. dollar is the currency most used in international transactions.[1] Several countries use it as their official currency, and in many others it is the de facto currency.[2]
The U.S. dollar is the currency most used in international transactions.[1] Several countries use it as their official currency, and in many others it is the de facto currency.[2]
Foreign exchange reserves
Foreign exchange reserves (also called Forex reserves) in a strict sense are only the foreign currency deposits and bonds held by central banks and monetary authorities. However, the term in popular usage commonly includes foreign exchange and gold, SDRs and IMF reserve positions. This broader figure is more readily available, but it is more accurately termed official international reserves or international reserves. These are assets of the central bank held in different reserve currencies, mostly the US dollar, and to a lesser extent the euro, the UK pound, and the Japanese yen, and used to back its liabilities, e.g. the local currency issued, and the various bank reserves deposited with the central bank, by the government or financial institutions.
Currency
In economics, the term currency can refer either to a particular currency, for example the US dollar, or to the coins and banknotes of a particular currency, which comprise the physical aspects of a nation's money supply. The other part of a nation's money supply consists of money deposited in banks (sometimes called deposit money), ownership of which can be transferred by means of cheques or other forms of money transfer such as credit and debit cards. Deposit money and currency are money in the sense that both are acceptable as a means of exchange, but money need not necessarily be currency.[1]
Historically, money in the form of currency has predominated. Usually (gold or silver) coins of intrinsic value commensurate with the monetary unit (commodity money), have been the norm. By contrast, modern currency, as fiat money, is intrinsically worthless. The prevalence of one type of currency over another in commodity money systems has arisen, usually when a government designates through decrees, that only particular monetary units shall be accepted in payment for taxes.
Historically, money in the form of currency has predominated. Usually (gold or silver) coins of intrinsic value commensurate with the monetary unit (commodity money), have been the norm. By contrast, modern currency, as fiat money, is intrinsically worthless. The prevalence of one type of currency over another in commodity money systems has arisen, usually when a government designates through decrees, that only particular monetary units shall be accepted in payment for taxes.
Costs, insurability, and underwriting
The insurer (the life insurance company) calculates the policy prices with intent to fund claims to be paid and administrative costs, and to make a profit. The cost of insurance is determined using mortality tables calculated by actuaries. Actuaries are professionals who employ actuarial science, which is based in mathematics (primarily probability and statistics). Mortality tables are statistically-based tables showing expected annual mortality rates. It is possible to derive life expectancy estimates from these mortality assumptions. Such estimates can be important in taxation regulation.[1][2]
The three main variables in a mortality table have been age, gender, and use of tobacco. More recently in the US, preferred class specific tables were introduced. The mortality tables provide a baseline for the cost of insurance. In practice, these mortality tables are used in conjunction with the health and family history of the individual applying for a policy in order to determine premiums and insurability. Mortality tables currently in use by life insurance companies in the United States are individually modified by each company using pooled industry experience studies as a starting point. In the 1980s and 90's the SOA 1975-80 Basic Select & Ultimate tables were the typical reference points, while the 2001 VBT and 2001 CSO tables were published more recently. The newer tables include separate mortality tables for smokers and non-smokers and the CSO tables include separate tables for preferred classes. [3]
Recent US select mortality tables predict that roughly 0.35 in 1,000 non-smoking males aged 25 will die during the first year of coverage after underwriting.[2] Mortality approximately doubles for every extra ten years of age so that the mortality rate in the first year for underwritten non-smoking men is about 2.5 in 1,000 people at age 65.[3] Compare this with the US population male mortality rates of 1.3 per 1,000 at age 25 and 19.3 at age 65 (without regard to health or smoking status).[4]
The mortality of underwritten persons rises much more quickly than the general population. At the end of 10 years the mortality of that 25 year-old, non-smoking male is 0.66/1000/year. Consequently, in a group of one thousand 25 year old males with a $100,000 policy, all of average health, a life insurance company would have to collect approximately $50 a year from each of a large group to cover the relatively few expected claims. (0.35 to 0.66 expected deaths in each year x $100,000 payout per death = $35 per policy). Administrative and sales commissions need to be accounted for in order for this to make business sense. A 10 year policy for a 25 year old non-smoking male person with preferred medical history may get offers as low as $90 per year for a $100,000 policy in the competitive US life insurance market.
The insurance company receives the premiums from the policy owner and invests them to create a pool of money from which it can pay claims and finance the insurance company's operations. Contrary to popular belief, the majority of the money that insurance companies make comes directly from premiums paid, as money gained through investment of premiums can never, in even the most ideal market conditions, vest enough money per year to pay out claims.[citation needed] Rates charged for life insurance increase with the insurer's age because, statistically, people are more likely to die as they get older.
Given that adverse selection can have a negative impact on the insurer's financial situation, the insurer investigates each proposed insured individual unless the policy is below a company-established minimum amount, beginning with the application process. Group Insurance policies are an exception.
The three main variables in a mortality table have been age, gender, and use of tobacco. More recently in the US, preferred class specific tables were introduced. The mortality tables provide a baseline for the cost of insurance. In practice, these mortality tables are used in conjunction with the health and family history of the individual applying for a policy in order to determine premiums and insurability. Mortality tables currently in use by life insurance companies in the United States are individually modified by each company using pooled industry experience studies as a starting point. In the 1980s and 90's the SOA 1975-80 Basic Select & Ultimate tables were the typical reference points, while the 2001 VBT and 2001 CSO tables were published more recently. The newer tables include separate mortality tables for smokers and non-smokers and the CSO tables include separate tables for preferred classes. [3]
Recent US select mortality tables predict that roughly 0.35 in 1,000 non-smoking males aged 25 will die during the first year of coverage after underwriting.[2] Mortality approximately doubles for every extra ten years of age so that the mortality rate in the first year for underwritten non-smoking men is about 2.5 in 1,000 people at age 65.[3] Compare this with the US population male mortality rates of 1.3 per 1,000 at age 25 and 19.3 at age 65 (without regard to health or smoking status).[4]
The mortality of underwritten persons rises much more quickly than the general population. At the end of 10 years the mortality of that 25 year-old, non-smoking male is 0.66/1000/year. Consequently, in a group of one thousand 25 year old males with a $100,000 policy, all of average health, a life insurance company would have to collect approximately $50 a year from each of a large group to cover the relatively few expected claims. (0.35 to 0.66 expected deaths in each year x $100,000 payout per death = $35 per policy). Administrative and sales commissions need to be accounted for in order for this to make business sense. A 10 year policy for a 25 year old non-smoking male person with preferred medical history may get offers as low as $90 per year for a $100,000 policy in the competitive US life insurance market.
The insurance company receives the premiums from the policy owner and invests them to create a pool of money from which it can pay claims and finance the insurance company's operations. Contrary to popular belief, the majority of the money that insurance companies make comes directly from premiums paid, as money gained through investment of premiums can never, in even the most ideal market conditions, vest enough money per year to pay out claims.[citation needed] Rates charged for life insurance increase with the insurer's age because, statistically, people are more likely to die as they get older.
Given that adverse selection can have a negative impact on the insurer's financial situation, the insurer investigates each proposed insured individual unless the policy is below a company-established minimum amount, beginning with the application process. Group Insurance policies are an exception.
The use of high leverage
By offering high leverage, the market maker encourages traders to trade extremely large positions. This increases the trading volume cleared by the market maker and increases his profits, but increases the risk that the trader will receive a margin call. While professional currency dealers (banks, hedge funds) never use more than 10:1 leverage, retail clients are generally offered leverage between 50:1 and 200:1[2].
A self-regulating body for the foreign exchange market, the National Futures Association, warns traders in a forex training presentation of the risk in trading currency. “As stated at the beginning of this program, off-exchange foreign currency trading carries a high level of risk and may not be suitable for all customers. The only funds that should ever be used to speculate in foreign currency trading, or any type of highly speculative investment, are funds that represent risk capital; in other words, funds you can afford to lose without affecting your financial situation.“ [17]
A self-regulating body for the foreign exchange market, the National Futures Association, warns traders in a forex training presentation of the risk in trading currency. “As stated at the beginning of this program, off-exchange foreign currency trading carries a high level of risk and may not be suitable for all customers. The only funds that should ever be used to speculate in foreign currency trading, or any type of highly speculative investment, are funds that represent risk capital; in other words, funds you can afford to lose without affecting your financial situation.“ [17]
Not beating the market
The foreign exchange market is a zero sum game[7] in which there are many experienced well-capitalized professional traders (e.g. working for banks) who can devote their attention full time to trading. An inexperienced retail trader will have a significant information disadvantage compared to these traders.
Although it is possible for a few experts to successfully arbitrage the market for an unusually large return, this does not mean that a larger number could earn the same returns even given the same tools, techniques and data sources. This is because the arbitrages are essentially drawn from a pool of finite size; although information about how to capture arbitrages is a nonrival good, the arbritrages themselves are a rival good. (To draw an analogy, the total amount of buried treasure on an island is the same, regardless of how many treasure hunters have bought copies of the treasure map.)
Retail traders are - almost by definition - undercapitalized. Thus they are subject to the problem of gambler's ruin. In a fair game (one with no information advantages) between two players that continues until one trader goes bankrupt, the player with the lower amount of capital has a higher probability of going bankrupt first. Since the retail speculator is effectively playing against the market as a whole - which has nearly infinite capital - he will almost certainly go bankrupt.
The retail trader always pays the bid/ask spread which makes his odds of winning less than those of a fair game. Additional costs may include margin interest, or if a spot position is kept open for more than one day the trade may be "resettled" each day, each time costing the full bid/ask spread.
According to the Wall Street Journal (Currency Markets Draw Speculation, Fraud July 26, 2005) "Even people running the trading shops warn clients against trying to time the market. 'If 15% of day traders are profitable,' says Drew Niv, chief executive of FXCM, 'I'd be surprised.' "[15]
Paul Belogour, the Managing Director of a Boston based retail forex trader, was quoted by the Financial Times as saying, "Trading foreign exchange is an excellent way for investors to find out how tough the markets really are. But I say to customers: if this is money you have worked hard for – that you cannot afford to lose – never, never invest in foreign exchange." [16]
Although it is possible for a few experts to successfully arbitrage the market for an unusually large return, this does not mean that a larger number could earn the same returns even given the same tools, techniques and data sources. This is because the arbitrages are essentially drawn from a pool of finite size; although information about how to capture arbitrages is a nonrival good, the arbritrages themselves are a rival good. (To draw an analogy, the total amount of buried treasure on an island is the same, regardless of how many treasure hunters have bought copies of the treasure map.)
Retail traders are - almost by definition - undercapitalized. Thus they are subject to the problem of gambler's ruin. In a fair game (one with no information advantages) between two players that continues until one trader goes bankrupt, the player with the lower amount of capital has a higher probability of going bankrupt first. Since the retail speculator is effectively playing against the market as a whole - which has nearly infinite capital - he will almost certainly go bankrupt.
The retail trader always pays the bid/ask spread which makes his odds of winning less than those of a fair game. Additional costs may include margin interest, or if a spot position is kept open for more than one day the trade may be "resettled" each day, each time costing the full bid/ask spread.
According to the Wall Street Journal (Currency Markets Draw Speculation, Fraud July 26, 2005) "Even people running the trading shops warn clients against trying to time the market. 'If 15% of day traders are profitable,' says Drew Niv, chief executive of FXCM, 'I'd be surprised.' "[15]
Paul Belogour, the Managing Director of a Boston based retail forex trader, was quoted by the Financial Times as saying, "Trading foreign exchange is an excellent way for investors to find out how tough the markets really are. But I say to customers: if this is money you have worked hard for – that you cannot afford to lose – never, never invest in foreign exchange." [16]
Forex scam
A forex (or foreign exchange) scam is any trading scheme used to defraud traders by convincing them that they can expect to gain a high profit by trading in the foreign exchange market. Currency trading "has become the fraud du jour" as of early 2008, according to Michael Dunn of the U.S. Commodity Futures Trading Commission. [1] But "the market has long been plagued by swindlers preying on the gullible," according to the New York Times [2]. "The average individual foreign-exchange-trading victim loses about $15,000, according to CFTC records" according to The Wall Street Journal. [3] The North American Securities Administrators Association says that "off-exchange forex trading by retail investors is at best extremely risky, and at worst, outright fraud." [4]
“In a typical case, investors may be promised tens of thousands of dollars in profits in just a few weeks or months, with an initial investment of only $5,000. Often, the investor’s money is never actually placed in the market through a legitimate dealer, but simply diverted – stolen – for the personal benefit of the con artists.”[5]
In August, 2008 the CFTC set up a special task force to deal with growing foreign exchange fraud.”[6]
The forex market is a zero-sum game[7] , meaning that whatever one trader gains, another loses, except that brokerage commissions and other transaction costs are subtracted from the results of all traders, technically making forex a "negative-sum" game.
These scams might include churning of customer accounts for the purpose of generating commissions, selling software that is supposed to guide the customer to large profits, [8] improperly managed "managed accounts", [9] false advertising, [10] Ponzi schemes and outright fraud. [4] [11] It also refers to any retail forex broker who indicates that trading foreign exchange is a low risk, high profit investment. [12]
The U.S. Commodity Futures Trading Commission (CFTC), which loosely regulates the foreign exchange market in the United States, has noted an increase in the amount of unscrupulous activity in the non-bank foreign exchange industry.[13]
An official of the National Futures Association was quoted [14] as saying, "Retail forex trading has increased dramatically over the past few years. Unfortunately, the amount of forex fraud has also increased dramatically..." Between 2001 and 2006 the U.S. Commodity Futures Trading Commission has prosecuted more than 80 cases involving the defrauding of more than 23,000 customers who lost $350 million. From 2001 to 2007, about 26,000 people lost $460 million in forex frauds. [1] CNN quoted Godfried De Vidts, President of the Financial Markets Association, a European body, as saying, "Banks have a duty to protect their customers and they should make sure customers understand what they are doing. Now if people go online, on non-bank portals, how is this control being done?"
“In a typical case, investors may be promised tens of thousands of dollars in profits in just a few weeks or months, with an initial investment of only $5,000. Often, the investor’s money is never actually placed in the market through a legitimate dealer, but simply diverted – stolen – for the personal benefit of the con artists.”[5]
In August, 2008 the CFTC set up a special task force to deal with growing foreign exchange fraud.”[6]
The forex market is a zero-sum game[7] , meaning that whatever one trader gains, another loses, except that brokerage commissions and other transaction costs are subtracted from the results of all traders, technically making forex a "negative-sum" game.
These scams might include churning of customer accounts for the purpose of generating commissions, selling software that is supposed to guide the customer to large profits, [8] improperly managed "managed accounts", [9] false advertising, [10] Ponzi schemes and outright fraud. [4] [11] It also refers to any retail forex broker who indicates that trading foreign exchange is a low risk, high profit investment. [12]
The U.S. Commodity Futures Trading Commission (CFTC), which loosely regulates the foreign exchange market in the United States, has noted an increase in the amount of unscrupulous activity in the non-bank foreign exchange industry.[13]
An official of the National Futures Association was quoted [14] as saying, "Retail forex trading has increased dramatically over the past few years. Unfortunately, the amount of forex fraud has also increased dramatically..." Between 2001 and 2006 the U.S. Commodity Futures Trading Commission has prosecuted more than 80 cases involving the defrauding of more than 23,000 customers who lost $350 million. From 2001 to 2007, about 26,000 people lost $460 million in forex frauds. [1] CNN quoted Godfried De Vidts, President of the Financial Markets Association, a European body, as saying, "Banks have a duty to protect their customers and they should make sure customers understand what they are doing. Now if people go online, on non-bank portals, how is this control being done?"
Parties to contract
There is a difference between the insured and the policy owner (policy holder), although the owner and the insured are often the same person. For example, if Joe buys a policy on his own life, he is both the owner and the insured. But if Jane, his wife, buys a policy on Joe's life, she is the owner and he is the insured. The policy owner is the guarantee and he or she will be the person who will pay for the policy. The insured is a participant in the contract, but not necessarily a party to it.
The beneficiary receives policy proceeds upon the insured's death. The owner designates the beneficiary, but the beneficiary is not a party to the policy. The owner can change the beneficiary unless the policy has an irrevocable beneficiary designation. With an irrevocable beneficiary, that beneficiary must agree to any beneficiary changes, policy assignments, or cash value borrowing.
In cases where the policy owner is not the insured (also referred to as the celui qui vit or CQV), insurance companies have sought to limit policy purchases to those with an "insurable interest" in the CQV. For life insurance policies, close family members and business partners will usually be found to have an insurable interest. The "insurable interest" requirement usually demonstrates that the purchaser will actually suffer some kind of loss if the CQV dies. Such a requirement prevents people from benefiting from the purchase of purely speculative policies on people they expect to die. With no insurable interest requirement, the risk that a purchaser would murder the CQV for insurance proceeds would be great. In at least one case, an insurance company which sold a policy to a purchaser with no insurable interest (who later murdered the CQV for the proceeds), was found liable in court for contributing to the wrongful death of the victim (Liberty National Life v. Weldon, 267 Ala.171 (1957)).
The beneficiary receives policy proceeds upon the insured's death. The owner designates the beneficiary, but the beneficiary is not a party to the policy. The owner can change the beneficiary unless the policy has an irrevocable beneficiary designation. With an irrevocable beneficiary, that beneficiary must agree to any beneficiary changes, policy assignments, or cash value borrowing.
In cases where the policy owner is not the insured (also referred to as the celui qui vit or CQV), insurance companies have sought to limit policy purchases to those with an "insurable interest" in the CQV. For life insurance policies, close family members and business partners will usually be found to have an insurable interest. The "insurable interest" requirement usually demonstrates that the purchaser will actually suffer some kind of loss if the CQV dies. Such a requirement prevents people from benefiting from the purchase of purely speculative policies on people they expect to die. With no insurable interest requirement, the risk that a purchaser would murder the CQV for insurance proceeds would be great. In at least one case, an insurance company which sold a policy to a purchaser with no insurable interest (who later murdered the CQV for the proceeds), was found liable in court for contributing to the wrongful death of the victim (Liberty National Life v. Weldon, 267 Ala.171 (1957)).
Life insurance or life assurance
Life insurance or life assurance is a contract between the policy owner and the insurer, where the insurer agrees to pay a sum of money upon the occurrence of the insured individual's or individuals' death or other event, such as terminal illness or critical illness. In return, the policy owner agrees to pay a stipulated amount called a premium at regular intervals or in lump sums. There may be designs in some countries where bills and death expenses plus catering for after funeral expenses should be included in Policy Premium. In the United States, the predominant form simply specifies a lump sum to be paid on the insured's demise.
As with most insurance policies, life insurance is a contract between the insurer and the policy owner whereby a benefit is paid to the designated beneficiaries if an insured event occurs which is covered by the policy.
The value for the policyholder is derived, not from an actual claim event, rather it is the value derived from the 'peace of mind' experienced by the policyholder, due to the negating of adverse financial consequences caused by the death of the Life Assured.
To be a life policy the insured event must be based upon the lives of the people named in the policy.
Insured events that may be covered include:
Serious illness
Life policies are legal contracts and the terms of the contract describe the limitations of the insured events. Specific exclusions are often written into the contract to limit the liability of the insurer; for example claims relating to suicide, fraud, war, riot and civil commotion.
Life-based contracts tend to fall into two major categories:
Protection policies - designed to provide a benefit in the event of specified event, typically a lump sum payment. A common form of this design is term insurance.
Investment policies - where the main objective is to facilitate the growth of capital by regular or single premiums. Common forms (in the US anyway) are whole life, universal life and variable life policies.
As with most insurance policies, life insurance is a contract between the insurer and the policy owner whereby a benefit is paid to the designated beneficiaries if an insured event occurs which is covered by the policy.
The value for the policyholder is derived, not from an actual claim event, rather it is the value derived from the 'peace of mind' experienced by the policyholder, due to the negating of adverse financial consequences caused by the death of the Life Assured.
To be a life policy the insured event must be based upon the lives of the people named in the policy.
Insured events that may be covered include:
Serious illness
Life policies are legal contracts and the terms of the contract describe the limitations of the insured events. Specific exclusions are often written into the contract to limit the liability of the insurer; for example claims relating to suicide, fraud, war, riot and civil commotion.
Life-based contracts tend to fall into two major categories:
Protection policies - designed to provide a benefit in the event of specified event, typically a lump sum payment. A common form of this design is term insurance.
Investment policies - where the main objective is to facilitate the growth of capital by regular or single premiums. Common forms (in the US anyway) are whole life, universal life and variable life policies.
Whole of Life Assurance
Unlike either Term Assurance or Endowment Assurance, a Whole of Life Assurance is a permanent policy, i.e. it lasts for the whole of one’s life.
Premiums are paid right up until death but there can be Whole Life contracts called Limited Premium Whole Life where premiums cease at a specific age, usually 65 or 80, although the contract itself continues until death.
Since there is no need to fund at quite so high a level with Whole Life as there is with the Endowment, because the sum assured is paid out on only one eventuality and not two, the investment element in the premium is less than in the Endowment premium.
The variations on Whole Life are the same as on Endowment, i.e. Non-Profit, With-Profit and Unit-Linked.
Premiums are paid right up until death but there can be Whole Life contracts called Limited Premium Whole Life where premiums cease at a specific age, usually 65 or 80, although the contract itself continues until death.
Since there is no need to fund at quite so high a level with Whole Life as there is with the Endowment, because the sum assured is paid out on only one eventuality and not two, the investment element in the premium is less than in the Endowment premium.
The variations on Whole Life are the same as on Endowment, i.e. Non-Profit, With-Profit and Unit-Linked.
Endowment Assurance
An endowment is basically an investment policy. The premium contains all three factors - ‘protection’, ‘expenses’ and ‘investment’ but it is the investment content which makes up most of the premium.
Endowment Assurance works in roughly the same way as the Term Assurance, i.e. if death occurs within a chosen term then the lump sum is paid out. However, where the Endowment differs is that at the end of the contract, (if the client has not died), a lump sum is also paid out. Thus it is certain that at some point in time the lump sum will be paid. To fund this certain payment, the life office must invest money over the term of the policy - the portion they invest is the investment portion of the premium.
Since there is this investment element in the premium, should the policy be stopped for any reason before the end of the term, except in the case of death, then a cash payment will be made of a proportion of the investment elements paid in. This is called a surrender (or encashment value).
Should the surrender occur in the early years of the policy life, the value of it will be very small compared with what has been paid in premiums. This is so because the life office has certain expenses to meet, e.g., The cost of setting up and issuing the policy document and salary plus commission to the salesman. The life office aims to recoup these expenses by taking back a little of each premium, i.e. the expense loading.
Endowment Assurance works in roughly the same way as the Term Assurance, i.e. if death occurs within a chosen term then the lump sum is paid out. However, where the Endowment differs is that at the end of the contract, (if the client has not died), a lump sum is also paid out. Thus it is certain that at some point in time the lump sum will be paid. To fund this certain payment, the life office must invest money over the term of the policy - the portion they invest is the investment portion of the premium.
Since there is this investment element in the premium, should the policy be stopped for any reason before the end of the term, except in the case of death, then a cash payment will be made of a proportion of the investment elements paid in. This is called a surrender (or encashment value).
Should the surrender occur in the early years of the policy life, the value of it will be very small compared with what has been paid in premiums. This is so because the life office has certain expenses to meet, e.g., The cost of setting up and issuing the policy document and salary plus commission to the salesman. The life office aims to recoup these expenses by taking back a little of each premium, i.e. the expense loading.
There are THREE basic forms of LIFE ASSURANCE.
They are:-
Term Assurance
Endowment Assurance
Whole of Life Assurance
Term Assurance
Term Assurance is the least costly of the three basic types. Term Assurance Premiums do not contain any investment element. The premium merely covers the risk of death and the expenses of the life office.
In return for a series of regular premiums a Term Assurance policy will pay out a lump sum of money if death occurs during a chosen term of years. If the policyholder does not die during the term but lives to the end of the term the contract ceases and no money is due to the client nor is there any return of premiums.
Term Assurance is like car insurance - if you don’t have a claim your premium is “lost”.
The client simply pays to cover the risk of his/her dying within a certain term.
Term Assurance
Endowment Assurance
Whole of Life Assurance
Term Assurance
Term Assurance is the least costly of the three basic types. Term Assurance Premiums do not contain any investment element. The premium merely covers the risk of death and the expenses of the life office.
In return for a series of regular premiums a Term Assurance policy will pay out a lump sum of money if death occurs during a chosen term of years. If the policyholder does not die during the term but lives to the end of the term the contract ceases and no money is due to the client nor is there any return of premiums.
Term Assurance is like car insurance - if you don’t have a claim your premium is “lost”.
The client simply pays to cover the risk of his/her dying within a certain term.
Life Assurance Company was the vision of a handful of Oklahoma insurance and financial professionals
Life Assurance Company was the vision of a handful of Oklahoma insurance and financial professionals who believed that business would respond to an aggressive, people-oriented company dedicated to providing inventive and fresh approaches to insurance coverage.
LAC is different from its competitors in numerous ways, not the least of which is its focus on a specialized niche market.
Only at LAC do you receive these special benefits:
Oklahoma domestic life and health insurance since 1978.
Internet presentation system.
Video presentation plan.
Regular on-site visits by company officials to assist you with administrative questions, communications and paper work flow.
Additionally, you can rest assured that complete access is always available to:
On-site training to improve knowledge of products and benefits.
Unique common stock participation plan.
The experts at Life Assurance Company stand ready to assist you in minimizing risk and maximizing fee income. Call or email us and a representative will contact you promptly to explain how we can work with you to help build your business.
Quality products, Quality people, and Quality service are the hallmarks of LAC. Let us have the opportunity to work for you.
LAC is different from its competitors in numerous ways, not the least of which is its focus on a specialized niche market.
Only at LAC do you receive these special benefits:
Oklahoma domestic life and health insurance since 1978.
Internet presentation system.
Video presentation plan.
Regular on-site visits by company officials to assist you with administrative questions, communications and paper work flow.
Additionally, you can rest assured that complete access is always available to:
On-site training to improve knowledge of products and benefits.
Unique common stock participation plan.
The experts at Life Assurance Company stand ready to assist you in minimizing risk and maximizing fee income. Call or email us and a representative will contact you promptly to explain how we can work with you to help build your business.
Quality products, Quality people, and Quality service are the hallmarks of LAC. Let us have the opportunity to work for you.
Sponsorship, Philanthropy and Awards
In 2008, Sun Life received the following awards:
Named one of the 50 Best Corporate Citizens in Canada [5]
Sun Life’s China operations recognized for exceptional corporate social responsibility
Insurance and Financial Communicators Association Award of Excellence for the Canadian Sun Life My Financial Plan website
The Canadian Children’s Aid Foundation's Corporate Award recognizing more than 25 years of support, including sponsorship of The Sun Life Financial Health and Well-Being Fund.
In Canada, The Globe and Mail Business for the Arts Award
Senior Vice-President Gary Comerford received the 2008 President’s Award from the Indo-Canada Chamber of Commerce
Sun Life named Child-Friendly Company in the Philippines
CFO, Rick McKenney, named one of Canada's Top 40 under 40
Pankaj Razdan, Deputy Chief Executive, Financial Services for Aditya Birla Group, was named to Indian business magazine, Business Today's league of extraordinary managers as one of the top 25 under 40 leaders in India.
Sun Life’s Hong Kong operations received Lipper Fund Awards
Birla Sun Life awarded Mutual Fund House of the Year for 2007 in India
Sun Life’s Hong Kong operations named “Caring Company” for sustainable commitment in good corporate citizenship.
Top 50 Best Companies to Work For in Ireland
Among other contributions in 2008, Sun Life provided financial and other support to the following organizations and initiatives:
The Canadian Heart and Stroke Foundation’s “Restart a Heart, Restart a Life Campaign”
ORBIS Canada’s India Childhood Blindness Initiative
Canada’s National Ballet School
Canadian Hearing Society’s Doctor Referral Program
Vancouver International Children’s Festival’s Adopt a Class program
West Park Healthcare Centre’s Spasticity Program
Segal Centre for Performing Arts at the Saidye
University of New Brunswick and Sun Life Financial Fitness and Lifestyle Assessment Centre
Saint Elizabeth Health Care’s First Nations communities program
Montreal Heart Institute
Toronto's Soulpepper Theatre Company Rush Program
Disaster relief work in China
ONE NIGHT LIVE in support of Sunnybrook Foundation [6]
Named one of the 50 Best Corporate Citizens in Canada [5]
Sun Life’s China operations recognized for exceptional corporate social responsibility
Insurance and Financial Communicators Association Award of Excellence for the Canadian Sun Life My Financial Plan website
The Canadian Children’s Aid Foundation's Corporate Award recognizing more than 25 years of support, including sponsorship of The Sun Life Financial Health and Well-Being Fund.
In Canada, The Globe and Mail Business for the Arts Award
Senior Vice-President Gary Comerford received the 2008 President’s Award from the Indo-Canada Chamber of Commerce
Sun Life named Child-Friendly Company in the Philippines
CFO, Rick McKenney, named one of Canada's Top 40 under 40
Pankaj Razdan, Deputy Chief Executive, Financial Services for Aditya Birla Group, was named to Indian business magazine, Business Today's league of extraordinary managers as one of the top 25 under 40 leaders in India.
Sun Life’s Hong Kong operations received Lipper Fund Awards
Birla Sun Life awarded Mutual Fund House of the Year for 2007 in India
Sun Life’s Hong Kong operations named “Caring Company” for sustainable commitment in good corporate citizenship.
Top 50 Best Companies to Work For in Ireland
Among other contributions in 2008, Sun Life provided financial and other support to the following organizations and initiatives:
The Canadian Heart and Stroke Foundation’s “Restart a Heart, Restart a Life Campaign”
ORBIS Canada’s India Childhood Blindness Initiative
Canada’s National Ballet School
Canadian Hearing Society’s Doctor Referral Program
Vancouver International Children’s Festival’s Adopt a Class program
West Park Healthcare Centre’s Spasticity Program
Segal Centre for Performing Arts at the Saidye
University of New Brunswick and Sun Life Financial Fitness and Lifestyle Assessment Centre
Saint Elizabeth Health Care’s First Nations communities program
Montreal Heart Institute
Toronto's Soulpepper Theatre Company Rush Program
Disaster relief work in China
ONE NIGHT LIVE in support of Sunnybrook Foundation [6]
Sunday, August 16, 2009
Permanent Life Insurance
Permanent policies can provide lifetime protection. There are several different types of permanent policies:
Universal Life Insurance
Universal life insurance can help meet the needs of people who desire long-term death benefit protection with a flexible premium structure. Learn more about our products with a potential to accumulate non-guaranteed tax-deferred cash value.
Variable Life Insurance
Variable life insurance offers a choice of death benefit options and a potential to accumulate non-guaranteed tax-deferred cash value that fluctuates based on the performance of underlying investment options that you choose. Learn more about our products.
> View Variable Life Insurance Prospectus and Performance.
Universal Life Insurance
Universal life insurance can help meet the needs of people who desire long-term death benefit protection with a flexible premium structure. Learn more about our products with a potential to accumulate non-guaranteed tax-deferred cash value.
Variable Life Insurance
Variable life insurance offers a choice of death benefit options and a potential to accumulate non-guaranteed tax-deferred cash value that fluctuates based on the performance of underlying investment options that you choose. Learn more about our products.
> View Variable Life Insurance Prospectus and Performance.
Life Assurance
An important part of a sound financial plan, life insurance from The Prudential Insurance Company of America and its affiliates provides a valuable death benefit to your beneficiaries upon your death. Your beneficiaries can then use this money to replace some of the income you would have earned or to help pay off debts or other expenses.
The two types of life insurance are term and permanent. The one that's right for you depends on many factors, including your budget, the amount of coverage you need, and the length of time you'd like the coverage to last.
Term Life Insurance
Term policies can help meet a wide variety of business and personal needs and often provide the most coverage for your premium dollar for set periods of time. Whether you want to supplement your existing coverage or simply purchase insurance to meet a specific need, our term policies have the flexibility to help meet your needs. Learn more about our products.
The two types of life insurance are term and permanent. The one that's right for you depends on many factors, including your budget, the amount of coverage you need, and the length of time you'd like the coverage to last.
Term Life Insurance
Term policies can help meet a wide variety of business and personal needs and often provide the most coverage for your premium dollar for set periods of time. Whether you want to supplement your existing coverage or simply purchase insurance to meet a specific need, our term policies have the flexibility to help meet your needs. Learn more about our products.
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