Life Settlements

Capital

The money or financial assets to operate a business

Nonconforming Contract

A contract that does not follow state guidelines and provisions

Material Information

Information that may alter either party's decisions regarding a contract

Rescission

An action that takes back, cancels, or nullifies

Health Insurance Portability and Accountability Act (HIPAA)

Protects individual's health information and sets standards for privacy and security of that informaton

Financing Transaction

Takes place when a licensed settlement provider obtains funds from the financing entity.

The person who, for compensation, solicits, negotiates, or offers to negotiate life settlement contracts is the

(A) Life settlement intermediary (B) Policyowner (C) Life settlement broker * (D) Life settlement provider

Life Expectancy

An important concept in life settlement contracts. It refers to a calculation based on the average number of months the insured is projected to live due to medical history and mortality factors.

Accredited Investor

An investor whose net worth is in excess of $1 Million, or a corporation with assets in excess of $5 Million

Disclosure

Information revealed so someone can make an intelligent and educated decision

Which of the following best defines the owner of a life settlement contract?

(A) A fiduciary for the contract (B) An insurance provider (C) A person who is selling the contract * (D) A person insured under the contract

Business of Life Settlement

Refers to any activity relating to the solicitation and sale of an insurance policy to a hatred party who has no insurance interest in the insured.

Financing Entity

This includes any accredited investor who provides funds for the purchase of one or more life settlement contracts and who has an agreement in writing to do so.

An investor buys a life policy on an elderly person in order to sell it for a life settlement. This is an example of:

(A) A prearranged funeral plan (B) A vatical settlement (C) Third-party ownership (D) A STOLI policy * - These are usually purchased by people who have no relationship with the insured with the intention of selling them for life settlements

In a life settlement contract, who does the life settlement broker represent?

(A) The beneficiary (B) The life settlement intermediary (C) The owner * - Brokers represent the policyowner. (D) The insurer

Life Settlement Contract

Establishes the terms under which the life settlement provider will pay compensation to the policyowner in return for the assignment, transfer, sale, or release of any portion of any of the following: The death benefit, Policy ownership, Any beneficial interest, or Interest in a trust or any other entity that owns the policy.

Life expectancy is used in the calculation of which of the following?

(A) Cash values (B) Extended term (C) Dividends (D) Life settlements * - One of the most important issues in calculating the amount to be paid under a life settlement is life expectancy of the owner of the policy. The insurance company will have to pay premiums for the duration of the contract, thus adding to the cost of the purchase.

Finder's Fee

A commission paid to someone who connects a buyer and a seller (an intermediary's fee)

Stranger- Oriented Life Insurance (STOLI)

A life insurance agreement in which a person with no relationship to the insured purchases a life policy on the insured's life with the intent of selling the policy to an investor and profiting financially when the insured dies. These policies violate the principle of insurable interest.

Which of the following terms means a result of calculation based on the average number of months the insured is projected to live due to medical history and mortality facts?

(A) Mortality rate (B) Risk exposure (C) Morbidity (D) Life expectancy *

Which of the following is NOT considered Business of Life Settlement?

(A) A producer tracks the profess of a life settlement contract he has submitted to a life settlement provider (B) A producer discusses the advantages and disadvantages of a life settlement contract for a client (C) A producer discusses the advantages of a universal life policy and how the flexible premium allows the owner to control the cash value and death benefit income * - Business of Life Settlement refers to any activity relating to the solicitation and sale of an insurance policy to a third party who has no insurable interest in the insured. (D) A producer mails life settlement advertising to a client outside of the state

Owner

The owner of the policy who may seek to enter into a life settlement contract.

The form used to establish the terms for both parties when a person sells his life insurance policy to a 3rd unrelated person is called a

(A) Living Benefits Form (B) Life Settlement Contract * (C) Unilateral Contract (D) Certificate of Authority

Life settlement contracts must be approved by which of the following?

(A) The policyowner (B) The NAIC (C) Te state's attorney general (D) The Superintendent of Insurance * - The Superintendent must approve all life settlement contract forms as well as the final contract

Which of the following is NOT true of life settlements?

(A) The seller must be terminally ill * (B) They could be used for a key person coverage (C) They could be sold for an amount greater than the current cash value (D) They involve insurance policies with large face amounts

Trust-Owned Policies

It is also illegal to use a trust, directly or indirectly, to provide funds for a STOLI transaction in a manner that violates insurable interest laws of tis state.

Life Settlement

Refers to any financial transaction in which the owner of a life insurance policy sells a life insurance policy to a third party for some form of compensation, usually can. This would require an absolute assignment of all rights to the policy from the original policy owner to the new policy owner.

In order to be a license life settlement broker, a person must complete which of the following requirements?

(A) Have been a licensed life producer for at least 6 months (B) Post a surety bond (C) Submit to a drug test (D) Submit fingerprints * - They will be used for a criminal history record check so the Superintendent may assess the character and trustworthiness of the applicant prior to licensing

What is the minimum age for applying for a life settlement broker license?

(A) 18 * (B) 19 (C) 21 (D) 26

If an association is applying for a life settlement broker's license, which of the following requirements must the association meet?

(A) Establish a board of directors (B) Authorize a natural person to act individually as broker * (C) Employ a minimum of 10 individual brokers (D) Maintain an active life license for at least 1 year

Which of the following is true regarding STOLIs in the state of New York?

(A) They are allowed if the policyowner did not know that the transaction was a STOLI (B) They are allowed by special permission from the Superintendent (C) They are allowed for trust-owned policies only (D) Direct or indirect participation in STOLIs is prohibited *

Life Settlement Broker

A person who, for compensation, solicits, negotiates, or offers to negotiate a life settlement contract. Life settlement brokers represent only the policy owners, and have a fiduciary duty to the owners to act according to their instructions and in their best interest.