Life Settlements

Broker License Requirements

- Be 18 years of age - High school diploma or equivalent - 2 to 4 years of experience as a practicing salesperson - Complete the required broker education - Take and pass the broker licensing exam - Complete the broker license application and pay the required fee

What does not constitute a Life Settlement:

-assignment of a life policy as collateral for a loan -a policy loan -surrender of an insurance policy -a 1035 exchange -assignment of a life policy to an individual -an agreement to assign a contract that is already a policy that has been acquired by a life settlement provider -an agreement between parties closely related to the insured by blood or law -other forms of legitimate business insurance -any other form of agreement determined similar to any of the above by the Superintendent

life settlement

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 cash.

HIPPA

Health Insurance Portability and Accountability Act: protects individual's health information and sets standards for privacy and security of that information

Protected Health Information (PHI)

Individually identifiable health information that is transmitted or maintained by electronic media.

material information

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

stranger oriented life insurance (STOLI)

Life insurance arrangements where investors persuade consumers (usually seniors) to take out new life insurance policies, with the investors named as beneficiary. Investors loan money to the insured to pay the premiums for a defined period. The insured ultimately assigns ownership of the policy to the investors, who receive the death benefit when the insured dies. The insured receives additional financial benefits, such as an upfront payment or a loan.

business of life settlement

Refers to any activity relating to the solicitation and sale of a life settlement contract to a third party who has no insurable interest in the insured

life expectancy

The average number of years an individual can be expected to live, given current social, economic, and medical conditions. Life expectancy at birth is the average number of years a newborn infant can expect to live.

finder's fee

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

nonconforming contract

a contract that does not follow state guidelines and provisions

owner

a person who owns the policy who may seek to enter into a life settlement contract

Life settlement broker

a person who, for compensation, solicits, negotiates, or offers to negotiate a life settlement contract

The state of New York does not,

allow direct or indirect participation of STOLIs

rescission

an action that takes back, cancels, or nullifies

accredited investor

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

financing entity

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

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 the following: the death benefit policy ownership any beneficial interest interest in a trust or any other entity that owns the policy

disclosure

information revealed so someone can make an intelligent and educated decision

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 insurance interest laws of this state

capital

money or other financial assets to operate a business

commission sharing

persons are prohibited from receiving any compensation for acting as a life settlement broker, or sharing any compensation with a person who is not licensed as such in this state

Privacy Rule of HIPPA

provides detailed instructions for handling and protecting a patient's personal health information.

financing transactions

takes place when a licensed settlement provider obtains funds from the financial entity

If a life producer has maintained an active license for one year,

the prelicensing class and exam, as well as fingerprinting, may be waived when applying for a life settlement broker license

STOLIs violate

the principle of insurable interest, which is in place to ensure that a person purchasing a life insurance policy is actually interested in the longevity rather than the death of the insured

If a firm or association applying for a broker license,

they must name and authorize natural persons to act individually as life settlement brokers for the firm

advertisements must be:

truthful accurate not misleading in any way