"You Can't Call This Living, 'cause It Ain't."
A front-page headline leads today into an article about "spin-life" Insurance Policies. That stands for speculator-initiated Life Insurance Policies. One type apparently consists of, first, a loan to a potential Policyholder to pay Life Insurance Premiums and obtain a Policy, followed by sale and assignment of the Life Policy proceeds to the speculator-investor. Charles Duhigg, "Late in Life, Finding a Bonanza in Life Insurance" (Sunday New York Times, December 17, 2006, page A1, col. 3.)
On October 27, 2006, my post addressed the issue of "life settlement" agreements. Those are arrangements in which people with great pain, or who are near death, sell the proceeds of their life insurance policies in exchange for money to pay current medical and other bills to continue daily life. Today's linked article, above, lumps "life settlement" agreements with "spin-life" premium arrangements .
Public Policy issues are many here. However, one highly practical Insurance issue deserves immediate focus. It is driven by economics and it is this: Life Insurance Companies depend on historical evidence, like other Insurance Companies, to determine whether they will accept a risk and if they accept the risk, what kind of Policy they will issue and what Premiums they will charge the Policyholder. The historical evidence summarized very well in today's article displays the fact that many Policyholders cancel their Life Insurance Policies. That is a fact and Life Insurance Companies plan on this fact. They include it in their basis for charging Premiums.
If instead all or nearly all Life Insurance Policies now in effect will produce payouts rather than Policyholder-cancellations, there may not be any Life Insurance available over the course of time, or what Life Insurance is made available will carry a very high Premium, because of the great increase in risk. The issues are addressed further in today's linked newspaper article.
REMINDER: THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP. ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY FAMILIAR WITH THE PARTICULAR INSURANCE ISSUE IN THAT JURISDICTION, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.
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