Join Tiffany Grant as she dives into the fascinating world of life settlements with industry expert Rob Haynie. In this episode, Rob demystifies life settlements, explaining how they work, who can benefit from them, and the financial and legal implications involved.

You'll learn about the process from both the seller’s and the buyer’s perspectives, providing you with a comprehensive understanding of this lesser-known financial strategy.

Check out the full show notes: https://moneytalkwitht.com/podcast-show-notes/life-settlement/

Key Discussion Points

• What is a Life Settlement? Rob provides a thorough explanation of life settlements, highlighting its benefits and the scenarios where this option might be useful.
• Legal and Ethical Considerations: Rob discusses the regulatory environment surrounding life settlements and emphasizes the importance of ethical practices in the industry.
• Types of Policies Eligible for Life Settlements: Learn which types of life insurance policies qualify for life settlements and the conditions under which they might be sold.
• The Buyer’s Perspective: Rob sheds light on what happens to a life insurance policy once it's sold, including potential investors and their interests.
• Practical Uses for Life Settlement Funds: Tiffany and Rob discuss real-life examples of how individuals have used the funds from life settlements to enhance their quality of life.

Connect with Rob

• Phone: 954-599-4433
• Email: rkh@lisettlements.com
• Website: www.lisettlements.com

Connect with Tiffany

• Website: www.moneytalkwitht.com
• Social Media: @MoneyTalkWithT

For more personal finance tips and discussions, be sure to subscribe to the Money Talk With Tiff podcast and leave a review to let us know what you think!

You know what it is? That's right. It's time to talk money with your money

nerd and financial coach. Now tighten those purse strings

and open those ears. It's the Money Talk with Tiff

podcast.

Hey, everyone. I am so excited because I have Rob Haney on the line

now. Rob is here to talk to us about something we've never talked about on

the podcast. And honestly, I haven't seen many people talk about at

all, really. And that's life settlement. So. Hey, Rob, how are

you? How are you, Tiffany? Good, thank you for having me.

Yeah, pleasure. Because I'm like, I am not an expert on

this, so I'm glad that I have an expert here. So let's just hop right

in. What is a life settlement? Okay,

so I'm going to try and make this really simple. So a life

settlement is the sale of a

life insurance policy from the owner, or in some

cases the owner and the insured to a third party

will call that person or that entity an investor

for money. Today, certainly less

than the death benefit, but certainly

more than nothing in the case of a lapse of a life insurance policy

or the cash surrender value that the individual may have accumulated in the

policy. So a perfect example would be someone who's in

their mid-70s, has a million

dollar life insurance policy that they no longer want anymore. The premiums became

too expensive. The reasons they bought the life insurance

policy no longer exists. The

situation would be they bought it in protection in case something happened to either one

of the breadwinners, they were to die prematurely,

the other could go on. Children's education,

et cetera. That all dissipates when you're in your 70s, kids have grown up, you

paid the house off, the mortgage, done, you may have already been retired,

and the policy is just something you don't need anymore. So most people

unfortunately don't know their life settlement exists. So they either lapse

the policy and no longer pay the premiums, or they cash the policy in for

the cash. You're undervalued. What we do is that 75 year old comes to

me and says, what's it worth? So in this case, we'll make the cash render

value of $50,000. So if this individual were

to surrender the policy, they would get $50,000 and the

policy would disappear. In my world, I go

out as a representative of that individual and I go out to a marketplace full

of lots of investors who invest in this asset class and put them

in the uncomfortable position of being in a bidding war. So they're

going to bid against each other based upon this individual's life expectancy

and the future cost those premiums. And in this example, we'll just say we were

successful and we found someone to give $250,000 to

the client. So instead of 50,000, the the

client, the individual now is 250,000

to use for whatever they would like to use it for. Some cases

they may buy an annuity, they may help to

fund their long term care plan, or they may just want to go on a

vacation or have a family reunion. But it's their money. They can deal with it

as they please. So to wrap it up, a life insurance

policy is an asset, just like your home. It's real property. You

can sell it, you can keep it, you can gift it, you can do whatever

you want, just like you can with your home. But to your point, not many

people do know what this is. I've been doing it for 31 years and

I kid myself at the same time punch myself in the face when I say

that our marketplace is

insufficiently educated. We probably

have an audience of less than 5% of the potential audience

members that could participate in this.

And that's just because there's a lot of forces working

against people selling their life insurance policies. For example. Life

insurance companies don't want you to know you can do this because they don't want

to pay. They don't want to pay a death claim when they don't have to.

People are afraid of it. They don't know why they're afraid of it, but they're

afraid of it. They think there's got to be something they're missing that sounds too

good to be true. And in essence it's not too good to be true for

everybody. But it certainly is when it works in the case that we just talked

about. So hopefully that gives you kind of an idea

of what it is and maybe give you some thoughts for some future questions.

Yeah, actually. So since you mentioned that, now I'm curious,

are there any legal or ethical considerations, like if

somebody was considering this option that they should be mindful

of? So that's a great question. So the answer to your question is there's

we're regulated that make it. We'll start this way. We're regulated

in 45 states in the District of Columbia.

The other five that don't regulate it choose not to because it's a state by

state decision. But we as an industry self regulate in the sense

that we use the NAIC or End Quill model. Act

regulation as it relates to the sale of the policy. So

there's nothing ethical or unethical about it because

everybody that knows the transaction is happening signs

off and acknowledges they know that they're transferring the ownership

to a third party and that they're getting money for that

transaction so no one can come back and say, hey, you pulled the wool over

my eyes. And most importantly, a life settlement only takes

place when you're getting more money than you could otherwise get any other

way. So if you have surrender in the earlier example of $50,000

and you're getting 250 and you say what's

better for you, 99 out of 100 are

probably going to say the 250.

Right? One thing we do is so people who this doesn't

sit well with, in other words, they've sold the policy and now they have the

money and for whatever reason they just can't sleep at night. It

just doesn't sit well with them. We have a 15 day right of

rescission on every one of these. They can

unwind the transaction, give the money back and the policy goes back and forth.

That has happened in my career three times and

unfortunately all three was when the insured that was selling the

policy or the family member inside that family was selling the policy

passed away inside of that 15 day rate of rescission.

So that's when it happened. So that's. Unfortunately that does

happen. But our marketplace has grown

so that you can be a lot younger and a lot healthier

and still sell your life insurance policy in our marketplace.

Gotcha. Now there's many different flavors and

styles of life insurance. So what does this work

with? So does this work with term, does this work with hold? What does this

work with? So you're so the answer is all the above

because you know you are changing, changing the ownership. As long as the investor

understands how the policy is to be paid for

going forward and they're comfortable with those premium allocations, they'll

buy just about anything. But I will tell you that the majority

of policies that are bought are universal life policies.

And then second are term policies that are inside

the conversion period because in those

days those policies a little bit later on will be converted to a

universal life and if not a universal life, a whole life policy.

Iuls Guls vuls also can be

sold. So it's one of those situations. And I just

had this conversation yesterday on another podcast where we talked about

what sells and what doesn't for people who don't know the best Thing that we

recommend is that you send us the policy information, you fill

out a state approved application and we'll

find out exactly what you're working with. A lot of people unfortunately don't know

what it is they even own when it comes to life insurance. For that matter,

there's a lot of life insurance agents that have no idea what they've actually sold

their clients. So our job is to kind of clean it up.

There's many times, Tiffany, that we get an answer and

sometimes we make the life insurance policy more valuable to the seller

and he or she doesn't sell the policy because they know it's worth

more later on if they were to sell it. So they hold onto

it like any other asset and they figure the older they get, the more value

it'll have in our marketplace. And quite frankly, that's not a bad idea.

Gotcha. Now I have a question. So these questions keep popping up because this is

the first time I've talked about it, right? So

if there's a buyer, right, do they

still go through like making sure that they vet

their health and things like this, or is it something

that people that can't qualify for life insurance

can go through this route and still get life insurance? I hope that question made

sense. You're talking about if they go through this route

and they don't qualify. Well, the only way you don't qualify for this

is two, twofold. One, you're, you have a life insurance policy, but

you are too healthy, you've taken out too big of a loan, the premiums

are too expensive, so the math doesn't work or

you don't have a policy at all. If you are looking to buy

life insurance, we're not the place to come, but we know a couple of places

where you can go to look to purchase life insurance. So

life insurance is kind of the opposite underwriting of a life

settlement. So when you try and buy life insurance, you work with your life

insurance professional and you go out, you do, you know,

medical examination and you give the insurance information, all

the information that they're requesting, not more information than they're

requesting, just the information they're requesting. So

you're not going to get into, when you talk about in a narrative of how

healthy or unhealthy you are, you're just going to let the underwriting

work for itself and you may apply multiple

carriers. With our business, we want to know

everything, okay? So we want to know all the stuff that's happened

in your life, insignificant in your mind, may

be Very significant in ours because we're looking at it as what

is your life expectancy really? We're not bundling you up

into an age and a class and saying, oh, the average person who looks

like that lives this long. We're looking at Rob Haney's

life expectancy, Rob Haney's medical reports, Rob Haney's

characteristics, Rob Haney's family history, and on that,

those life expectancies come into these investors and it is

those life expectancies and that information that gives them the idea of what a policy

is worth or not worth. Gotcha. Gotcha. Now, if somebody's listening to this and

they're like, this sounds really interesting, what

advice would you give them for weighing the option of

doing a life settlement? What are some things that they should be aware

of or should think about? What's the ideal person for

this? Okay, so we say that people should be anytime you're in

your 60s, so I just turned 60, so you do my

age or older and you have a life insurance policy that

you definitely don't want anymore,

you think you don't need it or you can't afford it.

You should look to have your life insurance policy

appraised by an organization like mine. So

what does that mean? So you're going to collect. I'm going to collect medical records

again, you're going to tell me all the doctors I should be going to. And

I'm going to collect. I'm going to collect them, not you. And I'm going to

collect your insurance information and I'm going to show that

to licensed providers in the state where you're

domiciled to give them an indication of interest. They're not going to underwrite

it fully. They're going to say, this looks like something we'd like to dig a

little further. We're going to go ahead and buy life expectancy and a life expectancy

or life expectancy. We can go through this whole process

and I can come back to you and say, I have

good news. You're not going to qualify for a life

settlement. And the reason is everyone has you as a life expectancy of

25 plus years, right? So that's good news for

you as an individual, not good news to sell your life insurance policy, but at

least, you know, or I can do that, go through

that process and someone come back and say, I've got good news and this group

is willing to offer you X. And you may

think, wow, that's not a lot of money or that's way More

than I thought. And at that point, there's a decision you made, what steps would

go further. But like I said earlier, you're in

control. Nobody is telling you you have to sell. We're

just trying to give you an idea of what it's worth. So when you think

about assets that most people have,

their home, their jewelry, their art,

watches, whatever it is, you want to know what they're

worth. You get an appraisal. And trust

me, the people that appraise all the items I mentioned in those lists, there's a

cost associated with that. But when you're done, you'll know

exactly what that watch is worth or that picture

that you've had in your family for generations is worth,

or what the home you live in is worth. So why not do the

same thing with your life insurance policy? Because in many instances, this

is either your second, third, or maybe even your

largest financial asset that most people don't even know

is a financial asset that they can sell. So that's what we try and teach

people. As you want to know what everything else is worth in your life,

why not know what your life insurance is worth as well? Exactly.

Exactly. Because you know when you put in your net worth, that

life insurance, at least the cash value is an asset.

Now, I have a question on the other side, because I'm

also business person, I love talking business too. On

the other side of the transactions. So let's say the buyer,

what do they now do with this policy? Well, it depends on the buyer.

But we use as a general example, they don't just

buy one policy. They buy hundreds if not thousands of

life insurance policies and they hold them and they create some cases they're in funds,

open end funds, closed end funds.

They buy the policies and the traditional

fund holds them to maturity. So they buy them, they pay the

premiums going forward, and as the individuals pass away at some

future date and time, they receive the full death benefit and they reinvest

more. I see others, there's others that buy the

policies. And there's a more fluid market, which we call a

tertiary market. And the buyers can buy and sell

policies after they've been sold initially on the secondary market,

much like any other asset that's out there today. So

one of the things, our life expectancies that we were able to buy went from

about 60 months at the turn of the

century to close to 240 months today.

And you say to yourself, well, who would buy a life insurance policy that

they know they're going to have to pay the premiums for

20 years or more. And the answer is pension

funds, because their liquidity needs are so far off in the

future, they like this asset. So to really make this make sense

is the reason they buy this asset. This is an alternative asset as

it's viewed by many. And they don't buy a lot of it because there's not

a lot of it to buy yet. But it's

uncorrelated. So if the market,

the stock markets, the financial markets across the globe were

to go south, we'll say for a

couple of weeks and there's huge

corrections everywhere you look. The life insurance

policies that you hold as an investor, has the death

benefit decreased,

premiums gotten more expensive?

Nope. They're the same life expectancy of the insured. You bought change.

So that's why they like it stable.

Very interesting. This sounds very interesting. That's why it's, that's

why it's got, like I said, it's got. We're 31 years

in the business and still so few people know that

exists. So that's why I'm always very, very optimistic

about the future. Because once people, individuals like

yourself, very intelligent in the business world hear this for the first

time, it doesn't take hours of convincing. It takes

seconds to realize this is a valuable thing for everybody. The investor

is going to win if he or she knows what they're doing. The

seller is going to win if they work with the right people or they work

with anyone at all for that matter. Because if they don't, we know what's going

to happen. They're going to surrender for the cash surrender value, which is really just

return of their own money, a little portion of it, or let it lapse, which

is the worst of all outcomes. So

it's got legs. The financial markets are looking at it. So give

you an idea. There's two companies that run ads on TVs. These are groups

that the providers I mentioned earlier in the conversation, one's called

Coventry. They run ads all the time on the financial channels and the

news channels. And as does Abacus. They do the

same. Abacus is a public company right now, traded on,

I believe the nasdaq. So. And they're going to

get bigger, but it's going to, it takes time. This isn't something that

people are, you know, clamoring to find out about it, especially

if they don't know about it. And if you think about it, the initial instincts

of a person when they hear about it, and I'll use myself as an example,

I thought it was the most ghoulish thing I ever heard of. I was like,

oh my God, this is horrible. But then as I was driving home literally for

that initial conversation, it dawned on me that, wait a minute, we're

giving people their money on an asset that they own

and paid for early as

opposed to waiting until they died. Like, if you own life insurance, you

don't get the death benefit. Your heirs do. You

have to die for them to get it. Well, now you're able to use the

money while you're alive. So we've had many, many

examples where they've done some really incredibly

fun things with their money because it's like found money.

I talked a little bit about family reunions. We had one couple, this is in

the 90s. They

paid for every one of their family members. I'm talking like 30 some odd people

to go to Disney World for a week, got them rooms, got them

all together. The individual that had cancer was

still able to do things and be himself. And he

died a year later. But he always had that memory and so will his family.

He was able to do that because he sold his life insurance policy while he

was still alive. We've had people gift their life insurance to

philanthropic organizations. One down here,

the Ballet in Miami, their names on it.

They gifted that to the ballet center and they were able

to, the last 10 years of life, go and enjoy the ballet, walk through

the doors with their name above on a financial donation that they gave as

a result of giving a life insurance policy. So instead of. And it's a win

win for everybody, they get the tax write off, they're still alive. And the

501C3 got to use the money tax free to

finish off the ballet center. So it was a pretty amazing,

amazing things. But again, thankfully for people like

you who are willing to put people like me on your podcast, more

people will learn about something that I bet you

99% of them never knew existed. Absolutely,

absolutely. And you know, I'm just thinking about, you know, on the

policyholder side, what it can help with, you know, just

practically like long term care expenses because it get real expensive,

y'all, when it comes to long term care. Care and things of

that nature where, you know, you don't want to be a burden on your

family. But now you have this extra option that you probably

never thought of that you can now use. So I really like this

for both sides, honestly, because I'm over here, like, how can I buy some

policies for later on in life when I'm

retiring and stuff, then I can start cashing them in, you know. But

anywho, we covered a ton in this episode. Now, if people

were interested in learning more about Life Settlements or about you, Rob, how could

they find you? Well, my. I have a phone

number that never stops ringing. And what. I like it ringing. So it's nine. That's

954-599-4433. That

is my cell phone. And like I said, day or night, reach out. If I

don't get back to you, I will shortly. And my email address

is

Rock

Settlements. S E T T L E M e n t s dot

com and my website is

www.lisettes.com.

All right, perfect. And I will make sure I have all of that information in

the show notes for our audience. So if you're doing something else, you couldn't write

it down. Don't worry, it's in the show notes. Thank you so much, Rob, for

coming on the show today. This was very insightful, even for me. Well,

that's, that's the goal. I mean, if you could just change one person's mind

perspective, it was, it was, it was well worth it. But I can't thank you

enough. All right, have a good one. Bye. Thank

you for listening, joining, and being a part of the Money Talk with Tiff podcast

this week. You can check Tiff out every Thursday for a new Money

Talk podcast, but if you just can't wait until next week, you can

listen to previous podcast

episodes@moneytalkwitht.com

or follow TIFF on all social media platforms at Money

Talk. Until next time. Spend wise

by spending less than you make A word to the money wise is

always sufficient.