Thanks for your excellent reply. I was trying to imagine all of the gears and incentives to all of the parties that make this type of deal possible. Now I get it
: )
I find it fascinating that people are able to conceive and complete deals like this, with a positive outcome for all involved. It’s a necessary and efficient use of capital and resources.
It’s also a shame that people who don’t understand capital (or are jealous of it) try to prevent people like you (and Wall St.) from doing business.
Good for you, I hope you have many more such deals.
I began working with LSPs about four years ago. Here is a theoretical example of using it as an investment vehicle. We cherry pick policies for 5-8 year life expectancies and would like to get premiums at about 3% if possible. Typical age would be in late 70s with numerous health issues.
DEATH BENEFIT: $1,000,000
ANNUAL PREMIUM: $40,000
PURCHASE AMOUNT: $200,000
LIFE EXPECTANCY: 6 years
If the insured lives for the 6 years, an investor has put in an initial $200,000 and spent $40,000 per year for premiums. That total of $440,000 turns into $1,000,000 at maturity. Even if the life expectancy is exceeded, the return on the investment is substantial.
I have thought about pooling investors together to acquire these and have a meeting with a major player who manages pension funds. For someone not needing the money for awhile, this investment can be a very lucrative part of a retirement investment portfolio.