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.
So I’ve been thinking about these.
If you were to pool them, and sell them, are they annuities? Or are they life policies, i.e. do you become an insurer? Are they governed by SEC rules as investments? LLC’s?
If these questions are too personal, please say so; my curiosity is less about your position than about the mechanism. Thanks!