Sample Cases for illustrative purposes only.  Each individual’s case will be unique depending on a variety of factors including one’s health and the pricing of one’s policy.

 

Case #1

 

  1. A senior citizen client buys life insurance for $6 Million in 2006 and owes $300,000 in premium payments for the first two years of the policy (an average of $150,000/per year).  The client takes out a loan from a Lender for the $300,000 plus interest and fees in order to acquire the life insurance. 
    1. The client appoints a beneficiary of his/her choice.
    2. If the client passes away before 2009, the beneficiary collects the death benefit and uses part of those proceeds to pay back the Lender the loan amount and fees.

Case #2

 

  1. A senior citizen client buys life insurance for $6 Million in December, 2006 and owes $300,000 in premium payments.  The client takes out a loan from a Lender for the $300,000 plus interest and fees in order to acquire the life insurance. 
    1. In December, 2008, two years after acquiring the insurance policy, the client will determine if he/she wants to pay back the loan and continue to make premium payments on their own.  If he/she instead chooses to sell the policy, the senior citizen client can make $2 Million by selling the policy to an Investor.  The client can then use those proceeds to pay back the loan principal and fees to the Lender. 
    2. The investor will continue to make the premium payments (at an average of $150,000 per year) until they collect the face value death benefit ($6 Million) of the life insurance policy when the client passes away. 

Returns: 

 

The Investor’s returns depend on how many annual premium payments are made.  If the client passes away in 2010, for example, the Investor would make $3.4 Million (paying $2 Million for the policy and two years of premiums at a total of $300,000 and then receiving $6 Million for the policy).

 

The client’s returns are the $2 Million minus the loan for the premium payments and interest and fees.  One of the advantages of this structure is that the client does not have to put up any money in order to obtain these returns.