Life Settlement Legislation Does More Than You Think.

With just 5 states left that do not have laws pertaining to life settlements or viatical settlements, the number of unregulated states is dwindling. Although, California, New Mexico, Minnesota, Michigan, Illinois, Massachusetts, Delaware and New York regulate just viatical settlements, many of these states have their eyes on legislating the broader life settlement market. California and New York have broad, sweeping bills in the works aimed at the life settlement industry. They are being watched closely due to their large life settlement markets and consumer friendly regulatory environment.

As pundits, consumer advocates and talking heads note the increased legislative activity, they often cite regulation as a way to "reign in" the life settlement industry. The connotation is that the life settlement industry is doing something wrong or bad and legislation is the counter balance to these actions.

Invariably, state legislation of life settlements includes licensing requirements for life settlement brokers & life settlement providers, in addition to prohibition of STOLI's. These elements are certainly needed and healthy for consumers and the life settlement industry alike. Delineated requirements of new legislation strives to ensure consumer protections and transparency in a life settlement transaction.

What is rarely mentioned by industry opponents or pundits is that legislation, especially newer legislation, often moves to protect a consumer's right to sell their life insurance policy. Life settlements are seen as a consumer friendly transaction as it provides an option to maximize an asset's value in an open market. States such as Maine, Washington and Oregon have recently included language in new laws that require life insurers to inform seniors of the life settlement option. This ensures seniors are fully aware that there may be more value with a life settlement than merely surrendering the policy back to the life insurance company that wrote the policy. This is a de facto endorsement of the life settlement option's rightful place in the marketplace.

For example, this year Oregon Gov. Ted Kulongoski signed life settlement legislation with an amendment requiring life insurance carriers to inform their insureds who are age 60 or older and are thinking of giving up their policies that they have other options. The notice in large, bold or conspicuous type must say: "Life insurance is a critical part of a broader financial plan. There are many options available, and you have the right to shop around and seek advice from different financial advisers in order to find the option best suited to your needs."

Maine's new law makes life insurance companies responsible for advising their senior life insurance policy owners that life insurance settlements are an alternative to surrendering their policy or allowing it to lapse. The new law, Chapter 376, ensures that policy owners with life insurance that may otherwise be surrendered or allowed to lapse can ask their life insurance company for the life settlement value of a policy in the secondary market. Life insurers must also include in the notice a brochure that informs seniors of their rights as a policy owner and describes the life settlement option.

Many states, such as Maine, also go as far as to prohibit insurers from impairing life settlement transactions. Life insurers are known to drag their feet when documentation is requested to support a life settlement. This new law in Maine, in addition to other states, ensures that life insurers will not be an impediment to the life settlement process and prevent a transaction from occurring.

Life settlement regulation should not be seen as the solution to a life settlement industry problem. Rather an evolution of an environment meant to help consumers and solidify their rights in a marketplace. New life settlement legislation firmly establishes the rightful place of a life settlement as one of multiple legitimate financial options for seniors.

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