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A third of middle-income workers will likely run out of money after 20 years of retirement and significantly more lower-income workers will deplete their savings after 10 years, according to a new study released Tuesday.

The major risk an investor (institutional or non-institutional) faces when investing in a life insurance policy or a portfolio of policies is what is known as longevity risk or the risk of policy maturity extending longer than expected. A longer than expected maturity on a life insurance policy lowers the rate of return on investment.

This is an interesting question. What the producer is really asking is if he is qualified to assume the role of both client advisor and life settlement broker. The intent here is to increase his compensation by assuming a larger and more responsible role in the transaction. To answer that question, a producer must not only understand the role of the life settlement broker in the settlement process, but the process itself and the multiple responsibilities assumed.

Life insurance industry publication Agent’s Sales Journal conducted its annual survey of life insurance producers to ascertain whether life settlements are a viable part of an agent’s business activity and if not, the reasons why not. ASJ conducted the survey in November 2009 and interviewed 340 life insurance producers who had sold at least one policy in the prior 12 months.

Historically, life insurance policy valuations have been approximately 300% of cash surrender values. The obvious questions are – why is the spread so large and what are the component parts to a policy valuation? Let’s examine these issues piece by piece.

June is life settlement awareness month and represents a good opportunity to answer the question of why someone would want to sell a life insurance policy.

One of the most frequently asked questions on life settlements is whether it creates a taxable event.    The answer is likely “yes”.   But - it depends on how much premium you have paid in, the amount you receive, and how much cash value was in the policy on the date it was sold.   Sound simple enough?  Not really.

Every advisor is familiar with the term “fiduciary”. A fiduciary is “one that stands in a special relation of trust, confidence or responsibility in certain obligations to others”. Fiduciary comes from the Latin root fiducia meaning trust. CPAs, attorneys, financial advisors and insurance agents are fiduciaries to their clients.

Cash value life insurance carries an investment component along with death protection. Premiums paid in excess of mortality and administrative costs are credited to the accumulation value of the policy. The accumulation values illustrated in the policy at inception are based on an assumed rate of compounding or crediting. These projections do not assume changes in interest rates or equity markets in a variable policy. The last decade has seen some remarkable changes in interest rates.