Top Ten Myths? - #9 “It’s twisting or churning and is illegal”

As an advisor, twisting and churning are basically the use of misleading practices to induce a client to lapse, surrender or terminate a financial product to effect a replacement for the purpose of generating a commission. These practices are usually illegal and always unethical. However, neither applies to the "Life Settlement" industry.

Potential "Life Settlement" candidates are typically identified through routine periodic insurance reviews or surrender or lapse notices, an automatic premium loan or past due premium notice.

The professional advisor will only present the "Life Settlement" option when it is in the best financial interest of the client. The "Life Settlement" option is no more inappropriate than recommending a surrender, lapse or 1035 exchange as an exit strategy for any life policy already in jeopardy.

It is true that the majority of "Life Settlement" recipients reinvest the proceeds into some current generation product such as an annuity, LTC plan, SPIA, MEC or a new policy, which is not a replacement since the original policy is still in force. On every occasion where the client reinvested their settlement they benefited financially.