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Insurance Abstract
A method and system for insuring against a potential loss in future
value of a life insurance policy by providing a stated value insurance
policy ("SV Policy"). The SV Policy is purchased by the
owner of the life insurance policy contemporaneously with the purchase
of the life insurance policy or at any time thereafter. If, at a
specified future time(s), the life insurance policy is determined
to be worth less than a predetermined value as set forth in the
SV Policy, then the SV Policy issuer pays the owner the difference
between the amount covered by the SV Policy and the then-current
value, assuming that the owner has satisfied the terms and conditions
of the SV Policy. In another aspect, a life insurance policy owner
enters into an agreement ("Lifegain Agreement") with a
third party ("Lifegain Provider") to protect against the
possibility that the life insurance policy will lose value. The
Lifegain Agreement is purchased by the owner of the life insurance
policy contemporaneously with the purchase of the life insurance
policy or at any time thereafter. If, at a specified future time(s),
the life insurance policy is determined to be worth less than a
predetermined projected value as set forth in the Lifegain Agreement,
the Lifegain Provider may either purchase the life insurance policy
for the projected value or pay the owner the difference between
the projected value and the then-current value, assuming that the
owner has satisfied the terms and conditions of the Lifegain Agreement.
Insurance Claims
1. A method for attempting to reduce the risk of financial loss
by a first party owner of a life insurance policy, comprising: purchasing
by said first party said life insurance policy; entering by said
first party with a second party into an Agreement that protects
against a loss in expected value of said life insurance policy,
said Lifegain Agreement including a projected value of said life
insurance policy at a specified future time(s); evaluating a then-current
value of said life insurance policy at said specified future time(s);
and determining said loss in value being a difference between said
projected value of said life insurance policy and said then-current
value of said life insurance policy at said future date(s).
2. The method of claim 1, further comprising the step of: substantially
satisfying by said first party, all conditions required of first
party by said agreement.
3. The method of claim 2, further comprising the step of: providing
by said first party to the second party a right to satisfy the second
party's obligations under said agreement.
4. The method of claim 3, wherein said second party satisfies its
obligations under the said agreement providing by paying said first
party substantially said loss in value.
5. The method of claim 3, wherein said second party satisfies its
obligations under the said agreement providing by purchasing said
life insurance policy from said first party at substantially the
projected value of said life insurance.
6. The method of claim 3, further comprising the step of: receiving
by said first party offers to sell said life insurance policy.
7. A method for attempting to reduce the risk of financial loss
by a first party owner of a life insurance policy, comprising: purchasing
by said first party said life insurance policy; purchasing by said
first party from a second party an SV Policy for protecting against
a loss in expected value of said life insurance policy, said SV
Policy including an insured amount of said life insurance policy
at a specified future time(s); evaluating the then-current value
of said life insurance policy at said future time(s); and determining
said loss in value being a difference between said covered amount
under said SV Policy and said then-current value of said life insurance
policy at said future time(s).
8. The method of claim 7, further comprising the step of: substantially
satisfying by said first party, all conditions required of first
party by said SV Policy.
9. The method of claim 8, further comprising the step of: providing
by said first party to the second party a right to satisfy the second
party's obligations under said agreement.
10. The method of claim 9, wherein said second party satisfies
its obligations under said SV Policy providing by paying said first
party substantially said loss in value.
11. The method of claim 10, further comprising the step of: receiving
by said first party offers to sell said life insurance policy.
12. A computer system configured to implement a method for attempting
to reduce the risk of financial loss by a first party owner of a
life insurance policy, said method comprising the steps of: purchasing
by said first party said life insurance policy; entering by said
first party with a second party into an Agreement that protects
against a loss in expected value of said life insurance policy,
said Lifegain Agreement including a projected value of said life
insurance policy at a specified future time(s); evaluating a then-current
value of said life insurance policy at said future time(s); and
determining said loss in value being a difference between said projected
value of said life insurance policy and said then-current value
of said life insurance policy at said future time(s).
13. The computer system of claim 12, further comprising the step
of: substantially satisfying by said first party, all conditions
required of first party by said agreement.
14. The computer system of claim 13, further comprising the step
of: providing by said first party to the second party a right to
satisfy the second party's obligations under said agreement.
15. The computer system of claim 14, wherein said second party
satisfies its obligations under the said Lifegain Agreement providing
by paying said first party substantially said loss in value.
16. The computer system of claim 15, wherein said second party
satisfies its obligations under the said agreement providing by
purchasing said life insurance policy from said first party at substantially
the said projected value of said life insurance.
17. The computer system of claim 15, further comprising the step
of: receiving by said first party offers to sell said life insurance
policy.
18. A computer system configured to implement a method for attempting
to reduce the risk of financial loss by a first party owner of a
life insurance policy, said method comprising the steps of: purchasing
by said first party said life insurance policy; purchasing by said
first party from a second party an SV Policy for protecting against
a loss in expected value of said life insurance policy, said SV
Policy including an insured amount of said life insurance policy
at a specified future time(s); evaluating the then-current value
of said life insurance policy at said future time(s); and determining
said loss in value being a difference between said covered amount
under said SV Policy and said then-current value of said life insurance
policy at said future time(s).
19. The computer system of claim 18, further comprising the step
of: substantially satisfying by said first party, all conditions
required of first party by said SV Policy.
20. The computer system of claim 19, further comprising the step
of: providing by said first party to the second party a right to
satisfy the second party's obligations under said agreement.
21. The computer system of claim 20, wherein said second party
satisfies its obligations under the said agreement providing by
paying said first party substantially said loss in value.
22. The computer system of claim 21, further comprising the step
of: receiving by said first party offers to sell said life insurance
policy.
Insurance Description
BACKGROUND
[0001] The present invention relates to a method and apparatus
for protecting the value of a life insurance policy.
[0002] Prospective life insurance policy owners ("owners")
purchase life insurance policies for many reasons, including to
protect their beneficiaries from being financially unprepared for
the death of the insured.
[0003] However, it is possible that an owner's personal circumstances
will change or the life insurance policy will not perform as expected,
and thus it may become desirable for the owner to seek other options,
such as a sale of the life insurance policy. However, at the time
the owner goes to sell the life insurance policy, the value of the
policy, i.e., the price that the policy would bring in an open and
competitive secondary market for life insurance or otherwise, may
be less than what the owner had expected or planned for. As such,
there is a need for the owner to reduce his potential exposure against
this type of risk.
SUMMARY
[0004] Exemplary embodiments of the present invention provide for
a method and system for insuring against a potential loss in expected
value of a life insurance policy. In an embodiment the risk of potential
loss is minimized by purchasing a stated value insurance policy
("SV Policy"). The SV Policy is purchased by the owner
of the life insurance policy or an interested party contemporaneously
with the purchase of the life insurance policy or at any time thereafter.
If, at a specified future time(s), the then-current value of the
life insurance policy is less than the amount covered under the
SV Policy the issuer of the SV Policy will pay the owner the difference.
[0005] In another exemplary embodiment, the risk of potential loss
is minimized by an option agreement ("Lifegain Agreement")
with a third party ("Lifegain Provider"). The Lifegain
Agreement is entered into by the owner of the life insurance policy
or an interested party contemporaneously with the purchase of the
life insurance policy or at any time thereafter. If, at a specified
future time(s), the owner believes that a sale of the life insurance
policy will result in proceeds less than the projected value (the
"Projected Value") of the life insurance policy at such
future time(s) as set forth in the Lifegain Agreement, the owner
may choose to exercise his rights under the Lifegain Agreement.
The Lifegain Provider then, in its discretion, may either purchase
the life insurance policy for the Projected Value or pay the owner
the difference between the Projected Value and the then-current
value.
BRIEF DESCRIPTION OF THE DRAWINGS
[0006] The foregoing and other advantages and features of the invention
will become more apparent from the detailed description of the exemplary
embodiments of the invention given below with reference to the accompanying
drawings, in which:
[0007] FIG. 1 is a schematic diagram illustrating the interaction
of the parties in the method and system according to an exemplary
embodiment of the invention.
[0008] FIG. 2 is a flowchart illustrating the method and system
of FIG. 1.
[0009] FIG. 3 is a computer system for implementing the method
and system of FIG. 1.
[0010] FIG. 4 is a schematic diagram illustrating the interaction
of the parties in the method and system according to another exemplary
embodiment of the invention.
[0011] FIG. 5 is a flowchart illustrating the method and system
of FIG. 4.
[0012] FIG. 6 is a computer system for implementing the method
and system of FIG. 4.
DETAILED DESCRIPTION OF PREFERRED EMBODIMENTS
[0013] Now referring to the drawings, where like reference numerals
designate like elements, there is an exemplary embodiment of the
invention shown in FIG. 1 illustrating an owner 10 who has purchased
70 a life insurance policy 74 from a life insurance company 20.
The owner 10 is responsible for making periodic premium payments
72 to the life insurance company 20 in order to keep the life insurance
policy 74 in force. The owner 10, or any named beneficiary of the
owner, is also entitled to any benefit conferred by the life insurance
policy 74.
[0014] As also shown in FIG. 1, the owner 10 purchases an SV Policy
62 by paying the SV Policy issuer 30 a premium(s) 64. The SV Policy
62 insures the value of the life insurance policy 74 to be $Z at
a predetermined time in the future
[0015] In a preferred embodiment, as part of the sale of the SV
Policy 62, the SV Policy issuer 30 includes certain terms and conditions
that must be satisfied in order for the owner 10 to make a claim
under the SV Policy 62. These conditions may include a temporal
scope of coverage, a `right to full disclosure` provision, and a
right to verify the value of the life insurance policy 74. Although
not discussed here, many other provisions may be included into an
SV Policy 62.
[0016] Under a temporal scope provision the SV Policy issuer 30
specifies a time period within which the owner 10 may make a claim
under the SV Policy 62 and within which the then-current value of
the life insurance policy is established. Each of these events may
be a same or different time periods.
[0017] Under a `right to full disclosure` provision an owner 10
promises to provide the SV Policy issuer 30 with all details and
communications regarding any offers, correspondence, solicitation
for offers, and the like that the owner 10 has received regarding
the life insurance policy 74.
[0018] Under a verification provision the SV Policy issuer 30 is
given the power to substantiate any existing offer(s) for the purchase
of the life insurance policy 74 and (directly or indirectly) obtain
additional offers in order to determine the then-current value of
the life insurance policy 74.
[0019] FIG. 2 illustrates a life insurance sale 70 and SV Policy
claim process according to an exemplary embodiment of the principles
of the present invention. A life insurance policy owner 10 purchases
a second insurance policy, the SV Policy 62, to insure the future
value of the life insurance policy. The owner 10 can make a claim
under the SV Policy 62 if (i) the owner complies with the terms
and conditions of the SV Policy 62 and (ii) at the time a claim
is made under the SV Policy 62, the then-current value of the life
insurance policy 74 is less than the amount covered by the SV Policy
62.
[0020] In segment S1, the owner 10 purchases 70 a life insurance
policy 74 from a life insurance company 20. The process continues
to segment S2.
[0021] In segment S2, the owner 10 purchases 60 an SV Policy 62
from the SV Policy issuer 30. The SV Policy 62 insures the value
of the life insurance policy 74 for $Z at a predetermined time in
the future. The process continues to segment S3.
[0022] In segment S3, in order to determine the then-current value
of the life insurance policy 74, the owner 10 (directly or indirectly)
receives offers to sell the life insurance policy 74 in the secondary
market or otherwise. The best and/or highest offer is $X. The process
continues to segment S4.
[0023] In segment S4, the owner 10 considers making a claim under
the SV Policy 62. The process continues to segment S5.
[0024] In segment S5, the SV Policy issuer 30 must determine whether
the owner 10 has complied with the terms and conditions of the SV
Policy 62. If the SV Policy issuer 30 determines the owner 10 has
not complied with the terms and conditions of the SV Policy 62,
then the process continues to segment S8 and there is no claim and
the process ends. If the SV Policy issuer 30 determines the owner
10 has complied with the terms and conditions of the SV Policy 62,
then the process continues to segment S6.
[0025] In segment S6, the SV Policy issuer 30 reviews the offers
that have been received for the life insurance policy 74 and determines
whether $X is more than $Z. If the SV Policy issuer 30 that determines
$X is more than $Z, then the process continues to segment S8 and
there is no claim and the process ends. If the SV Policy issuer
30 that determines $X is not more than $Z, then the process continues
to segment S7.
[0026] In segment S7, the owner 10 makes a claim under the SV Policy
62 and the SV Policy issuer 30 pays the owner 10 the difference
between $Z and $X, and the process ends.
[0027] Thus, at the end of the process, if the then-current value
of the life insurance policy 74 is less than $Z and the owner 10
has complied with the terms and conditions of the SV Policy 62,
then the owner has a claim under the SV Policy 62 for $Z minus $X.
If the owner 10 does not comply with the terms and conditions of
the SV Policy 62 or sells or has an offer to sell the life insurance
policy 74 for more than $Z, then the owner 10 will not have a claim
under the SV Policy 62.
[0028] FIG. 3 illustrates that in a preferred embodiment, computers
1100, 1200, 1300, and 1400, respectively used by the owner 10, life
insurance company 20, SV Policy issuer 30, and third parties 40
that make offers to purchase the life insurance policy 74 from the
owner 10 may each be coupled to a network 1000. The network 1000
may be, for example, the Internet or any other wide area or even
local area network. A portion of the network 1000, for example,
between the owner computer 1100 and the life insurance company computer
1200, may be a local area network, while another portion of the
network 1000 (or the entire network) may be part of the Internet.
In an embodiment, the SV Policy issuer 30 can use its computer 1300
to determine whether the conditions of the SV Policy 62 have been
complied with before performing their obligations under the SV Policy
62. Additionally, in another aspect of the invention, the computers
1100, 1200, 1300, and 1400 are used to implement additional features.
The computers 1100, 1200, 1300, and 1400 may include at least one
world-wide-web server for supporting one or more web based applications
for performing the above described tasks. The web based application(s)
may be accessible on one or more intranets. The web based application(s)
may also be accessible over the global Internet.
[0029] Another exemplary embodiment of the invention is shown in
FIG. 4 illustrating an owner 410 who has purchased 470 a life insurance
policy 474 from a life insurance company 420. The owner 410 is responsible
for making periodic premium payments 472 to the insurance company
420 in order to keep the life insurance policy 474 in force. The
owner 410, or any named beneficiary of the owner, is also entitled
to any benefit conferred by the life insurance policy 474.
[0030] As also shown in FIG. 4, the owner 410 purchases 460 a Lifegain
Agreement 462 by paying a Lifegain Provider 430 a purchase price
464. The Lifegain Agreement 462 includes a Projected Value of the
associated life insurance policy 474. The Lifegain Agreement 462
is purchased contemporaneously with the purchase of the life insurance
policy 474 or at any time thereafter.
[0031] In a preferred embodiment, as part of the purchase 460 of
the Lifegain Agreement 462, the Lifegain Provider 430 includes certain
terms and conditions that the owner 410 must satisfy before exercising
his option under the Lifegain Agreement 462. These conditions may
include a temporal scope of coverage, a `payment discretion` provision,
a right to verify the current value of the life insurance policy
474 and a `right to full disclosure` provision. Although not discussed
here, many other provisions may be included in a Lifegain Agreement
462.
[0032] In an example of a temporal scope provision the Lifegain
Provider 430 specifies a time period within which the owner must
exercise his option under the Lifegain Agreement 462 and within
which the then-current value of the life insurance policy 474 must
be established. Each of these events may be a same or different
time periods.
[0033] Under a `payment discretion` provision the Lifegain Provider
430 has the right to choose whether to (i) purchase the life insurance
policy 474 from the owner 410 for the Projected Value or (ii) pay
the owner 410 a net cash settlement price. The net cash settlement
price may be, for example, the difference in value between the Projected
Value and the then-current value of the life insurance policy 474.
[0034] Under a verification provision the Lifegain Provider 430
is given the power to substantiate any existing offer(s) for the
purchase of the life insurance policy 474 and (directly or indirectly)
obtain additional offers in order to determine the then-current
value of the life insurance policy 474.
[0035] Under a `right to full disclosure` provision, an owner 410
promises to provide the Lifegain Provider 430 with all details and
communications regarding any offers, correspondence, solicitation
for offers, and the like that the owner 410 has received regarding
the life insurance policy 474.
[0036] FIG. 5 illustrates a life insurance sale 470 and Lifegain
Agreement election process according to an exemplary embodiment
of the principles of the present invention. A life insurance policy
owner 410 purchases 460 a Lifegain Agreement 462 to protect the
owner's investment in a life insurance policy 474. The owner 410
can exercise his option under the Lifegain Agreement 462 if (i)
the owner 410 complies with the terms and conditions of the Lifegain
Agreement 462 and (ii) the then-current value of the life insurance
policy 474 is less than the Projected Value.
[0037] In segment S51, the owner 410 purchases 470 a life insurance
policy 474 from a life insurance company 420. The process continues
to segment S52.
[0038] In segment S52, the owner 410 purchases 460 a Lifegain Agreement
462 from the Lifegain Provider 430 where the stated Projected Value
of the life insurance policy 474 is $Z. The process continues to
segment S53.
[0039] In segment S53, in order to determine the then-current value
of the life insurance policy 474, the owner 410 (directly or indirectly)
receives offers to sell the life insurance policy 474 in the secondary
market or otherwise. The best and/or highest offer is $X. The process
continues to segment S54.
[0040] In segment S54, the owner 410 elects to exercise his rights
under the Lifegain Agreement 462. The process continues to segment
S55.
[0041] In segment S55, the Lifegain Provider 430 must determine
whether the owner 410 has complied with the terms and conditions
of the Lifegain Agreement 462. If No, then the process continues
to segment S60 and the process ends. If Yes, then the process continues
to segment S56.
[0042] In segment S56, the Lifegain Provider 430 determines whether
$X is more than $Z. If Yes, then the process continues to segment
S60 and the process ends. If No, then the process continues to segment
S57.
[0043] In segment 57, the Lifegain Provider 430 decides whether
to purchase the life insurance policy 474 for $Z. If Yes, then the
Lifegain Provider 430 pays the owner 410 $Z in exchange for all
right, title and interest in the life insurance policy 474 and the
process continues to segment S60. If No, then the process continues
to segment S58.
[0044] In segment S58, the Lifegain Provider 430 pays the Owner
410 a net cash settlement in the amount of $Z minus $X and the process
continues to segment S60. In an aspect of the invention, the Lifegain
Agreement 462 can be modified to eliminate the cash settlement option
described in this paragraph and the Lifegain Provider 430 would
purchase the life insurance policy 474 for $Z as in S57.
[0045] In segment S60 the process ends.
[0046] Thus, at the end of the process, if at the time the owner
410 elects to exercise his rights under the Lifegain Agreement 462
the value of the life insurance policy 474 is determined to be less
than $Z and the owner 410 complies with the terms and conditions
of the Lifegain Agreement 462, the Lifegain Provider 430 will either
purchase the life insurance policy 474 from the owner 410 for $Z
or pay the owner 410 a net cash settlement in the amount of $Z minus
$X. If the owner 410 does not comply with the terms and conditions
of the Lifegain Agreement 462 or sells or has an offer to sell the
life insurance policy 474 for more than $Z, then the Lifegain Provider
430 is not required to pay the owner 410 under the Lifegain Agreement
462.
[0047] FIG. 6 illustrates that in a preferred embodiment, computers
6100, 6200, 6300, and 6400, respectively used by the owner 410,
life insurance company 420, the Lifegain Provider 430, and third
parties that make offers to purchase the life insurance policy 474
from the owner 410 may each be coupled to a network 6000. The network
6000 may be, for example, the Internet or any other wide area or
even local area network. A portion of the network 6000, for example,
between the owner computer 6100 and the life insurance company computer
6200, may be a local area network, while another portion of the
network 6000 (or the entire network) may be part of the Internet.
In an embodiment, the Lifegain Provider 430 can use its computer
6300 to determine whether the conditions of the Lifegain Agreement
462 have been complied with before performing their obligations
under the Lifegain Agreement 462. Additionally, in another aspect
of the invention, the computers 6100, 6200, 6300, and 6400 are used
to implement additional features. The computers 61000, 6200, 6300,
and 6400 may include at least one world-wide-web server for supporting
one or more web based applications for performing the above described
tasks. The web based application(s) may be accessible on one or
more intranets. The web based application(s) may also be accessible
over the global Internet.
[0048] While the invention has been described in detail in connection
with the exemplary embodiments, it should be understood that the
invention is not limited to the above disclosed embodiments. Rather,
the invention can be modified to incorporate any number of variations,
alternations, substitutions, or equivalent arrangements not heretofore
described, but which are commensurate with the spirit and scope
of the invention. In another aspect of the system other types of
assets can be used in place of the life insurance policy. For example,
a paid-up life insurance policy can be used in place of a life insurance
policy that has outstanding premium payments. Additionally, in another
aspect a contract can be used in place of an SV Policy. Also, the
SV Policy or Lifegain Agreement can be priced to provide the owner
with more or less protection, i.e., the amount of protection is
not necessarily tied to the owner's exposure to life insurance premium
payments. Furthermore, although described with reference to an embodiment
using a single insurance policy, the invention is not so limited
and can utilize more than one insurance policy for use as collateral.
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