Tuesday, December 19, 2006

Speculator Initiated Life Insurance Policy

I don't know if SpinLife or Speculator Initiated Life Insurance also known as Stranger owned Life insurance (SOLI )or Investor Owned Life insurance ( IOLI ) has reached the Indian Sub-continent, but the concept of Buying Life Insurance for Investment purpose is getting notoriety in the US, with many BIG Investors buying Insurance policy with Huge Premiums as a Big Gamble.

OK, now you must have had Pesky Insurance Agents trying to sell you an Unit Linked Insurance Policy as a Good investment Option.. Don't be confused, Unit Linked Policies would look like Sovereign Bonds when you compare it with this High risk Policies called SPIN Life.

In SpinLife, the gamble is on the Life of a Person and not on the future earnings of a stock Company.
It all started when Insurance Agents who are also Financial Planners saw that many Rich Old people had Huge Life Insurance covers but their dependents that are already mature are independent enough that they don't really need the Life Insurance proceeds.

You are old, and you are paying huge premiums... The Insurance proceeds will however go to your Sons and Grandsons who are already well off! So Why not use the money yourself?
But then, as in insurance contracts, you only get to see the money... well your dependents will get to see the money when you are dead. You have to be dead to enjoy the proceeds of your Insurance that you have been paying all your life..

This is where this SPIN Life Investors come in.
They will buy the policy from you!
They will pay you a lumpsum which you can use to enjoy in your old age.. Surgery, Viagra and what not :)

In return they will get the insurance proceeds when you are dead.
They will just hope that you die soon, because now they will start paying your premium also.
Fair deal.. You get to enjoy your money.. And the investors have a good way of earning way above the market rates.. You see elderly people do tend to die :)..
The investors will get a better return the sooner you die.
Fair Deal.. Everyone wins.
But as long as it is in the hands of genuine Investors.
What if Crime syndicates starts investing...
They would just Kill!!!!
I guess SPIN Life will be banned one day or the other though!

eg: You have Policy worth 1 crore ( this Transactions only happen on Very High value Policies)..
You have already paid a premium of 5 lakhs...
These Investors will say pay you 25-30 lakhs, and a promise to pay all the Future Premiums.
They will recieve the 1 crore when the Insured is dead.

If the contract is properly designed, the investor can design it such a way that he will never lose the principal and earn at least a minimum return even if the Life were to survive very long...
Death is a Certainty.
That Infosys will continue to make profits is not..
And here we are, raking our minds on how to double our money from the Stock Markets.
I think SPIN Life practice will start in India..
Or maybe it is already started...

Spin life will be very popular with Term Life Insurance where getting life quotes is also very easy.


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