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.

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&#39;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 S 1 , the owner  10  purchases  70  a life insurance policy  74  from a life insurance company  20 . The process continues to segment S 2 .  
         [0021]     In segment S 2 , 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 S 3 .  
         [0022]     In segment S 3 , 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 S 4 .  
         [0023]     In segment S 4 , the owner  10  considers making a claim under the SV Policy  62 . The process continues to segment S 5 .  
         [0024]     In segment S 5 , 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 S 8  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 S 6 .  
         [0025]     In segment S 6 , 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 S 8  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 S 7 .  
         [0026]     In segment S 7 , 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&#39;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 S 51 , the owner  410  purchases  470  a life insurance policy  474  from a life insurance company  420 . The process continues to segment S 52 .  
         [0038]     In segment S 52 , 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 S 53 .  
         [0039]     In segment S 53 , 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 S 54 .  
         [0040]     In segment S 54 , the owner  410  elects to exercise his rights under the Lifegain Agreement  462 . The process continues to segment S 55 .  
         [0041]     In segment S 55 , 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 S 60  and the process ends. If Yes, then the process continues to segment S 56 .  
         [0042]     In segment S 56 , the Lifegain Provider  430  determines whether $X is more than $Z. If Yes, then the process continues to segment S 60  and the process ends. If No, then the process continues to segment S 57 .  
         [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 S 60 . If No, then the process continues to segment S 58 .  
         [0044]     In segment S 58 , 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 S 60 . 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 S 57 .  
         [0045]     In segment S 60  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&#39;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.