Did You Know Future Disability Income Payments Can Be Acquired?
Posted by Marty Granoff
About four years ago we were approached by a cash flow broker with a most interesting prospect. He had been a dentist who developed a hand problem not allowing him to practice anymore. He could, however, do other work either within the dental field or outside of it. He happened to be a businessman as well and had a business of manufacturing specialty doors which he had made in China. He needed money for this business. He was seeking to accelerate some of the disability income payments he was receiving from the disability income policy he had acquired many years before his hand problem developed. He was receiving over $20,000/month from this (yes, I've never seen this large a disability income benefit being paid either) and the insurance company allowed him to work his door manufacturing business while still being considered totally disabled as per this policy's definition of total disability.
We had never done a transaction like this before and were intrigued to see if we could help this former practicing dentist. The first problem to overcome is that disability income payments cease upon death. How can we thus acquire future payments that can stop at any time? The prospect happened to have a large, inexpensive term life insurance policy. OK, if we can get a collateral assignment on the life insurance death benefit so we could receive from the life policy what we couldn't any longer receive from the disability income policy if he dies, and if we could get the disability income company to agree to an irrevocable assignment on a specific number of future disability income payments, this just might work. Well, it all came together and we were able to acquire enough future disability income payments to advance the prospect around $700,000. To date everything has functioned smoothly with us receiving the monthly payments and with the former dentist having a most successful business. He told us our help allowed him to raise the money he needed without having to give up any equity in his company which, before we came along, seemed his only possible alternative.
With another more recent case, serious food poisoning compounded by bad follow-up surgery resulted in a high ranking corporate executive qualifying for permanent disability under his corporate/group plan which also included a sizable life insurance policy. We have acquired future payments from this client twice - about a year and a half ago and recently. For some reason neither of these client's life insurance policies had a premium waiver benefit. We thus needed to prepay enough of the future annual premiums to assure these life policies remained in force for the time period we needed them to.
Above are three very nice future cash flow acquisitions we had never considered until the cash flow broker brought us the first prospect. We have looked at others but none, so far, have been doable for reasons such as our not being comfortable with the policy definition of total disability and/or there being no existing life insurance and acquiring new life insurance was not feasible for health reasons. We anticipate doing many more of these in the future when more people learn about the possibilities here. Isn't the cash flow business a wonderful business?