Beneficial Interest Certificate or “BIC” is a document that describes the individual fractional interest position purchased by an investor in a given series trust.
Fractional Interest Position or “FIP” is the term used to describe a partial position as a beneficiary of a series trust of the RLSSST. A fractional interest position is not a life insurance policy. Rather it is both a right to receive a portion of the net death benefit of a life settlement after the insured dies and a valid claim is collected, AND the obligation to pay pro rata premiums, fees and expenses until the insured dies.
Fractional Interest Position Holder or “FIPH” is the term used to describe the investor who holds a position as a beneficiary of a series trust of the RLSSST. FIPHs are beneficiaries of one or more series trusts of the RLSSST, but they do not own the life settlement held by a series trust.
Insured is an individual covered by a life insurance policy and on whose life the policy is based.
Life expectancy is the average or mean number of years (or months) a member of a group of like-kind individuals can be expected to live.
Life expectancy assessment or “LE” is a formal report issued by a registered and licensed life underwriting company concerning an individual insured. Most LEs include a morality curve which is a numerical representation of the probabilistic distribution of deaths over time among the members of the group like-kind individuals of which the insured is a member.
Life insurance policy is a legal contract entered into by and between an insurance company, an applicant (the policy owner) and an insured (the person on whose life the policy is based). The policy owner agrees to pay premiums in exchange for the assurance that when the insured dies, the net death benefit will be paid to the beneficiary. There are three basic types of life insurance policies: whole life, term life and universal life.
Life settlement is both the process of selling an unwanted or unneeded life insurance policy in a regulated transaction (in most states), in exchange for money and other consideration, and the term used to describe a life insurance policy after it is sold for the first time. Once a life insurance policy is sold in a life settlement transaction, it is called a life settlement.
Life Shares is the commercial name used by Reliant Life Shares, LLC to refer to fractional interest positions (“FIPs”) as a beneficiary of a series trust.
Longevity risk is the risk of living longer than expected. Life settlements are a form of longevity risk for the policy owner.
Mortality risk is the risk of dying sooner than expected. Life settlements are a form of mortality risk for the insurance company that issued the policy (i.e., the carrier).
Premium is the term used to describe money paid to the insurance company in exchange for insurance coverage. There are several components of premium the largest of which is the Cost of Insurance or “COI,” which is the price of the risk associated with the policy. In a life insurance policy the risk to the insurance company is that the insured dies and a claim must be paid. This risk increases as the insured ages, so the COI of life insurance policies rises as the insured ages. Therefore, the longer the insured lives, the higher the COI component of premium will be over time.
Pro-rata Premiums or “PRPs” (including fees and expenses) is the term used to describe amounts owed by a FIPH whose FIP is still active after the original premium reserve amount has been exhausted. Each PRP amount is based on the expected premiums due for a given life settlement policy in the next calendar year, plus a buffer amount, plus the per FIP administrative fees and any per policy expenses expected to be incurred for the next policy year. The total PRP for each life settlement owned by a series trust is allocated to each FIPH in a given series trust based on the percentage interest as a beneficiary purchased by each FIPH in that same series trust.
Qualified Plan or “QP” is a type of account that affords the beneficiary of the account certain tax benefits so long as the assets contributed remain in the account. QPs include self-directed IRAs, defined contribution plans, defined benefit plans, Roth IRAs, SEPs, and other forms of qualified plans.
Qualified Plan Custodian refers to the company that holds assets for the benefit of (“FBO”) a beneficiary who contributes money and other assets to a QP. QP Custodians act at the direction and on behalf of the plan beneficiary (i.e., the person who stands to benefit from the plan).
Reliant Life Shares Series Statutory Trust or “RLSSST” is the trust under which each series trust is formed and by which each series trust is governed.
Series Trust refers to a sub-trust of the RLSSST. Each series trust holds a single life settlement (i.e., life insurance policy) and issues FIPs in the form of Beneficial Interest Certificates to FIPHs in exchange for the purchase price and other obligations.
Servicing or policy servicing means the set of activities necessary to maintain each life settlement by paying premiums and tracking the person covered by the policy (i.e., the insured). The servicing company or “Servicer” also processes claims and collects the net death benefit on behalf of the policy owner, the RLSSST and its related series trust.