Trusted Betty White Now Promoting Risky Investments

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Betty White endorses life settlementsBetty White's endorsement can be a powerful boon for business. The former "Golden Girl" was recently named America's most trusted celebrity. That's good news for William Page and Associates: They've got White starring in a music video promoting "life settlements."

The irony here is that White, 89, is probably as unfamiliar with the downside of life settlements as most senior citizens are when they get pitched these products. And while life settlements, also known as "viaticals," are presented as win-win propositions, they can be anything but for the seniors who buy into them.

Viaticals 101

Here's how viaticals work. Companies buy various people's existing insurance policies, then sell them to other people. (Viaticals involve policies of people expected to die within a few years, while life settlements involve policies of those who are simply of a certain age, such as 60 or older.)

Here's a simplified example that will make the concept clear: Imagine that Bob is very sick and isn't expected to live for more than about two more years. He's running low on funds, and has a life insurance policy that will pay off when he dies. Meanwhile, Jane is interested in investing some money effectively. She's presented with the opportunity to essentially invest in Bob's policy. If it's set to pay $100,000 on his death, Jane might pay $75,000 for it. That way, Bob gets a lot of cash now, and Jane expects to get the $100,000 in about two years. At that rate, she'd be earning a solid return.

That arrangement seems great at first: Bob gets much-needed funds, and Jane gets a compelling investment.

And then the risks appear...

For starters, what if advancements in medicine help Bob live 10 more years, not two? Jane's ultimate return on her investment will drop significantly -- especially if she's on the hook for making his premium payments. After all, it's not inconceivable that Bob will end up outliving Jane.

And there's bad news for Bob, too. If he ends up beating his disease, he'll be living without the life insurance that he might have wanted and needed -- and it's very possible that his health history will prevent him from getting a new policy.

Life settlements that don't involve terminally ill people can present similar risks. Some 65-year olds will live another 10 years, while others may hang on for 30 more. All of these arrangements may have tax implications, and depending on where you live, many of them may not be highly regulated.

Now, in reality, investors like Jane don't buy policies directly from policyholders like Bob. But there is plenty of money to be made by middlemen, ranging from public companies such as Life Partners Holdings (LPHI) and Imperial Holdings (IFT) to smaller privately held ones. Even big banks such as Goldman Sachs (GS) and Credit Suisse (CS) have looked into entering the business, helping pension funds make life insurance-linked investments.

Middlemen often take a cut of each deal. The folks at the Lifeline Program, for example, are eager not only to sell investors on the concept, but also to buy life insurance policies. Signing up Betty White helps the company attract the attention of the many Baby Boomers who love her.

Drawing Attention

There have been lots of consumer complaints about these settlements over the years, prompting government entities to start taking a harder look at them.

Life Partners in particular now faces a Securities and Exchange Commission investigation for allegedly underestimating the life expectancies on its policies, and therefore suggesting that investors will earn more than they actually will. A Wall Street Journal investigation found that in 90% of its policies, people outlived Life Partners' projections.

The North American Securities Administrators Association maintains a list of investments that "threaten" investors. As it noted, "Legitimate investments in life settlement contracts involve a high degree of risk, and investors may be responsible for routinely paying costly premiums for policies that insure people who outlive their life expectancies." Fraudsters and scammers offer plenty of not-so-legitimate investments as well. Tread carefully.

I can imagine why Ms. White, 89, might have agreed to the deal. She's well known as an animal lover and animal-rights advocate, and it seems that a portion of proceeds from the sale of the video will go to the Los Angeles Zoo. (She apparently didn't know much about life settlements before being approached by William Page's Lifeline Program.)

While her intentions may be pure, and while viaticals may make sense for some people, for most of us -- probably including Betty White -- there are better ways to raise or invest money.

Learn more about life settlements, their dangers, and how to be smart about them:

Longtime Motley Fool contributor Selena Maranjian holds no position in any company mentioned. Click here to see her holdings and a short bio.



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13 Comments

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Gloria Grening Wolk

JHamp claims life settlements are legitimate--false. And claims I was booted from NCOIL's telephone conference call for "antics and raving." I was booted off the phone by the legislator from Georgia who objected when I described life settlements as NOT legitimate simply because a state has a law to regulate the transaction. If the state does not enforce the law--poof. If the state, like Georgia, welcomes companies like Page's LifeLine (the one that pays Betty White megabucks) after they were booted from Florida for fraud--poof. The legislator was screaming that I should be disconnected. But I submitted a lengthy, detailed treatise to NCOIL that documented lawsuits in which insureds were victimized by numerous companies. The details were from court documents.

This is a high risk industry for those who want or need to sell their own policies and for investors.

There is little regulation until thousands are victimized. Then, the actions taken against the companies do little to restore the victims. In fact, they never recover fully.

December 02 2011 at 2:56 PM Report abuse rate up rate down Reply
panuco1

BETTY WHITE knows exactly what she is doing, and i am sure her staff is in on it too.... just because she is old, doesn't make her stupid

September 21 2011 at 1:49 PM Report abuse rate up rate down Reply
leeberman14

Wow. Very timely article (sarcasm). Betty White has been promoting Page and Associates for years! This is not a new arrangement. It's just that in the last 2 years Ms. White has become very popular again after years of being mostly invisible in Hollywood. Further, as JHamp describes, this industry is so over regulated that the investment risk is not what it was in years past. In fact the state depts of insurance have gone so overboard with regulations to protect investors that they have restricted the ability of people in need to sell their policies. I won't rehash what JHampo said, but he makes good points. Do your research instead of writing with an obvious agenda

September 21 2011 at 10:17 AM Report abuse +1 rate up rate down Reply
Pappakenn

Betty, Betty you need not bother youself with the promotion of investments of any kind unless its for the USO or government backed bonds! Everything else is and always will be risky.

Stay the sweet person that you are, (get rid of whomever suggested you do this promo) stay away from promoting speculation. Continue and it can FUBAR your years as an American Icon!

September 21 2011 at 8:24 AM Report abuse rate up rate down Reply
fitecf

You gotta love the underlying philosophy here.....I'm praying every night that you die sooner rather than later....so I get more money. Somewhere God has got to be cringing.

September 21 2011 at 7:43 AM Report abuse rate up rate down Reply
dterraman

haven`t you noticed, she will do ANYTHING for a buck

September 21 2011 at 5:43 AM Report abuse +2 rate up rate down Reply
savemycountry911

Maybe Betty is senile.

September 20 2011 at 9:56 PM Report abuse +1 rate up rate down Reply
hgeorgech

good grief .. does she really need the $$$?

September 20 2011 at 6:42 PM Report abuse rate up rate down Reply
Gg

I'll vote for Marge Simpson and Edith.

September 20 2011 at 3:46 PM Report abuse rate up rate down Reply
JHamp

There is nothing wrong with legitimate life settlements. As a matter of fact, life settlements happen to be one of the most highly regulated sectors in insurance today and according to the GAO, in just four years, life settlements have provided consumers over $5.62 billion more than the cash surrender value of their policies in life settlement transactions, an average of more than eight times the cash surrender value.

You should do your research first, because you would also find that according to the National Association of Insurance Commissioners (NAIC) Complaints Database System, from the start of 2008 through present, only five closed consumer complaints involving settlements were recorded. This is compared to the more than 20,000 closed consumer complaints reported involving life insurance over the same period.

I would also recommend further differentiation between a legitimate life settlement and a life settlement investment. While life settlement investments are not for everyone, especially individuals, they do offer attractive options for some investment portfolios.

...and instead of forwarding consumers to websites like the Viatical and Life Settlements Consumer Info site mentioned above (which I might add, Gloria Wolk was recently booted from an NCOIL call for her antics and ravings), try forwarding them to a more reputable source like the Life Insurance Settlement Association.

September 20 2011 at 2:35 PM Report abuse -1 rate up rate down Reply