In the field of life insurance there are plentiful things to make note of. There are myriad terms to get acquainted with and ensure that the risks and benefits are good. That’s why it’s good to stay educated on the matter whenever considering life insurance. Today, we are going over L bonds.
What are bonds and how do they work?
A bond is a type of security used in investing situations. It is a way for holders to get a direct recompense from the person who issued it. The bond itself acts as a confirmation that the issuer is in debt to the one holding the bond and will have to pay the money owed to them in specific situations. This can be after a specific amount of time, on holders’ call, or if certain criteria are met.
This is something to keep in mind for L bonds and their way of operation. It’s also important to keep in mind that the value of these bonds usually increases with interest at certain periods of time.
What are L bonds?
What L bonds are is an important question to answer in order to fully understand them and potential interaction with them. To put it in simple terms, the L bonds represent unrated life insurance bonds that are used to make payments for life insurance when bought in the secondary market.
With these bonds, there are some differences to standard purchases. An L bond is a high-yielding debt instrument. It relies on purchasing life insurance policies from their current policyholders.
When these bonds are utilized, they form a situation where it is the bondholder that profits from the premiums that insurance would otherwise pay out to policyholder or their associated contacts.
How do L bonds work?
The L bonds only work if the policyholder actually gets paid from their life insurance. Because of this, the bonds are considered a somewhat risky investment. These bonds have the high yield going for them though so it’s a frequent conundrum where to go with them.
The actual way they work is as such. The policyholder gets life insurance. This insurance can vary and the included premiums will not be the same everywhere but the key point is that they have some form of it.
After that, if the policyholder stops requiring life insurance or decides they don’t want to benefit from the life insurance it’s possible to sell bonds tied to it. These bonds are L bonds and what they do is enable those who purchase them to benefit from payouts tied to life insurance in case the original policyholder would be given those benefits.
Are they safe?
The key point to remember about L bonds is that they are a rather new concept. They are little over 10 years old with the most invested connection to them being GWG Holdings firm. This firm has been selling bonds that cumulatively carry a worth of over a billion dollars.
The L bonds are pretty risky, as most bond investments of this type. The risk is even cleared by the GWG Holdings because they make sure to note the worth of L bonds can be highly speculative and carry risk of losing your entire investment. This means that a misstep will be likely when investing in L bonds and you may even end up losing the whole investment into certain bonds from such missteps.
Other warning signs of L bonds
Not only are the initial assumptions of an L bond rather risky, assuming that the premium payouts may not even happen, but there’s a chance you’ll simply not get a payout period. This is because the company that’s supposed to handle paying out bond owners, which is an affiliate of GWG Holdings, already has a huge debt. With this debt, it’s impossible to actually pay out those whose L bonds have come to pass and as such leave these bonds pretty risky in terms of investment.
But that’s not all. Last year, GWG Holdings themselves stopped selling L bonds and declared bankruptcy. The GWG Holdings are also under government investigation for selling the L bonds without means to pay them out
If you suffered the negative experiences with GWG Holdings’ L bonds, you should seek to contact a law professional. At the very least you should do it for the sake of consulting on the course of actions you should take in order to attempt retrieving your investment.
With mdf-law.com you can get high quality and immediate consultations and support that won’t cost you unless the money is returned to your hands. That way, you needn’t worry about initial costs of it all but rather pay it off with the cash that’s turned back to you. It’s worthwhile to check out their stipulations on what makes you eligible for recovery of cash in case L bonds affected you.
To wrap it all up we should note the overall utility of bonds is often overshadowed by the stipulations and conditions attached to them. In the case of L bonds, these are pretty unfortunate as the bonds themselves are already decently tough to cash in with but the extra problems presented by the L bonds make them function in a very odd way.
In fact, they don’t really function. As we’ve mentioned above, not only are they not as likely to pay out but even in the situation where payout is supposed to happen and you are about to reap the extra cash from your investment, you won’t be able to.
The reason for this is because the company that was supposed to pay these bonds out is already under massive debt. Additionally, the parent company of that one also contains the troublesome weight of false promises with it. This led to a bankruptcy, an investigation, and overall betrayal of their clients’ trust.
L bonds are not a type of bond you can trust and getting into them isn’t only unsafe, it’s downright awful. There have been no new bonds being made ever since the government investigation was made public but if you are ever in a situation where somebody tries to sell one to you keep the aforementioned downsides in mind.
We hope this has prevented you from making an investment before listening to all the facts and has hopefully kept your money safe for other, better investments.