Life Settlements
In a life settlement, a life insurance policy holder sells his/her policy to an investor. A whole life or universal life policy almost always can be sold for much more than the surrender value the insurance company would pay.
History of the Life Settlement Industry.
In 1911, the Supreme Court ruled in Grigsby v. Russell that life insurance policies were freely assignable for value.
Viatical settlements began in the early 1990′s as a solution for those terminally or chronically ill lacking the
funds to pay for the medical treatments, medicine and/or hospice care. Rising out of the viatical business, life settlements took hold by focusing on individuals who were not terminally or chronically ill but, instead, had experienced a change in their financial needs subsequent to the issuance of their life policy.
What is a Life Settlement?
The Life Insurance Settlement Association (LISA), the national trade association for the life settlement industry,
defines a life settlement as “the sale to a third party of an existing life insurance policy, generally by seniors over
the age of 70, for more than its cash surrender value (CSV), but less than its net death benefit.” Simply stated, a
life settlement enables older individuals, businesses, trusts, and other organizations to sell a life insurance policy
they currently own—but no longer want or need—for a lump sum cash payment in an amount greater than the CSV. Life settlements average 22% of their policy’s face value, policy owners now have a vehicle to produce liquidity and an appropriate return on their policy.
Who are the Players in a Life Settlement Transaction?
Most life settlement transactions involve a policy owner, an insured, the policy’s insurance carrier (the “insurer”), a
life settlement provider (the “buyer”), an institutional funder, a life expectancy provider, and a life settlement
broker. The policy owner actually owns the policy and is the only one authorized to sell the policy. The policy owner can be an individual, a trust, a bank, a corporation, or a charitable organization. The insured is the individual life that is covered by the life insurance policy. An insured, who is not the policy owner, cannot sell the life insurance policy but must cooperate in signing certain releases if the sale is to be executed.
To gain additional knowledge or assistance…be sure contact me and I would be happy to assist you in any way that I can.
March 9, 2010
Tags: business, investment, life insurance policy, life settlement, policy owner, seniors Posted in: insurance
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