What is a Life Settlement?
What is it all about?
A life settlement is the sale of a life insurance policy-usually insuring the life of an individual age 65 or older-to a third party for an amount greater than the cash surrender value. Life settlements allow the owner of a policy to obtain a cash payment while the new owner assumes the rights to the policy. The new owner continues to make the premium payments, and therefore receives the proceeds from the death benefit.
Prior to the life settlement opportunity, an owner had few options once they made the decision that the policy would no longer be needed or wanted, or was no longer affordable. Their only option was to surrender the policy to the life insurance carrier, or allow the policy to lapse. With the life settlement market, a new option exists. The life insurance policy could now be sold to an institutional investor and the amount paid for the policy exceeds cash surrender amount.
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