Life settlement

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Related to Life settlement: viatical

Viatical Settlement

A transaction in which a life insurance policy holder sells his/her policy to a third party. The situation occurs when the policy's fair market value exceeds the cash surrender value that the insurance company offers. The third party is known as a life settlement provider, who, in the United States, must abide by applicable state regulations. The life settlement provider becomes the policy's new beneficiary, is responsible for maintaining premiums, and upon the death of the insured person, receives the benefit. The secondary market for life insurance began growing in the last part of the 20th century. In a viatical settlement, the life settlement provider is speculating on how long the insured person will live; indeed, it is in the life settlement provider's financial interest for the insured person to die as soon as possible. A viatical settlement is also known as a life settlement.

Life settlement.

If you are over age 70 and no longer need your life insurance policy, you may be able to sell it to a third party in what's called a life settlement.

You're paid a cash amount less than the death benefit but typically greater than the surrender value, and the party that buys your policy will get the death benefit when you die.

Similar to viatical settlements, in which terminally ill people may sell their life insurance policies, generally to use the cash to pay for healthcare, life settlements let you forgo a death benefit and use the cash in your policy while you're alive.

However, life settlements are for people who are healthy and expect to live more than a couple of years. Specific rules for life settlements are set by the state where a specific transaction takes place.

Some businesses specialize in buying life insurance policies from older or terminally ill individuals and reselling them as investments.

However, because these insurance arrangements are controversial and most investors understand them poorly, both people considering selling policies and people considering investing in them are advised to proceed with caution. For example, there may be complex estate-planning and tax consequences to life settlements.

References in periodicals archive ?
Abacus believes the time has come to broadly illustrate the financial science behind the life settlement option and to reverse the egregious lapse-rate statistics," Butcher added.
Crown Life Canada, a Canadian private company with corporate head offices in Mississauga, Ontario is in the business of purchasing and holding until maturity, senior life settlements.
The financial crisis that began in 2008 landed a one-two punch on the life settlement industry.
A life settlement would have saved his business if he had sold his policy for cash.
An insurance agent can file the required paperwork with the state, pay a fee and then become a licensed life settlement broker.
A life settlement involves a transaction with someone who's merely 60 years of age or older, whereas viatical settlements always deal with a person who is terminally or chronically ill, and does not have a life expectancy beyond two years," Bayston said.
Conning Research & Consulting estimated the life settlement market grew to $5.
Policies considered for purchase by life settlement companies must meet certain eligibility requirements, such as:
In a recent survey of accountants, attorneys, estate planners and insurance professionals by Maple Life Financial, a Maryland-based life settlement provider, 45% of respondents had clients over age 65 that had surrendered a life insurance policy for its cash value.
Many life settlement providers are backed (funded) by well-known financial institutions that view life insurance as an asset in a diversified portfolio.
Packaging and structuring life settlement assets into buy-and-hold investments
Rory O'Connell, Emergent's chief financial officer and chief credit officer, will be among leading industry, political and research experts who will be participating in a series of panel discussions that will examine the life settlements markets from the investor, lender and reinsurer perspectives.