Life settlement

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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 ?
The company is also active in the Senior Settlement Market as funding assets for pension plans and investment funds.
The portfolio, including the debit cards, takes the work of four full-time staff to manage: one product manager, one new account processor and two senior settlement processes.
Senior settlement is like reconditioning an engine whose mission has become obsolete but whose efficiency is without fault.
With his legal costs of pounds 250,000 and the pounds 50,000 Mary Senior settlement, that will take the cost to pounds 1million.
The shortcoming here is that a senior settlement is not tax-free.
Today, operating from its headquarters in Atlanta, Georgia, The Lifeline Program is the preeminent life and senior settlement company in the United States.
This practice, known as "lapse based pricing," may well prove to be a very costly mistake for insurance companies, because this new senior settlement marketplace could result in most policies being held until death.
The Securities Commission's not-so-sweet 16 list included: -- Affinity fraud -- "Churning" of investment accounts -- Equity indexed certificates of deposit -- Oil and gas investment fraud -- Personal information scams -- Offshore prime bank schemes -- Pump-and-dump schemes -- Recovery rooms -- Registered high-interest promissory notes publicly advertised -- Sale and leaseback contracts -- Self-directed pension plans -- Short-term commercial promissory notes -- Speculative inventions and new products -- Unsuitable recommendations -- Variable annuities -- Viaticals and senior settlement investments
Its specific focus is on helping financial planners, advisors, brokers, CPAs, attorneys, trust officers and others with fiduciary responsibility in the senior settlement market.
A viatical, also referred to as a life settlement or senior settlement, is an investment in a life insurance policy whereby the original insured -- usually elderly or terminally ill -- sells their "death benefit" to a third party who then solicits investors to buy an interest in the same policy.
A "viatical," also referred to as a life settlement or senior settlement, is an investment in a life insurance policy whereby the original insured -- usually elderly or terminally ill -- sells their "death benefit" to a third party who then solicits investors to buy an interest in the same policy.
Standard & Poor's--Viatical and senior settlement securitizations continue to attract some inquisitive investors despite the special challenges and risks those transactions pose.

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