Life settlement

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Related to Life settlements: Life Insurance Policies

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 ?
Today, 34 states regulate life settlements to protect life insurance policy owners who are considering a life settlement and more states are currently considering and adopting legislation.
argued in presentations at the conference that the risks of investing in life settlements may not be well understood.
Life settlements are based on the proposition that some insured individuals no longer want, need or can afford their coverage.
While there are no specific Internal Revenue Code provisions pertaining to life settlements, there are some general guidelines CPAs can use to help determine the tax implications.
From a business perspective, life settlements can be considered when a business is for sale or the owner is retiring.
As an uncorrelated asset class, the risks and returns in life settlements don't respond in ways that common asset classes do, and offer an attractive offer for diversified portfolios.
nd] Annual International Life Settlements Investor Conference will be held at the London office of Ernst & Young at 1 More London Place, London SE1 2AF.
And he says insurers are working to align legitimate life settlements with stranger-originated life insurance (STOLI).
Many broker-dealers and insurance marketing organizations, as well as some carriers, are beginning to see that life settlements are viable, consumer-friendly transactions that have a legitimate place in a financial plan.
This arbitrage most often takes the form of a block of policies that have been included in a life settlement vehicle created by the investment firm.
Most who allow policies to lapse are not aware of the life settlement option.
The purchase and close of this significant portfolio establishes Crown Life Canada's leadership in the life settlement market.