Life Settlements
August 31st, 2009
Life settlements revolve around the sale of life insurance policies by the policy owner for an amount lower than the face value of the life insurance policy, to other investors. The investors are designed to make earnings when the death of the insured takes place by collecting more in death benefits than was originally paid out for the policy. That is, they pay out an amount lower than the combined total of the purchase price, transaction costs, and any premiums required. This usually amounts to higher profit margins the more rapidly the death of the original policy holder occurs. Viatical settlements are pretty much identical to life settlements, with the exception that the life insured is chronically or terminally ill as outlined in IRS regulations. During the notoriety of the AIDS epidemic of the 1980’s, the policies of these people were highly sought out by policy holders, as well, the recent recession and massive financial losses have again raised a demand for the acquisition as well as for investors to seek out these types of policies, because, for older individuals, their life insurance policy is one of their most worthily possessions.
Generally, life settlement deals are for the most part options for people of high net worth over the age of 70. Some estimates report that within this group of prospects, approximately 20% of them have policies that would have a market price that exceeds the cash value offered by the life insurer. A developing number of experts now believe that letting clients know about the possibility of offering life settlements and viaticals should become the fiduciary duty of financial advisers. This established, individuals established in the industry are now establishing an emphasis of life settlement and viatical education on individuals in the financial industry to facilitate that they can make aware of and present accurately the viatical option to every client who might possibly benefit from it. A majority of the time, policy holders 70 and older are prime candidates, but occasionally people as young as 55 years of age are eligible and or possible. Mostly, the insurance policies of such individuals are required to have a minimum face value of $50 thousand, and have been active for a minimum of 2 years. A low cash surrender value, and life insurance premiums lower than 8 percent annually are also considerations. Where there is a life expectancy lower than two years, the term viatical settlement is used. There are numerous individuals that are involved and a party to a transaction of this type taking place. First you have the policy holder, you have financial advisers, the policy providers, brokers, life insurance investors, as well as life expectancy providers and possibly many others. Viatical Settlements and Viatical Settlements are quickly becoming a popular type of investment and as a path for older people to accommodate their costs and quickly rising medical costs later in life.
