Mar 27
Life Settlement – An Unusual Financial Tool
Life settlement is a term for a financial transaction in which a person who holds an unneeded or unwanted life insurance policy sells that policy to a third party for an agreed upon price. The seller receives an immediate cash payment and the buyer becomes the policy beneficiary at maturation, which is when the seller passes away. The buyer assumes all premium payment obligations.
This business developed in the eighties, when AIDS patients were looking for a way to pay for their medications. Today, life settlement has developed into a secondary market in life insurance policies that is expected to grow to $160 billion over the next few years. It appears that the sharks are circling, as life settlement packages have become an investment vehicle for hedge funds and other financial high rollers, with potential returns of up to seventy percent.
Generally speaking, many policy owners who are the sellers in life settlement transactions are unfamiliar with this option until a financial professional mentions the option to them. The fact is that a life settlement contract is often arranged by a broker who earns commissions for identifying elderly sellers and steering them to investors.
Interest from investors such as Warren Buffett has generated a fair amount of discussion in print and in financial circles about this market segment; however as yet the industry has few rules and no regulation. It is a developing opportunity for speculation in yet another convoluted financial instrument.
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March 27th, 2007 at 3:07 am
Oh! but Is it the think that you know earlier??