What is a life Settlement
A life settlement is the purchase of an existing life insurance policy, by a third-party investor, for more than the cash surrender value of the policy. Originally designed for institutional and corporate investors, the life settlement market is now available to qualified individuals.
Life settlements have no correlation to stock or financial markets, oil prices, interest rates, or traditional investment classes. Investing in life settlements can offer outstanding returns while minimizing risk.
Life settlements evolved in the United States during the late 1990s, and experts estimate the market to grow to between $100 and $160 billion over the next two decades. A significant number of policies are expected to come to market, supported by various trends including Baby Boomer population growth, financial uncertainty and favorable legislation.
Cash Surrender Value vs. Secondary Market
Until recently, the only option a policy owner had was to surrender their policy back to the insurance company. With the advent of life settlements, an insured can now sell their policy on the secondary market for an amount much greater than its cash surrender value.