Life settlements as an investment
Life settlement means the sale of an existing insurance policy to the third party or industrial investors. The policy owner sells the insurance policy and at rate less than the face value of the insurance policy itself. The third party is than responsible of paying all the remaining premiums and transaction costs. The life settlement is a grown form of viaticals life settlements that were very popular in 80’s. Mostly senior insured citizens having age above seventy five sell their life insurance policies to the third party in order to get the high-net worth of the policy. In order to be eligible for a life settlement the policy holder must be an age of seventy or older. The minimum face amount of the policy must be $50,000 and the policy must be active from two years along with less than 8% premium per annum.
Investors also known as risk takers, they are the finance entities as they provide the capital or finance for the life settlement transaction that is providing the cash for the purchase of the life insurance policy. Investors might use their own capital to purchase such policies or they may arrange the fund through other investors undergoing through a variety of structures. Life settlement providers are the entity that enters into the transaction with the policy owners for purchasing the policy and in return pays the owners when the transaction is agreed and closed. In most of the cases the providers have a written agreement with the investors underlying the fact that they will be providing with the fund needed to acquire a policy. This shows that the Investors are the ultimate under for the monetary transaction however in some transaction the provider itself acts as an investor and uses it own capital to purchase the policy for its portfolio.