Secondary market for life insurance policies
Life insurance policies have been the stable investment for the last 30-40 years throughout the world. Life has no surety and so every practical person wishes to make certain securities for people who depend on him or her. This also has immense tax benefits.
But when a sudden awkward illness erupted (AIDS), which was not even covered, people started to collect whatever securities they could in the short expected life span. Obviously, selling the policy to the original seller would never have been profitable, since it straight became the buyer’s market. Loans on policy also had huge interests. In those times, secondary markets came as a big boon for these policyholders.
Definition of secondary market
Secondary market, by definition, is an alternative. A normal analogy would be the use of grapes in the making of wine. Secondary market is finding additional scope of a particular asset in other fields. Viatical firms came as a great forward step for the policyholders to take, as they would loathe negotiating with the holders on weak terms. The viatical firm would buy the policies of the people with life expectancy of less than a year or so. The policy would be theirs and they would pay the premiums. The faster the policyholders died, the more they would stake advantage.
Examples of market
There are three types of markets; primary, secondary and tertiary. The first is when there is direct dealing and the seller normally takes the lion’s share. The second is when a third party enters and shares the tax load and even percentage of profits or loss. Tertiary markets are when the initial root branches off in many directions. The factory-wholesaler-retailer-consumer is a great example. This is also the case in diversified market when a single thing is used for various facilities; like rubber or steel.
Describe life settlement market
When AIDS crept in, there was mystery about the illness and the survivors would be negligible. The policyholders got the news of life settlement markets opening in and were thrilled. These life settlement markets would settle life fear for the consumers and buy their policies at a fair price. This is when the initial market paid as less as one-third the market price. These life settlement markets brought the insurers in some trouble as they lured the holders to sell the policies to them. It was a two-way profit and eventually the insurers had to strike covert deals after making heavy AIDS research and life expectancy. Incidentally, the number of AIDS survivors has risen since then.
Benefits of secondary market
The primary benefit is that you get very prompt money to settle final dues and cater to the medicinal expenses. Secondly, the tension of paying the premiums on a regular basis is no longer yours. Your family escapes the trouble of dealing with the insurers in case of sudden death. The percentage they pay is very adaptable and is a heady relief. It is also an avenue that life insurance policies have opened up, from where they may benefit the clients through different molds.