Life Settlements as an Investment

A life settlement is a financial transaction in which a life insurance policy is sold on the open market for a value greater than the policy surrender value (the cash value of the policy which the insurance company will pay to “repurchase” the policy) but less than the full policy benefit value. A life settlement is one of the most consumer friendly life insurance alternatives that offers an obvious benefit to the option of lapsing or surrendering the policy. For investors, life settlements provide the potential for low-risk, high return investing with low market correlation.

Attractive Expected Returns
Potential for high yield returns relative to investment grade fixed income classes.

High Credit Quality
Insurance carrier’s credit is nearly always investment grade and insurance policies remain a senior obligation.

Expanding Regulated Market
The life settlements market has grown in size and estimates of the overall market range from an estimated $240 to $600 billion of policy benefits.

Low Correlation of Return
The asset class historically has lower exposure to economic and financial market cycles.

Flow of a Life Settlement Transaction

 

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