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Most Recent Articles
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- Introduction To Life Settlement Investment
You may have already heard of this newer aspect of the life insurance industry called a life insurance settlement that has recently come about. A life insurance settlement is the sale of the legal ownership rights to another life insurance policy. These rights go from the insured to a third party for an amount that is more than the surrender value but less than the total death benefit. This is good for the seller if they are cash strapped, and nice for the buyer because it makes a good investment. Essentially, the seller of the rights gets quick funds, and the buyer of the insurance policy will get an even larger amount on the death of the insured.
To get a better understanding for life settlements, you have to take a deeper look into the life insurance settlement history. The life settlement industry is actually cousin to the viatical settlement industry which came about in the 1980's during the AIDS epidemic. In order to pay for medical treatment, many AIDS patients used all of their cash reserves, and then some. The only thing many patients had left worth anything was the life insurance policy that they held. During this time of need, a small group of investors understood that it made practical investment sense to purchase these insurance policies. As an example, if someone had a $600,000 policy they wanted to sell for $300,000 and their life expectancy was a year, this makes for a smart investment for anyone with to money to buy it. The investor which purchases the rights would realize a pre tax gain of $300,000 (100%), subtracting any fees necessary to keep the insurance policy up. The industry quickly exploded to a multi-billion dollar industry practically over night. Fortunately, technological advancements increased the life expectancy of AIDS patients from one year to 20 years. Because of this, instead of %100+ yearly returns on the investment, investors were typically seeing a %5 yearly return. The industry quickly vanished as quick as it came. - Strategies For Life Settlement Investment
Life insurance settlements go hand in hand with death. But, individuals investing in life settlements need to know some strategies before investing in any life insurance settlement simply because death may be imminent, but if it’s not immediate and you have money invested in a life insurance settlement you may find yourself wishing someone would just roll over and die. Life settlements are interesting investments because you know the face value you will receive from the life insurance policy but you have no absolute answer as to when that will be and how much money you will make/lose in the process. It’s a gamble, just like any other investment, but there are ways to make the gamble pay off in your favor more often.
First of all, a life insurance settlement is when an individual sells their life insurance policy for less than face value before they die. Individuals investing in this will want to consider the following tips to ensure they only buy policies that have the best possibility of a good return. Remember as well that the longer a person is expected to live the cheaper the policy will cost. The “when” aspect of death is what has many investors wondering about life insurance settlements and whether or not they are good options. Illness, life expectancy, and new technologies that could extend life should all be considered when looking into life settlements.
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