Unneeded or underperforming insurance policy holdings? Ever thought
or heard of a financial services valuation tool and strategy called
life insurance settlements? Well, if not, the capital markets certainly
have heard and taken notice. Life Insurance Settlement companies
purchase unwanted or un-needed life insurance policies from individuals
and ultimately collect the death benefits. These payments are passed
on to third-party institutional investors who are looking for returns
that are not correlated with existing portfolios. A key component
to this growth expectation is that business is conducted in a responsible
manner. Poor sales practices by settlement firms could hamper growth
and spark a new wave of litigation. At present, there is roughly
$13 billion of total in force settlement business. While small compared
to the $9 trillion of individual life business on the industry's
books, the settlement market has grown about eight times faster
than non-traditional life insurance. This growth rate differential
will continue and could expand over the next few decades, which
will draw more attention to the settlement business and senior life
settlement in particular.
Here is a description of the dynamics at work and a little background
detail about process:
A life insurance settlement is a transaction in which policyholders
sell the rights to the death benefits associated with their insurance
policies to third party settlement companies. In other words,
this process in effect creates a secondary market for life insurance
products - like life insurance settlements. The typical market
for these products includes individuals over the age of 65 with
life expectancies of 4-10 years.
A settlement firm, representing third-party investors, or better
yet, an institutional funder, will provide a cash payment to the
policyholder that exceeds the cash surrender value embedded in
the policy. From that point on, the original policyholder will
have no further involvement or association with the policy.
The life settlement firm will continue to make premium payments
on the policy to the life insurer, until a death benefit is claimed.
The death benefit will be collected by the settlement company
and passed on to third party investors, who are likely interested
in returns that are not highly correlated with their other assets.
(Source: Corporate reports and Bernstein Estimates)
A life settlement, to summarize, is basically the sale of a life
insurance policy at a price, higher than the cash surrender value.
Many seniors are realizing the extraordinary benefits of unlocking
the dormant asset value of life insurance, allowing them to better
plan for their future through what is essentially newly-found money.
<a href=http://www.life-settlementco.com>
Life insurance settlements </a> are increasingly offering
seniors viable options for their life insurance policies, and, as
we are now seeing, more financial options can be rewarding indeed.
Life Insurance Settlement Experts http://www.life-settlementco.comJon Thomas has been involved in finance and insurance,
specializing in emerging growth markets since 1979.
