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.  Life 
insurance settlements  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.com

Jon Thomas has been involved in finance and insurance, 
specializing in emerging growth markets since 1979.