Life Settlements
What is a life settlement?
A Life Settlement is the transfer of ownership and transfer of beneficiary rights of a life insurance policy in exchange for a cash settlement. The seller of their policy no longer has the financial responsibility of paying their life insurance premiums. When the seller (insured person) passes away in the future, the purchaser receives the benefit from the insurance company.
An investor's profit from a Life Settlement is based on the difference of the face value of the life insurance policy and the cost of the investment.
Life settlements can benefit policyholders by providing them with an opportunity to access the value of their life insurance policy while they are still alive, rather than letting the policy lapse or surrendering it to the insurance company for a lower value.
A Socially Responsible Investment
Individuals who are ill-prepared for retirement can utilize life settlement proceeds to replace pre-retirement income and help maintain a dignified standard of living.
Frail and disabled persons use life settlement proceeds to pay for assisted living and long-term skilled nursing, subsequently reducing the burden on the shoulders of family or government programs.
The Benefit of decades of premiums paid on a policy to be realized by an individual in need rather than being forfeited to insurance companies.
Saving Policy
Holders' Value
$100B+
In face value of life insurance lapsed or surrendered each year by seniors
(Life Insurance Settlement Association)
​
​
31%
Of consumers’ intrinsic economic value of their life insurance is rescuted by the life settlement markets
(Deloitte)
​
History of Life Settlements
Supreme Court ruling
Gigsby vs. Russell
•Life insurance policies are deemed private property. Private property that can be sold to a third-party.
•This ruling enabled the legal sale of a Life Insurance policy for cash through a private property transaction.
Viatical Settlements industry begins
•A V.S is the legal sale of an existing life insurance policy (terminally ill individuals) to a new owner for more than the surrender value, but less than its Net Death Benefit, to a third-party investor.
•Industry began with individuals battling with AIDS, who sold their policies.
•Money received helped many individuals struggling with expenses of this terminal illness prolong the time spent with their families.
•Viaticals Settlements are associated with policies of terminally ill policy holders.
Life Settlement industry begins
•A L.S is the legal sale of an existing life insurance policy, (U.S. senior citizens), for more than the surrender value, but less than its Net Death Benefit, to a third-party purchaser. The purchaser assumes the financial responsibility for ongoing premiums and receives the death benefit when the insured senior citizen dies.
•Industry began when senior citizens who were struggling with the costs of their retirement or no longer needed their LifeInsurance policies sought after a better financial solution than lapsing or surrendering their life insurance policies.
•Money received by seniors is typically 4 to 11 times more than what their insurance company would give them in exchange for their policy.
•This money helps seniors to fund long term care, medical costs, the costs of retirement, and living expenses.
The Life Settlement Industry Now
•The regulated Life Settlement industry of today continues to grow, with $23B Life Settlements currently in-force and $10B of secondary market trades occurring annually. Investment institutions like Berkshire Hathaway and Blackstone have deployed billions of dollars into the space, due to the unique non-correlated nature of the Life Settlement asset class. At both a regulatory level and a transactional volume level, the industry continues to evolve, with key analyst groups, such as Conning, forecasting multiples of industry growth into the 2030s.