How a Life Insurance Settlement Works
An investment company/provider purchases a life insurance policy by paying a percentage of the policy's face value to the owner. Among the factors that contribute to the selling price are the death benefit amount, current medical condition, and life expectancy of the policyholder. When the company/provider purchaes the policy, it continues to pay all future premiums and collects the entire death benefit when the insured dies.
Investment companies buying life insurance policies usually look at two things: whether the policy is worth a large sum (generally no less than $100,000) and the health of the policy holder. From the provider's perspective, a healthy policyholder means the life insurance policy might not create a profit for a long time.
Life Insurance settlement companies use various methods to determine when a former policyholder dies. Some companies occasionally send a postcard asking the insured to send it back. If the postcard is not returned, the company investigates further. Others designate a third party (a lawyer, for example) to stay in touch with the former policyholder.
Life Insurance settlements are different from their financial clone, viaticals, which are settlements where a terminally ill policyholder sells a life insurance policy to a third party. In life insurance settlements, the policyholders are not terminally ill. Their health has simply declined. An example of this is a person who develops a heart condition, or possibly some type of cancer.
The difference in health conditions explains why life insurance settlements are riskier than viaticals from the investor's perspective: You don't know when the insured is going to die. As a result, the sick are likely to get more money for their policies through viaticals. Policyholders can get 50 to 80 percent of their policy's face value in a viatical sale, but only around 20 percent or more in a life insurance settlement.
Investment companies buying life insurance policies usually look at two things: whether the policy is worth a large sum (generally no less than $100,000) and the health of the policy holder. From the provider's perspective, a healthy policyholder means the life insurance policy might not create a profit for a long time.
Life Insurance settlement companies use various methods to determine when a former policyholder dies. Some companies occasionally send a postcard asking the insured to send it back. If the postcard is not returned, the company investigates further. Others designate a third party (a lawyer, for example) to stay in touch with the former policyholder.
Life Insurance settlements are different from their financial clone, viaticals, which are settlements where a terminally ill policyholder sells a life insurance policy to a third party. In life insurance settlements, the policyholders are not terminally ill. Their health has simply declined. An example of this is a person who develops a heart condition, or possibly some type of cancer.
The difference in health conditions explains why life insurance settlements are riskier than viaticals from the investor's perspective: You don't know when the insured is going to die. As a result, the sick are likely to get more money for their policies through viaticals. Policyholders can get 50 to 80 percent of their policy's face value in a viatical sale, but only around 20 percent or more in a life insurance settlement.
posted by Life Settlement Pro at 11:11 AM
