A life settlement can be defined as the sale of an existing insurance policy by a policy holder. The policy holder may consider the sale of their insurance policy because they no longer need the policy, need money for family reasons or no longer can pay the premiums on the policy.
Over the last several years private investors have dumped trillions of dollars into life settlement tools. The money is primarily used to purchase life insurance policies of seniors ages 65 and over. Depending upon the fund, people may sell policies ranging from $50,000 and up. When a person decides on a life settlement they will sell their policy with the understanding once the policy holder dies, the investment company or hedge fund will receive the face value of the policy.
When a person decides to sell their life insurance policy they essentially have two different options. They can sell the insurance policy back to the original company or seek the assistance of a life settlement company willing to shop their case amongst a group of buyers. These buyers are the hedge funds, some banks and private investors.
The policy holder will oftentimes look for the company that can provide them the amount closest to the face value of the policy. This means more money for the policy. The insurance company will oftentimes spend about 10% to purchase the policy back, while life settlement companies tend to offer a significant higher payout for the same policy.
The legal aspect of a life settlement follows:
Should it be legal to purchase another’s insurance policy?
Does the insurance industry have legal recourse to stop these types of buyouts?
While some people purchase life insurance for their siblings many people use their policies for investment and tax purposes. The idea that a company can provide a life settlement to an individual is legal. In fact by allowing companies to provide life settlements for their clients could ultimately increase the number of policies being written on a yearly basis. There is more incentive to purchase life insurance if the consumer understands they may be able to sell their policy at a higher face value later.
While the insurance industry frowns upon companies that purchase life settlements they currently have no legal recourse at this time. Many consumers first contact the insurance company prior to dealing with a life settlement broker. After reviewing the settlement offer from the insurance company the consumer may decide the payoff is much too low. As a result the consumer may deal directly with a broker than can get double or even triple the offer from the insurance company.
The legal aspect of a life settlement is fair enterprise. The life settlement industry in some aspects is no different than the mortgage industry. If there are companies that can offer you more money for your life insurance policy the consumer should have the ability to shop for the higher cash value.
Content written By Jeffery Grawbowski: For more information on legal issues visit our website
Filed under: Uncategorized |