Human beings are living longer but unfortunately, their retirement funds are not. Especially in America after retirement, the lifestyle of a senior citizen is not very good. And that’s why towards the end days of their life the senior citizens opt for the life settlement so that they can live their last days in peace.
What is life settlement investment and why don’t people know much about it? People do not know about it because most of the industry is owned by major institutional investors or insurance companies.
But it can be beneficial and can help you with a lot of problems. If you are not aware of what life settlement investment is, then you can find the designated information below:
Life Settlement. An Overview
We all take insurance policies for our future but most of the time the amount we get from the insurance policies is not that much. Especially for the senior citizens in states like America and other countries. To solve this problem most people nowadays opt for a life settlement. In simple words, a life settlement is the selling of the insurance policy to a third party. In return, you get a lump sum amount that is enough for you to lead your remaining life peacefully. But the thing is that the life settlement may be more than the actual value of the insurance but is not more than the death benefit.
The life settlement industry is enormous and is about 50–60-billion-dollar industry
For example, if we have Mr. John gained the insurance policy of the 6million dollars and is paying around 3 hundred thousand every year for the premiums. Now he has out valued all his options but nothing is much considering one. That’s why he thinks that the option of selling is the best one. As in this way, he will get about 2-3 folds more money than the original value of the policy.
Is Life Settlement Investment-Worthy?
Well, the thing is that yes it can be worthy, especially when you are done with all your duties and your kids are now able to support their own families.
What we mean is that an insurance policy can be really helpful, especially when you are young, have kids to take care of and a household to support. It can even care for your kids even after death. But after you are done with all the things and now it’s just you, then it can turn out to be a burden. Because whether or not you are doing something you still have to pay the premiums.
And at that time the life settlement investment can turn out to be a worthy option. It’s a win-win situation. Because the investors also profit from this and yourself also gets a good amount of profit from your life insurance policy.
Who Is Interested in A Life Settlement?
Now the question here comes: who invests in the life settlement? And where you should go if you are thinking of selling your insurance policy. And if you are someone who is going to purchase one, then are you capable of purchasing one.
Then the answer to this question is both the accredited investors and the institutional investors are capable of purchasing the insurance policy from the owner.
Accredited ones are qualified ones because of their net worth and capability of investing in non-registered securities. Whereas the institutional ones such as the endowments, financial institutions, and hedge funds, pool money so that they can invest on the behalf of others.
Pros of Life Settlement Investment
Now the principal thing that comes to mind is that what are the benefits of investing in the life settlement investments:
- High Returns
Now the biggest advantage of the life settlements is that they have high return rates. Especially, these types of investments can bring about double the amount they have invested. And this has been proved by a lot of case studies by very renowned institutions. For example, the case studies done by the London school of business or the journal of risk and Insurance states that the returns are around 8-12% annually, which is a considerable amount.
- Less Amount of Risk
Another enormous advantage of the life settlement investment is the moderate amount of risk. As this investment does not fluctuate according to the market trends or interest rates. The only risk that the investors might face is longevity. Because the death expectancy of the insured one is uncertain when the transaction closes. This can be overcome by investing a bit less in the healthy one and investing more in the policy of ones that have more medical conditions.
- Beneficial For Parties
Well, as we mentioned before, it is a win-win situation. The policyholders get paid twice thrice the amount they were going to get. Which can turn out to be sufficient for their remaining life. And on the other hand, the investors benefit from the high rate of return that they get from these investments.
Cons of Investment
There are only 2 cons that the investor might need to consider before going for the investment.
- These are highly regulated policies as these policies are regulated at the state levels. So, it means that the disclosure, contracting or the requirements that a broker, seller, or investors might need to take care of will vary in different states.
- Second, as we mentioned before, is longevity. The death expectancy of the owner is uncertain which can highly affect the investor’s annual yield. And for that, the investor might need to first completely view the lifespan and the medical conditions of the policyholder.
Why Are Investors Interested in This Investment?
- The first thing first is that they are unaffected by the ups and downs of the stock market.
- political situations or any economic situations don’t affect them.
- These investments do not require any management fees and are just one-time investments.
- No taxpaying till the policy is active
- High and consistent rates.
So now we have outlined all the details and benefits of the life settlement investment. The next step of yours should be contacting a trustworthy investor in your area to secure your amount.