Many people opting for life insurance do so with the hope that when they die, their beneficiaries will gain from the coverage. For a long time this was the rule, however one can gain from such a life insurance policy while he or she is still alive. This is through life settlements. For those new to this concept, this involves the sale of legal rights of the policy to a third party.
The settlement amount is higher than the surrender value but lower than the death benefit offered through the policy. This presents benefits to both parties since the buyer gets an investment opportunity while the seller can realize immediate liquidity from the policy.
Although this industry had a big boom when diseases such as AIDs emerged reducing the life expectancy of many, nowadays even such patients have longer life expectancies extending up to twenty years. This makes investment in life insurance settlements a necessitate a longer term investment horizon.
This means one needs certain strategies to gain from the investment. The first consideration is the life expectancy of the seller. If he or she has a longer life expectancy, the cost will be much cheaper. Remember to factor in new technologies that might increase ones life expectancy.
One should also note that it is beneficial to work in cooperation with experienced life settlement investment companies. These alternative investments are more complex than equities or bonds since there is a complicated underwriting process and opaque nature not associated with more vanilla investments. It is also ideal to purchase on investments in limited to policies from A rated firms. Otherwise the risk of the carrier not paying the death benefit goes up.
Finally it is always advantageous to remember that the policies which are at least 2 years old and out of the contestability period are the ones with a lower risk profile. As long as you stick with these important considerations, it is easy to benefit from life settlements investments.