Good for Purchasers

Purchasers acquire policies at a discount from the face value and must continue to pay premiums on the policies until the policies mature, at which time the death benefit is collected. The market value of a policy is driven by the assessment of the life expectancy of the insured individual coupled with the premiums required in order to maintain the policy until maturity. Depending on the risk tolerance, preservation of capital requirements and hurdle rates, specific types of life settlement assets can be purchased and/or structures created to meet a wide range of internal rates of return (“IRR”), with the lower risk categories (seasoned senior settlements) having an IRR of between 6%-10% and the higher risk categories (contestable or premium financed policies) showing an IRR of upwards of 15%-18%. In case of early maturities the return on investment can be substantially higher.

Life settlements returns are largely independent of economic downturns, such as interest rate fluctuation and increasing fuel costs, for example. By adding life settlements to an investment portfolio, an investor can add diversification with a non-correlated asset class. In addition, the investor is helping the insured person by enabling them to receive more money than they would receive from the life insurance company for surrendering the policy.

Good for Policyholders

A number of circumstances prompt individuals to consider selling their policies on the secondary market:
      • Need for immediate cash
      • Increased health care costs
      • Loss of income
      • Insured has outlived his family or beneficiaries
      • Policy is on the brink of lapse due to unaffordable premiums
      • Fund a final dream

According to a study by the Financial Institutions Center of the Wharton School, University of Pennsylvania, life insurance holders who sold their policies to life settlement providers in 2002 received $243 Million in excess value that would otherwise have been forfeited to the life insurance industry.