Does Investing in Life Settlements Make Sense?

Investing in life settlements is a big business. Many investors purposely seek out individuals hoping to sell their life insurance policies. On this page, we will hope to explain to you whether or not investing in a life settlement is worthwhile, and whether these investments make sense, financially speaking. They can be very expensive and are an investment that you will have to sit on for some time for it to yield profits [if at all].

Now, should you want to know what a life settlement is, and whether or not making an investment in one is worthwhile, you have come to the right place.

Does investing in life settlements make sense? Let’s find out.

How Do Life Settlements Work?

Before we can move on to whether or not they are sound investments, and whether or not they make sense as an investment, let’s first discuss what a life settlement is, and how they work.

A life settlement is, essentially, when a person [who has a life insurance policy] can no longer afford to keep up with their policy repayments [usually elderly, retired people who have no serious illnesses or diseases], sells their policy on to an investor. The investor will buy the policy and keep up with the repayments and pay anything associated with the policy for its duration. When the original policyholder dies, the new beneficiary [the investor] will inherit all of the money the policy holds. The original policyholder will receive a substantial payment [although one that is less than the policy itself] in return for transferring the policy.

Life insurance policies are very popular at the moment, and when they are taken out, they can be very useful, whether to protect family, friends, or dependents, however, they can become very expensive. In Florida alone, there is an estimated one-point-five trillion dollars tied up in life insurance policies, but, due to troubling economic times, many of these policies are at risk.  But, according to one agent who has life settlements available in Florida, life settlements are a fantastic alternative to losing your insurance policy altogether. Instead of forfeiting your policy, you can receive a tax-free payout for your policy and still live peacefully.

Are Life Settlements Beneficial for Policyholders?

Life insurance policies are lifelong commitments, and they can be very expensive. For many people, life insurance policies become far too costly or are no longer needed. When you are younger, have a family, or are building one, a life insurance policy is definitely required. However, as you get older, and as your children and family establish themselves, a life insurance policy becomes quite the opposite.

To answer the question, yes, life settlements are beneficial. Instead of sinking money into a policy that is wholly unnecessary, why not opt for a life settlement? A life settlement can give you money to retire on and to enjoy your old age in luxury. As long as your family will be provided for, or can provide for themselves, then you have no reason not to cash in your life insurance policy.

How About for Investors?

To answer our titular question, is a life settlement an investment that makes sense? yes, it is. Life settlements are great investments and can yield massive profits. You will pay the original policyholder a substantial, albeit significantly reduced, amount of money. Life settlements are incredibly low risk, and all you need is time, other than that, you don’t have to do anything at all; they outperform traditional stocks and bonds; there are no management fees at all, and it’s a win-win for everybody involved.

Advantages of Investing in a Life Settlement

Here are a few advantages of investing in a life settlement, and while this is not all of them, this is a few of the best:

  • Life settlements are strictly regulated and monitored, which means you can rest-assure that you as an investor are protected and insured. You cannot lose out on your investment.
  • The returns offered by the life insurance industry now are higher than ever, and while you cannot, of course, guarantee or pinpoint a rate of return, they are typically better performing than other investments and areas.
  • Data is abundant in the subject, therefore allowing investors to work with specialists who can determine an estimate of how long it’ll take you to receive your payout. This, while morbid, is an important thing to consider, for the longer, it takes the original policyholder to pass, the longer it takes for you to get your profit.

Now, with the help of this page, you know everything that it is for you to know about investing in life settlements, and whether or not they make sense. You should now know that yes, they do make sense, and yes, they are a worthwhile investment.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.