(Newswire.net — February 15, 2014) —
The protégé to life settlements were “viaticals” which became popular in the ‘80’s when the AIDS epidemic was at high levels and the certainty of a short life span once diagnosed was relatively certain. 6 months was an eternity amongst AIDS sufferers and the concept was to establish an investment in viatical policies whereby such insurance policies could be bought out in advance of the death occurrence and a discounted cash payment would be offered to the policy holder in exchange for the beneficial rights to the policy in full at the time of passing. With HIV advances in medicine in the early ‘90’s, AIDS was no longer an imminent outcome and consequently the investment in these policies was no longer a sure bet.
Life settlements actually originated in 1911 in a famous Supreme Court case called Grigsby vs Russell where a patient was willing to sell his life insurance policy for $100 to the operating doctor in exchange for the death benefit. In today’s environment, this industry has become popular with investment funds, pensions, and insurance companies that are constantly seeking long dated asset investments in order to fund their amalgamation of short to long term liabilities. The reliability of these assets to pay and earn a decent return on the investment is always the quandary that the investment world wrestles with. The safety factor is paramount since the fund’s reputation rests on its ability to pay time in and time out over the duration of its existence.
The investment is truly a mathematical equation whose return is determined by its face value price which is a discount to its face value, the time remaining until the policy pays in full (at death), and the premium payments that must be paid until death in order to keep the policy in force.
Life insurance is probably a misnomer and should be better coined “death insurance” since its benefit is really derived at the death of the insured. Life settlements is actually an investment or opportunity that the insured can benefit while alive, not dead. This class of investment has opened up an opportunity to the investment community that has suffered extreme losses in the stock and bond markets, derivatives, currencies, commodities, precious metals, real estate, and many other market related products. This is not to denote that there are not opportunities in any of these aforementioned classes of investing however the problem arises that they all suffer unpredictable cycles and volatility that are virtually impossible to track and predetermine to prevent such adverse outcomes.
As one of the of the most abundant accumulation of assets, life insurance policies serve multiple purposes with this added value of providing liquidity and a solid investment vehicle that not only the insured can capitalize on, but others that are seeking returns for their own investment purposes.
The other major factor to note is that life settlements are backed by insurance companies that have substantial balance sheets and a pay history that has never defaulted in the history of the United States. In the rare instances where insurers have not survived such as Executive Life and Mutual Benefit Life, their policies have still paid in full through a state regulated insurance procedure that absorbs the outstanding policy payoffs and spreads them amongst the other insurers in that state where the defaulting insurer resides. Risk syndication as it is affectionately named, provides the comfort with policy holders and their beneficiaries that their insurance policies will always be secure. This investment is not necessarily about its absolute returns as much as it is about its absolute protection from loss.
For more information regarding this asset class of investment, feel free to contact: (866) 907-2978 info@needseo.com .