Life Settlements

History of the Industry

What is a Life Settlement?

Life Settlements transactions have a lengthy history in the United States. In 1911 with the US Supreme Court case Grigsby v. Russell it was established that a life insurance policy is private property. As a result, this property can be sold or transferred at the discretion of the policy holder, in a similar fashion to any other property. This is the foundation on which the Life Settlement industry operates today.

As with any financial transaction, there are nuances. Yet, the concept of how a life settlement works is extraordinarily simple.  As an asset of the owner, a life insurance policy can be sold or traded to another party for value.  As a result of this sale, or transfer of ownership, the new policy owner assumes all responsibilities for the maintenance of the policy and is entitled to the policy value.  For the sale, or transfer, of the insurance policy the insured typically receives a lump sum payment.  This lump sum is in excess of any cash or surrender value the policy currently has.  In this way, the principal nature of an insurance policy is similar to any asset that can be bought or sold.

What is the Life Settlement market today?

Although life settlements have been a legal and typically beneficial transaction for policy holders for over 100 years, it is only in the past three decades that the industry has matured.

In the early 1980’s there was a shocking rise in the prevalence of AIDS. In addition, there was a growing number of individuals with cancer. Often, individuals with these diseases were in need of liquidity for expensive treatments, or to maintain quality of life. As a consequence of the current life settlement market took root.

In the years that followed, the life settlement industry went through a series of changes and shocks due to both financial market cycles and medical advances. Today, the life settlement industry is a mature and responsibly regulated niche. Often these transactions are focused on people with change in life situations, and are initiated by competent financial or estate planning professionals. As a result the liquidity that the sale of a life insurance policy can provide often helps fortify an estate, or provide needed funds to facilitate other life choices.

Who is involved in the Life Settlement Market?

Today, and throughout the years, many large and commonly known financial institutions have been involved in providing liquidity to the life settlement market.  Some companies that are household names such as Berkshire Hathaway, AIG, Credit Suisse, Deutsche Bank and others, have a strong foothold in maintaining the life settlement market.

Some financial advisors and broker dealers are unfamiliar with the life settlementindustry – to the detriment of their clients. Often, investment professionals are blind to these valuable assets in their client’s portfolio and make financial decisions that fail to take this into account. Because of this, Liberty Universal Life Settlements actively promotes the education of investment professionals in the life settlement market, including the effect it has on their clients.

For more information Visit LISA Life Insurance Settlement Association

Age of the Industry
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