Life settlement investor – is it for you? Many insureds think that some life settlement investor is going to buy their policy specifically. There have been transactions like that, and sometimes even the insured himself had the option of being the investor for his own policy. I remember a few years ago, I was approached by a couple of “agents” who told me I could take some of my clients, in the right age, with large life insurance policies, and bring them to a broker that had contacts to investors, who would buy their policy. The client had to wait two years before selling the policy and he had first right of refusal, and could at that time buy the policy. If he died before the two years, his family would get the majority of the death benefit and if he lived, he could sell the policy and make a profit.
It’s a little different now. You would not be a life settlement investor in a policy that you really know about. Yes, those kinds of transactions do occur occasionally but more often it is now a pool that you invest in rather than one specific individual. As a life settlement investor, you are much better off getting a reasonable return on your money with the pool, than waiting for one specific client to die.
Many of the parts are still there, but generally the experience of the pool is where the investment really lies and getting 12% to 13% on your money is still not too far off for an investor. The real difference is that the true investors are the large institutional houses that review each case and the investor is the one who invests with the institution rather than on any individual.
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