During the past year, the life settlement news has not been what we wanted to hear. There is plenty of money around, but the people who have it are afraid to commit to any one course of action. Investing in life settlement contracts is all about spreading the risks and that takes a great deal of money.
Consider what would happen to a small settlement portfolio if only one or two of the insureds lived well beyond their life expectancy. The entire investment could fail. That’s life settlement news the investors do not want to hear. The best way to avoid this problem is to have thousands of insureds, allowing the law of average to work in your favor. That takes real money.
The funders crunch the numbers and pay the smallest monthly charge to keep every policy in force. That means the policy has little or no cash value to reduce the net amount at risk. When a $500,000 policy has a $200,000 cash value, the net amount at risk to the insurance company is only $300,000. Interest is earned and credited on the $200,000 cash value, but the owner needs to cover the risk (mortality) charge on the $300,000. What about a policy with almost now cash value? As a person gets older, the cost of that risk becomes greater. As a person approaches 100, the risk cost approaches the face amount of the policy.
The good life settlement news is that money seems to be coming back into the market. Like before, investors will want to diversify their portfolio and that means higher prices for life contracts.
Life settlements take time, so your timing might be perfect to catch the next wave. For more on life settlement news click the LIVEpdq.