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How life settlements let investors buy life insurance payouts
The article explains that life settlements involve purchasing an existing policy and taking over premium payments so the buyer receives the death benefit when the insured person dies.
Yahoo Finance describes life settlements as the sale of an existing life insurance policy to an entity other than the original insurer. In the arrangement, the buyer pays the premiums, and upon the policyholder’s death, the buyer receives the death benefit instead of the policyholder’s family.
The outlet traces the industry’s roots to the AIDS epidemic, when viatical settlements emerged as a way for people who were dying to convert their policies into cash. According to the article, viatical settlement activity declined as antiviral treatments improved outcomes for people with HIV.
As that viatical model waned, Yahoo Finance says newer companies shifted toward purchasing policies from older adults, using the term life settlements. The piece also notes that the practice is described as legal and discusses why some policyholders choose to sell their coverage.
The article frames life settlements as a distinct secondary market for life insurance, and it highlights factors buyers and sellers should consider when evaluating policy buyouts.