Monday, October 23, 2017
Life-settlement, the purchase of a life-insurance policy by a third party, got its start at the height of the AIDS epidemic with viatical settlements. Viatical settlements allowed terminal patients to sell their insurance policies in order to cover the cost of treatment and care. This growing industry has slowly shifted focus from the terminally ill to older adults. The process involves a company like Coventry, among the largest life-settlement providers, evaluating potential clients to see if they want to buy their life-insurance policy and take over premium payments. Similar to a reverse-mortgage, these companies are betting against the individuals from whom they buy the policies. Essentially, the purchaser is hoping the seller dies sooner, rather than later, in order to maximize profit. While somewhat macabre, many people let their policies expire and forfeit an opportunity to make money. Though the current market comes with a caution flag, walking away from a paid-up policy is rarely an ideal option.
See Paula Span, Wringing Cash from Life Insurance, The New York Times, October 13, 2017.
Special thanks to Joel C. Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.