Chapter 3 — Prospects for Lifetime Settlements

For years, insurance companies and their agents have presented many reasons for purchasing life insurance — to protect heirs, pay estate taxes, serve as a tax-advantaged investment vehicle, indemnify businesses for the loss of key employees, fund business succession plans, and more. With the emergence of a secondary market for life insurance policies, “insurance planning” is no longer a simple synonym for “insurance purchase.” Those engaged in financial planning must now consider the possibility of selling existing policies that no longer meet a client’s needs, alongside the question of buying new ones.

The important points addressed in this chapter are:

• Differences between viatical settlements and senior settlements
• Motivating factors for policyholders contemplating the sale of their policies
• Types of policies acceptable for viatical and senior settlements
• NAIC Model Act requirements on minimum pricing of viatical settlements
• Factors affecting the pricing of senior settlements
• Individual uses of senior settlements
• Business uses of life settlements