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Life insurance is a sophisticated financial planning asset. Inherent in life insurance design is the flexibility to manage its economic potential over time and in accordance with changing circumstances. Viatical and Life Settlements create a secondary market that significantly enhances the utility value of life insurance. Policies that no longer accomplish the owner’s financial goals may be sold in the secondary market for ‘fair market value’ to a third party.
The ‘fair market value’ purchase price is usually a cash amount less than the death benefit but more than the policy’s cash surrender value. The seller receives a cash payment or, alternatively, can request an irrevocable interest in the policy death benefit without any ongoing premium payment obligation. The purchaser assumes policy ownership, all contract obligations and is the designated policy beneficiary or co-beneficiary.
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