Life Insurance: Settlement Investments on the Rise

It seems that life insurance settlements have become the new cash crop for investments looking to make some money. Unfortunately, the major profit investors gain from these unique life insurance policies are hedging bets on someones death.

What Are Life Insurance Settlements?

Settlements are a twist on the traditional policies. They actually start off as regular life insurance policies, but later become investments for those trying to make money.

Typically, a senior citizen will own a policy, but then can no longer be able to afford the monthly premiums. In order to make some quick cash, the person will sell the policy off, often for as much as $500,000 for a million dollar policy.

Now, the new owner of the policy has made a great investment and is simply waiting for the person to die. When they do, the new owner cashes in with no other steps to take in the process.

Wall Street caught on to this venture several months back, but now it seems that other investors are also cashing in on the deaths of others.

Critics Calling for a Ban on This Practice

Some critics are calling for a ban on the sale of life insurance settlements, mainly because the practice of buying and selling them is virtually unregulated. Some believe that it should not be legal to sell an insurance policy to a third party with a conflict of interest being that the seller wants to live long and the buyer wants the seller to die soon.

However, for the time being, the investments are still moving full speed ahead. And with the odds that most seniors who sell their policies will pass away within three to seven years, its likely that many more will be making investments in settlements.