Have you been looking for lucrative investments to add to your portfolio? If you have been investing for a while, then you definitely know just how vital it is to have a diversified portfolio. Aside from earning you returns from a variety of investments, a diversified portfolio actually protects you from incurring too much risk.
That said, life settlements have been an alternative asset for many investors for probably over a century. However, not many people know just how lucrative the industry is.
Basically, a life settlement is where a life insurance policyholder sells their policy to a third party for a one-time payment, typically more than the policy’s cash surrender value. So, why do people do it, and how does this work? Also, why should you invest in life settlements? Read on to learn more:
How Does Life Settlement Work?
A life insurance policyholder might decide to sell their policy for various reasons. Maybe they can no longer afford the premiums and consequently risk having their policy canceled. Other reasons include:
- Cash emergencies: the policy owner needs quick money to cover unexpected expenses.
- The holder no longer needs the policy: the reasons for taking the policy are no longer there.
- Policies taken on behalf of employees who don’t work with an employer anymore: the company can sell to recover their money.
A life settlement transfers ownership of the policy to an investor in exchange for an agreed-upon amount, usually higher than the cash surrender value but not more than the payout in case of death.
The investor, who is the new owner, becomes solely responsible for paying the premiums and becomes the beneficiary upon the insured person’s death.
Now, a life settlement is different from a viatical settlement in that with the latter, the policyholder has a terminal illness and sells their policy at a discounted rate for some quick cash.
Benefits of Life Settlements Investments
So, why should you consider life settlements investments as an investor? With a sound investment strategy, you stand to gain a couple of benefits:
Possible High Returns
Life settlements can give you a high rate of return on your investment. In fact, they often outperformed popular asset classes like stocks and funds.
If you’re feeling the heat of the turbulent markets, life insurance settlements can help you reduce your risk and absorb losses if they occur. Moreover, life settlements are not typically tied to other investments like stocks and bonds. So, they do not react to the same factors or in the same way.
Lastly, you also get some tax advantages on your money. We know that taxes can eat up investment returns. But with life settlements, you grow your money and don’t pay any tax upon maturity or payout.
How to Invest in Life Settlements
If you want to invest in a life settlement, you need a life settlement broker. Basically, this is a company or agency that buys life insurance policies from holders and sells them to interested investors.
Invest in Life Settlement to Diversify, Protect & Grow Your Portfolio
As an investor, you want to build a robust investment portfolio that safeguards and multiplies your wealth. So, aside from the typical assets like stocks and bonds, you want to diversify with good alternative assets. Consider life settlements to enjoy excellent potential returns, greater diversification, and tax advantages.