Frequently Asked Questions

Why haven't I heard about this?

Institutional investors have kept it under the radar; Time Magazine, Wall Street Journal and The Economist have in the last several years increasingly written major articles about the growth and nature of the industry. Fractional ownership of life insurance policies is what makes Life Settlements available to the individual investor. This concept of fractional ownership has just recently caught on and been made widely available.

See our research page to see what the media is saying.

Is it legal to buy and sell insurance policies?

Life Insurance policies are personal property. The Supreme Court case of Grigsby v. Russell (1911) established the policy owner's right to transfer an insurance policy. The law permits them to be sold and resold with all the normal protections of personal property law.

How secure are Life Settlement policies as an investment?

The policies purchased are issued by some of America's oldest and most financially sound life insurance companies. The owners/investors enjoy the same regulatory protection available to all life insurance policy holders. Even during the Great Depression, life insurance companies still paid on their claims. Most in the industry consider the risk to be similar or better than “AAA” Bonds.

Our FREE Life Settlement Investing Guide is a great way to learn more about the safety of Life Settlements.

Why wouldn't a policy holder just surrender the policy for its cash value?

Investors will often pay several times the cash surrender value offered by the insurance company which makes it a very easy decision to sell the policy instead of letting it lapse or taking the cash surrender value.

Why would someone sell their life insurance policy?

A life settlement may provide a better alternative than allowing an unneeded policy to lapse or to be surrendered for its cash value. Life settlements are considered for a variety of reasons, such as:

1. Policy is no longer needed or wanted (e.g., spouse dies, divorce, children no longer dependent, etc.)

2. Changes in estate, tax or financial plans or changes in law, etc., occurring subsequent to policy issuance can cause an individual to consider lapse or surrender of a policy

3. Funds are needed to pay for long-term care or healthcare costs

4. Premium payments have become unaffordable as policy owners grow older

5. Investment in the insurance is no longer appropriate

Who purchases life insurance policies in life settlements?

Traditionally most purchasing of insurance policies on the secondary market has taken place by multi-national banks, international corporate conglomerates, global insurance companies, pension funds, hedge funds and other major financial institutions.

Two of the largest insurance holding companies in the United States, Berkshire Hathaway and American International Group, have been significant purchasers of life insurance policies.

How much selling of policies is going on?

Industry estimates put the figure at $40 Billion of face value maturities for 2007. This is expected to dramatically grow over the next decade or so as the baby boomers enter retirement and look to capitalize on the market value of their life insurance policies.

Is the buying and selling of existing life insurance policies regulated?

Not on a national level, but individually in many states yes. The National Association of Insurance Commissioners, representing insurance commissioners from all 50 states, adopted the “Model Act” which has been partially adopted in as many as 29 states. Regulation of life settlements is generally administered through the respective insurance departments of each state.

Life settlement statutes in most states require life settlement providers to obtain a license from the state in order to enter into life settlement transaction. To obtain a license, providers are required to submit extensive information on the company and its principles, which is then reviewed by the state's department of insurance. In addition, all forms of application, purchase agreement, and other ancillary documents that a provider intends to use for a life settlement transaction must be approved for use by state regulators.

What is the best way to get started investing in Life Settlements?

Contact us today and we will be happy to get you started in the process and answer any additional questions you may have.

Step 1 - Prospective Life Settlement policy is found

Seniors wishing to sell their life insurance policy typically work through their financial advisor or insurance agent to offer their policy up for sale. In a similar way that one would shop to get the best quote on car insurance, seniors shop to get the best offer for their life insurance policy.

Most of the offers come from companies that buy policies for institutional investors like hedge funds, pension funds and banks. While it would be difficult for individuals to compete and purchase policies by themselves, Niche Investment Group can connect you with a company that will organize and coordinate the process whereby you and multiple other investors purchase fractional shares. This allows you to invest in Life Settlements without needing to shell out the money needed to purchase an entire policy or multiple policies by yourself.

Step 2 - Analysis

Not every life insurance policy makes a sound investment. Every prospective policy must be analyzed to ensure all of the following are true:

•  Policy is transferable

•  Past the suicide date

•  Past the contestability period

•  Life expectancy of policy holder
meets investment goals

Step 3 - Transaction

Niche Investment Group works with you, a Life Settlement transaction company and an independent escrow agent to coordinate the purchasing of your fractional shares. As a diversification strategy, we always recommend the purchasing of multiple fractional shares instead of just one.

We recommend that all funds used in the transaction be held in an escrow account and managed by an independent escrow agent. Additional funds are also typically left in escrow for future premium payments.

Step 4 - Holding Period

For the duration of the policy, premiums are maintained using funds left in escrow for such purpose. Should the subject of the insurance policy live beyond life expectancy, additional funds will have to be provided to cover premiums.

Step 5 - Maturation

Policy Matures – Investor receives the pro rata share of all proceeds plus any unused premiums held in escrow.