The US life settlement market is attractive to foreign investors
for many reasons.
- First, unlike the term156 and endowment157 products primarily offered to the secondary markets in the United
Kingdom and Germany, the US life settlement market is largely made up of permanent policies158 (whole life and universal life).159
- Second, in countries such as Canada, life settlements are largely banned within the provinces, so investors cross the border to participate.160
- Third, if premiums are paid, there is a guaranteed payout because death is a certainty—the only unknown is when.
Therefore, the life settlement market attracts investors beyond US borders, but the lives being gambled on are largely those of US citizens.
156. Term life insurance provides coverage for a certain period of time, normally between one and thirty years. Life Insurance Basics, INS. INFO. INST., http://www.iii.org/article/life-insurance-basics [https://perma.cc/S7RH-7BH3] (last
visited Feb. 22, 2016).
157. An endowment policy is an investment tool that also includes term life insurance. If the insured dies during the term, a death benefit is paid. Amy Fontinelle, The Pros Of An Endowment Life Insurance Policy, INVESTOPEDIA, http://www.investopedia.com/articles/pf/12/endowment_life_insurance.asp (last visited Feb. 22, 2016).
158. Permanent life insurance remains in force until the insured’s death if all premiums are paid. Life Insurance Basics, supra note 156.
159. The Secondary Markets for Life Insurance, supra note 143. Both whole life and universal life insurance is a type of permanent policy, but with universal life insurance the premiums are more flexible. Life Insurance Basics, supra note 156. As cash value accumulates in the policy, the policy owner has the option to reduce the premium payments as long as the interest earned on the cash value is sufficient. Id.
160. Perkins, supra note 155