The sale by a policyholder of a life contract to an investor who pays the premiums and collects the benefit, resting on the policy being treated as transferable property.
A policyholder who no longer needs a life contract may surrender it for its cash value, often modest, or sell it to an investor for more than that value. The investor then pays the premiums and collects the death benefit, so the return depends on the insured's lifespan, which makes this one of the few markets where longevity is a financial risk held the wrong way round. The legal basis is old, the United States Supreme Court having held that a life insurance policy is transferable property like any other, a decision on which the whole later development rests. The market answers a real need, since contracts taken out to protect a family lose their purpose and were previously abandoned for very little, and it raises two persistent difficulties: protecting the selling policyholder, whose circumstances are often constrained, and the reliability of life expectancy assessments, an unexpected lengthening having already produced heavy losses among institutional investors.
The United States Supreme Court held in 1911, in Grigsby v. Russell, that a life insurance policy is transferable property its holder may freely dispose of, the decision on which the life settlement market rests.
life settlement, viatical settlement, rachat de police vie, marché secondaire vie