Life Settlement FAQs
Life Settlements as an Alternative Investment
Life Settlements are a relatively new and often unfamiliar investment strategy for many investors, making them one of the most novel opportunities in today’s alternative markets. At their core, they involve purchasing existing life insurance policies at a discount, taking over premium payments, and collecting the benefit at maturity. Because returns are based on contractual obligations from regulated insurers rather than market cycles, Life Settlements offer diversification and stable, targeted annual returns of 15–20%.Â
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How does a life settlement transaction work?
Investors acquire life insurance policies from policyholders who receive a lump sum payment in exchange for transferring the policy’s ownership and beneficiary rights.
What due diligence is performed when selecting a policy for purchase?
Prior to purchase, a buyer is presented with the insured's medical records, policy details and life expectancy estimates. These are crucial factors in the decision.
What types of investors are suitable for life settlements?
Due to the substantial capital requirements and the complex nature of these investments, life settlements are only suitable for accredited investors and institutional investors.
What are the potential returns from investing in life settlements?
Compared to traditional investments, life settlements can offer potentially higher returns, but they involve unique risks that investors must consider.
What are the risks associated with life settlements?
Risks include changes in life expectancy and policy premiums. Longevity risk is a primary factor that Momentix strives to manage and mitigate by implementing several safeguards. Investors should carefully assess these risks before investing.
What is the investment horizon for life settlements?
Momentix strives to structure its investments to align with a client's preferred time horizons. Life settlement investments usually have a medium to long-term horizon, ranging from several years to a decade, depending on the life expectancy of the insured.
How are life settlement investments managed?
Active asset management involves regular monitoring of policies, managing premiums, updating medical records, and tracking of the insured. It also ensures timely adjustments to maximize policy value and long-term benefits
Are life settlements regulated?
Life Settlement activities are regulated by provincial regulators to ensure compliance with the Insurance Acts of each jurisdiction. There is a robust and established regulatory framework already in place in the US at the state and federal level.
What tax implications are there when investing in life settlements?
Tax treatment varies by the circumstances of the vehicle in which the benefit is being held. Consult a tax advisor to understand how investing in life settlements may affect your tax situation.
How is a life settlement valued?
Deriving a Fair Market Valuation of a policy is a complex procedure and involves rigorous analysis of the insured's medical condition, policy details and multiple life expectancy estimates, combined with several actuarial approaches.
How is the performance determined for a life settlement investment?
Performance is evaluated based on the difference between the purchase price, premiums paid and the benefit amount, adjusted for any expenses and fees.
How can I learn more about investing in life settlements?
Speak to us! Momentix Capital is a BC based firm that specializes in life settlements and deeply understands their investment strategies, risks, and returns. Consult with us to see if life settlements align with your investment goals.
