In 2018, the life settlement industry saw significant growth, according to one survey. There was a 28% increase reported in the number of life insurance policies sold, and the face amount was also increased to $3.8 billion.
There are several reasons for the industry continuing to thrive in recent years. As baby-boomers approach retirement, they’re more inclined to utilize the sum being used for insurance policy premiums on their own terms instead of continuing to pay for a policy they no longer need. In some cases, individuals can no longer afford to pay the hefty premiums or may require money urgently for medical expenses.
Needless to say, the life settlement industry has evolved considerably over the last couple of decades.
The Birth of the Life Settlement Industry
The 1980s are remembered for many things, and the AIDS epidemic is one of them. Almost 40 years ago, when the epidemic struck, AIDS victims found themselves facing what was then considered to be a terminal illness. Consequently, they also saw themselves facing a shortened life expectancy. This meant that they no longer needed their life insurance policies that were expected to last for several more years to come.
The AIDS epidemic led to the creation of a new market within the life insurance industry. Terminally ill AIDS patients could now sell their purchased insurance policies to other buyers in an attempt to earn some much-needed cash to help with their treatment. This was the first instance of viatical settlements formalizing, and allowed dozens of individuals facing reduced life expectancy to sell off their insurance policies to third party buyers. These third-party buyers could purchase the life insurance policy, become the new owners and beneficiaries, and be made responsible for the premium payments.
In 1994, the Viatical Association of America (VAA) was formed. It was one of the first non-profit organizations in the industry. The company changed its name to Viatical and Life Settlement Association of America (VLSAA) in 2000, and later to Life Insurance Settlement Association (LISA).
The New Millennium
Over time, viatical settlements grew less common than they once were. The 2000s saw the growth of life settlements, which referred to the purchase of insurance policies from individuals in their late 60s or 70s. The National Association of Insurance Commissioners’ Model Act (NAIC) that had been introduced and amended in the 1990s was further revised to include life settlements as part of the model law. By 2005, 25 states had regulated life settlements with many more on their way to incorporate it into their legislation.
As of 2020, life settlements remain to be a popular option among senior citizens. Brokerage firms like Prosperity Life Settlements have helped elderly individuals who wish to sell their life insurance policy for cash make the most of their retirement years.
Get in touch with our life insurance settlement brokers today to avail our free life insurance settlement calculator and determine if you qualify for a life settlement.