How To Buy Other Peoples Life Insurance Policies?

  1. 21750 POINTS
    Jim Winkler
    CEO/Owner, Winkler Financial Group, Houston, Texas
    Great question! Let's start off first with a couple of important basics. You have to have what the insurance company calls "an insurable interest" in the person that you want the policy for. That means that if that person were to pass away, you would suffer some form of measurable loss. For example, if your spouse were to pass away, you would be left with less income, and more hardship. You can buy insurance for your spouse. The guy down the street that you see once in a while, you would suffer no loss from, so you would not be able to purchase a policy for him. You also need that person's cooperation and consent. They will be required to sign the application, and must be aware and understanding of what is happening, and in agreement. I would recommend that if you aren't familiar with the process, that you find a good agent and walk through the process completely first, as there are a lot of different products out there to choose from, and not all will be good fits for you. If you would like some help, I'd be happy to, just contact me. Thanks for asking!
    Answered on April 17, 2014
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  2. 325 POINTS
    Robert Bland, CLU
    Founder, CEO, LifeQuotes.com, Darien, IL
    Buying an existing life insurance policy on another person, presumably a stranger, in order to pay the premiums and then collect the eventual death benefit is called "life settlement."   This kind of investment is very risky and highly regulated in most states because it requires the investor to assess and then calculate how long somebody has to live and requires the investor to have enough money to pay the premium until that happens.  For this reason, professional investors tend to pool their money so that they can buy many policies to spread the risk.  In a way, this is a bet against modern medicine.  On top of that, you have to wonder why somebody who has 10 or less years to live would not keep their policy so that their own family could reap the rewards, so all such investors have the risk that the person you are insuring is not as sick as they claim.  Typically, life settlement investments are highly regulated and made available only to high net worth individuals who, through a prospectus describing the risks, are able to hold such an investment for many years, perhaps decades.   I own shares of stock in a small public company called Imperial Holdings Inc. (IFT) and they own several hundred life insurance policies that will eventually payoff, however, huge premiums must be paid every year in order to keep those in force, so it's risky.
    Answered on April 17, 2014
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