Longevity investing is coming of age.

A life settlement is the purchase of an existing life insurance policy, by a third-party investor, for more than the cash surrender value of the policy. Policies are then aggregated into large investment portfolios (or funds) and held until all of the life insurance policies have paid out.

Originally only accessible to large institutional, corporate and high net worth investors, the life settlement market is now available to more groups and individual retail investors through Life Tokens.

Summary

  • A life settlement is a life insurance policy sold by the owner – typically the insured, a family member or a trust – for an amount higher than the policy’s cash surrender value but lower that the face amount (or death benefit).
  • The purchaser of the life settlement becomes the new owner and beneficiary of the life insurance policy. Returns are projected based on the acquisition price, carry cost, and size of the death benefit.
  • The legal and regulatory landscape for life settlement transactions provides comprehensive protections for consumers (policy sellers) and investors alike.
  • Seniors can benefit from re-purposing the value of their life insurance by selling their unwanted, unneeded, or expensive policies for cash now that can help them more directly (and immediately) in retirement.
  • Life Tokens provide more investor access to this institutional-grade asset class allowing the everyday investor to participate.
  • Secured on the blockchain and with additional liquidity options, LifeTokens are the first longevity asset-backed security token available in the market.

What is a Life Settlement?

Life insurance has become a core part of financial planning in the US since its first appearance in 1760. A life insurance policy has become a valuable asset that provides benefits to families, businesses, and others who might otherwise experience hardship from the early death of a loved one.

However, with the Life Settlement Market’s advent, the present value of an insurance policy can be unlocked during an insured’s lifetime. A Life Settlement is where an unwanted, unneeded, or no longer affordable life insurance policy is sold to a third party investor. Often sold for an amount ten-times more than the surrender value offered by life insurance companies, life settlements give seniors a fair market value option for their life insurance policies.

Transaction Flow Diagram

Life insurance policy owners get to re-purpose the value of their life insurance by receiving a fair market lump sum cash settlement amount.  Life settlement investors receive a valuable investment asset that generates high yield with low correlation to traditional financial markets.

Investing

Investors in life settlements receive a high yielding asset with low correlation to broad financial markets. After the initial purchase, investors continue to make premium payments until the life insurance policy matures where the full death benefit (or policy face amount) is collected.

The total return, or multiple of investment, is the death benefit minus policy purchase price and premiums paid until maturity.

Single Policy Example column chart showing purchase cost premium payments and death benefit over time.

We aggregate hundreds and thousands of life settlement policies in portfolios for diversity, predictability, and actuarial stability.

By taking advantage of the law of large numbers, we experience returns distributed across the entire portfolio.  This allows individual policy investment performance to average around the target return.

Small Portfolio of 10 Policies Example Returns Column Chart

Legal Basis and Regulation

Life insurance policies are considered personal property. Just like you can sell your house or car at any time, life insurance policies can be sold during the policy holder’s lifetime.

The legal basis for life settlements as an option for life insurance owners comes from the Grigsby v. Russell decision from the US Supreme Court in 1911.

The crux of Justice Holmes’ opinion was this: “So far as reasonable safety permits, it is desirable to give to life policies the ordinary characteristics of property. To deny the right to sell except to persons having such an interest is to diminish appreciably the value of the contract in the owner’s hands.”

Forty-three states and the territory of Puerto Rico regulate life settlements, affording approximately 90% of the United States population protection under comprehensive life settlement laws and regulations.

Transparency is a crucial part of life settlement regulation around the nation. Most states containing comprehensive regulation require policyholders to receive substantial consumer disclosure and privacy protection. Also, some states require disclosure of the compensation paid to brokers and agents who may facilitate transactions.

Life and Viatical Settlement Regulation USA Map
States with Life or Viatical Regulation

Benefits for Seniors

Before life settlements, seniors who owned life insurance they no longer wanted, needed, or could afford were faced with either letting the policy lapse or surrendering the policy back to the insurance company. Approximately 88% of a life insurance in the US never ends up paying a claim.  The life settlement marketplace now provides consumers with a much-needed option where they can receive substantially more than the cash surrender value for their life insurance.

Increase Savings

When insurance needs change later in life, expensive premiums can be eliminated. Those premium savings can be redirect to cover current living expenses.

Cover Medical

The fair market value of life insurance policies can cover current and long term medical expenses, allowing seniors to maintain a higher standard of living and care.

Fund Retirement

Repurposing life insurance can help retirees maintain their quality of life and do all those things we dream about having time for in retirement.

Generate Income

Converting the cash outflow of life insurance premiums into a regular cash inflow by re-investing the market value of life insurance into income producing investments can help pay for every day living expenses.

LifeTokens

Our LifeTokens represent investor interests (ownership) in a fund that holds an extensive portfolio of life settlement policies. We target 10 to 12% annualized returns produced by our institutional-grade investment portfolio.

Issued as security tokens, we utilize the ethereum blockchain to secure investor’s rights, interests, and participation in the fund. Additionally, token holders benefit from increased security and liquidity not typically available in traditional alternative investment offerings.

The value of LifeTokens increase as policy maturity evens (death of the insured) occur and as time passes and we move further down along the survival curve of the remaining insureds.  In short, realized death benefits and passage of time increase the value of LifeTokens.

Investing in life settlements on the blockchain through LifeTokens brings all the benefits of alternative longevity based insurance linked securities to the mainstream.