Life Insurance on the Line
Marketplace, August 3rd, 2007
Lisa Napoli: A few weeks ago, a pair
of Irish hedge funds filed for bankruptcy after some risky investments
went south. Ritchie Capital had invested in what are called "life
settlement policies." That's basically where investors buy life
insurance policies and profit when the original policyholders die. As
Marketplace's Amy Scott reports, it's not the only way investors are
cashing in on matters of life and death.
Amy Scott: You've probably seen the ads on cable:
Life Insurance Ad: If you're a senior like me, you may be surprised at how much you can be paid for your life insurance.
If you're over 65 and short on cash, you can sell your life
insurance policy to a company like J.G. Wentworth. So-called life
settlement companies pool your policy with others and sell it on to
investors in the form of a bond.
Nick Potter is an attorney with the law firm Debevoise and Plimpton.
He says unlike viatical settlement companies that target the terminally
ill, life settlement companies focus on healthy seniors.
Nick Potter: Someone who
feels that, well I could use the money now, and I might as well sell
the policy and have someone else wager on the duration of my life.
Ghoulish? Certainly. Shady? Perhaps. Life settlement firm Coventry
First is under investigation. State officials say the company may have
underpaid people who sold their policies. Those bankrupt Ritchie
Capital hedge funds invested in Coventry's life settlements.
Read more of this article. Learn more about Life Settlements.