Are you looking for excellent returns on your money with minimal risk? Read on to discover life settlements, the new asset class that many people are investing in to replenish their retirement accounts or build back their capital.
Life settlements themselves aren't really new.
They've been around for 30 or 40 years.
Unfortunately, they were not available to regular individual investors.
You had to be able to invest millions to make them work for you -- which means that only foundations or really wealthy people were able to take advantage of life settlements.
Now, a new product has appeared: the fractional life settlement.
This means that you don't have to buy entire policies at a time but can purchase small portions of various different policies.
This gives you the added benefit of diversifying your already fairly low risk, if you work with the right company.
To understand the significance of the fractional life settlement as well as how it works, you need to know exactly what life settlements are.
Generally, life insurance is paid out after the insured person dies.
There are a few policies that have a "cash out" option, but that amount is usually minuscule compared with the face value of the insurance.
So people who have paid into their life insurance policies for decades have had no good way to access their money while they are alive.
At the same time, as those people grow older, the premiums increase so much that they can't afford to maintain their policies.
That's why only 30% of life insurance policies end up paying out a death benefit.
Usually their expenses are going up as well, making it even harder to pay their premiums.
What they really need is a way to access the money in their life insurance policies for what they need and want now, and not have to keep paying those premiums.
If you were in their place, wouldn't you be happy to get a big chunk of money for whatever you want now, rather than let your policy lapse and get nothing, or accept the ridiculous pittance the life insurance companies offer you to "cash out"? Life settlements make that possible.
Here's how it works.
Investors can purchase the insurance policies and pay the insureds somewhere between 40% to 60% of the policies' face value, depending on life expectancy.
This helps the insureds -- who get their money and no longer have to worry about premiums.
And it makes for a relatively safe investment -- since we all die, sooner or later, the payout virtually always comes.
The risk lies in when the insured person will die.
One of the biggest benefits of this new approach to life settlements is that it mitigates that risk.
Traditionally, you had to buy an entire policy -- which generally ran into the hundreds of thousands of dollars.
If you could afford several of those, you could still spread your odds, and chances were good that you would receive an excellent return on your money.
However, with the new approach -- fractional life settlements -- you get to buy very small portions of many different policies -- so the risk is spread around and ends up being very small.
It's a win-win all around.
Someone in their 80s, for example, may not need life insurance anymore to care for their immediate family.
With life settlements, their payments are eliminated, they get money that they can use right now, and the investors get a safe investment that delivers outstanding returns, historically around 14% a year.
With certain companies, you can reasonably aim for higher.