What are the legal rights of a life insurance policy owner to engage in a “Life Insurance Settlement”?
The legal right of a policy owner to engage in a Life Settlement is guaranteed by the landmark Supreme Court decision; Grigbsy v. Russell establishing that life insurance possessed all the ordinary characteristics of property, and therefore represented an asset that a policy owner has the right to transfer without limitation. Life insurance is personal property and the owner is protected by all the same inalienable rights that any owner of real estate, stocks or any other assets enjoy.
As seniors look for assets they can use to offset lack of savings or losses in equity; the Life Settlement market has grown rapidly, with $13 billion in transactions completed in 2008. 90 million senior citizens own more than $500 billion worth of life insurance, of which over $100 billion was owned by seniors eligible for Life Insurance Settlements. The Wharton Business School issued a study about Life Settlements where they observed, “Life insurance policies are typically assignable, which means that a policyholder is free to transfer their ownership of the policy to another person. A policyholder’s right to assign their policy to someone other than the insurance carrier has existed for some time.” The study also went on to observe that a Life Settlement “gives the policyholder the economic freedom to choose between a number of buyers and, in so doing, to receive the fair market price for their policy.”
Among the legal rights of a life insurance policy owner are:
· Sell the policy to another party · Name the policy beneficiary · Change the beneficiary designation · Assign the policy as collateral for a loan · Borrow against the policy
A number of insurance industry organizations such as the National Association of Insurance Commissioners (NAIC), National Council of Insurance Legislators (NCOIL), American Council of Life Insurers (ACLI), National Association of Insurance and Financial Advisors (NAIFA), American Association of Life Underwriters (AALU) and the Life Insurance Settlement Association (LISA) support the legal rights of a policy owner to liquidate a life insurance policy through a Life Settlement.
Read the Grigsby v. Russell decision issued by Justice Oliver Wendell Holmes in 1911: Supreme Court Ruling on Life Insurance as Transferable Property.pdf (42.00 kb)