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How Do Life Settlements Work?
Just like any other asset, a life insurance policy can be sold by one party to another for cash. So very simply, a life settlement is a transaction in which a life insurance policy is sold by one party to another. These policies are sold to a state licensed financial institution.
The purchasing party is an investor willing to pay the policy holder a fee to become the beneficiary of the policy while assuming responsibility for paying future premiums.
As part of the purchase transaction, the investor assumes responsibility for paying all future premiums required to keep the policy enforced. When the insured passes away, the investor receives the death benefit.