Senior life settlements are investments that offer an assured payoff, if done properly. In essence, you buy an existing life insurance policy from an elderly policyholder. As long as that policy stays in force, you know you’ll receive the policy’s death benefit. You might get that return in one week, without making any further outlays, or you might have to wait for years before you collect a penny.
Generally, you’ll probably invest through a specialized firm that handles senior life settlements. Such a firm will find people who want to sell their policy, evaluate the deal, and bring in investors.
You probably will buy a piece of a policy from an individual whose name is not revealed to you. If a $250,000 policy is bought for $125,000, for example, you might invest $25,000 and receive $50,000 at the policyholder’s death. Alternatively, your $25,000 might go into a pool of $1 million or more. Several policies could be purchased, from different policyholders, and you would get some return whenever one of the insured individuals dies.
In any case, you should not underestimate the importance of working with the right investment firm. You’ll want a sponsor who can pick out sellers who truly have short life expectancies, so you can receive a payout before too much time has passed.
