The Financial Industry Regulatory Authority (FINRA) published an Investor Alert on life settlement. Life settlement is the transaction that involves selling one's life insurance policy to a third party that did not issue the policy for a lump sum payment whose value is higher than the policy's cash surrender value but less than the net death benefit.
Because life settlement is targeted at senior people, the industry can be subject to sales practice abuses. Potential investors should take caution when consideration selling one's life insurance policy. Things to consider might include: know the price of other life insurance policies that you want to replace with, know if the price is fair (since there is not secondary market, the only way to price a policy would be to do your research of the policies that are out there in the market), and understand how life settlement might impact your participation in state or federal public assistance.
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