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If you're unfamiliar, a life settlement is the instance in which a senior who possesses a life insurance policy chooses to sell that policy for a lump sum, rather than let it lapse, to an investor who then takes over the premium payments and receives the death benefit when the insured passes away. Life settlements are, and will continue to be, a viable and growing asset for investors for a number of reasons.

The Simple Facts
Today, many policy owners are still unaware of the options provided by life settlements, yet the industry continues to grow. The growth of the life settlement industry is driven by a number of basic factors. For example:

-- The 65+ demographic is continuing to grow by more than three times the rate of growth for the entire population. In 2007, the Social Security Administration estimated that by 2030, over 19% of the population of the US will be over 65 years old.
-- There's more concern now more than ever about retirees outliving their savings.
-- A larger and more diverse group of institutional investors have gotten involved in life settlements, including Wall Street.
-- Every day, more trusted advisors are realizing the benefits that a life settlement may be able to offer to their clients, and are informing their clients about the option.
-- The Government Accounting Office (GAO) found that seniors who sell their life insurance on the secondary market receive, on average, eight times their cash surrender value.

As more education about the life settlement market is spread, the more it is being looked at as a great option not only for investors, but for seniors who want to lose the burden of a monthly premium they can no longer justify or simply do not need.

A Court Case and the Future of Life Settlements
At the time of writing, there's currently a lawsuit playing out in California that will have a significant impact on the life settlement market. In the case of Larry Grill, et al. v. Lincoln National Life Insurance Co., the owner of the policy is claiming fraudulent concealment and financial abuse of an elder for withholding information about the life settlement market.

In the case, the plaintiff held a policy valued at over $7 million, which he purchased from the defendant. When the policy's monthly premiums began to outweigh the investment returns, the policy owner was informed that his only options were to continue paying premiums or surrender a portion of the policy to lower the cost. After surrendering $5 million of the original face value, the policy owner learned about the life settlement market, and specifically, that he could have sold that $5 million worth of coverage.

While the outcome of the case will have a direct impact on the life settlement market, it's important to note that the mere fact that the case exists is an indicator of the viability of life settlements. The market provides investors with an opportunity to diversity their portfolio, while it offers policy owners an opportunity to find other investment opportunities or to simply build on their existing nest egg for retirement.

Leo LaGrotte is founder and president of Life Settlement Advisors.

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