The idea of selling the proceeds of one’s own life insurance policy to another may at first glance appear to be outside the scope of traditional insurance practices, but recently a growing number of policyholders have embarked on this process in an attempt to find additional sources of income as medical costs continue to rise. Unfortunately, the transaction process is not an easy one as the industry is largely unregulated. Courts, state regulators and even insurance companies themselves have started to reexamine traditional practices in an effort to address the growing demands of life insurance policyholders in this area. 

 

The authors address the complexities that have arisen. For example, “Though courts seem inclined to entertain expanding the scope of insurable interest to include certain employer-employee relationships, a practitioner must be aware that this issue remains a constant concern in the life insurance settlement market where there is no recognizable relationship between the parties prior to the transaction. One potential scenario which highlights the complexity of the transaction is when the investor purchases a life insurance policy with loaned funds from a financial institution with the intent to resell the policy.”    

Access the complete commentary on lexis.com