Glossary

Learn more about Life Settlements as an asset class.

Beneficiary	The person(s) named in the policy to receive the life insurance proceeds upon the death of the insured.
*Cash Value*	The amount that is available in cash or loans and that may be available for withdrawals in a whole life insurance, universal life insurance, or survivorship life insurance policy.
Contestable Period	In an insurance policy there is a clause that explains the conditions under which the insurer my contest or void the life insurance policy. This contestability is for a limited period of time, which, in most states, is 2 years.
Death Benefit	The payment made to a beneficiary from a life insurance policy when the insured dies.
*Face Amount (Face Value)*	The amount stated on the face of a life insurance policy that will be paid in case of death of the insured.
*Insurable Interest*	An insurable interest exists when the person applying for an insurance policy and the person who is to receive the policy benefit will suffer an emotional or financial loss in the event of the death of the insured. Without the presence of insurable interest, an insurance contract is void. This is often referred to as STOLI (Stranger Originated Life Insurance).
Insured	A person whose life is insured by an insurance policy.
*Lapse*	The termination of an insurance policy because a renewal premium is not paid.
Life Expectancy	An actuarial term, which means the average time remaining for which an individual will live, based on known medical factors and past mortality experience on pools of lives similar to the insured. Some people will die before this date and some will die after.
*Life Settlement*	A financial transaction in which a policy owner possessing an unneeded or unwanted insurance policy sells the policy to a third party for more than the cash value offered by the life insurance company. The purchaser becomes the new beneficiary of the policy at maturation and is responsible for all subsequent premium payments.
*Life Settlement Provider*	Companies that facilitate the sale of life insurance policies to investors.
*Policy Owner*	Entity that has legal ownership of the life insurance policy. This may or may not be the insured or the beneficiary. The policy owner has the right to designate beneficiaries and/or bring the life insurance policy to market for a life settlement transaction.
Qualified Purchaser	Any natural person who owns at least $5,000,000 in investable assets, or an entity, not formed for the specific purpose of investing in the products offered, that owns and invests, on a discretionary basis, at least $25,000,000 in investments.
*Synthetic Longevity Instruments*	A financial contract that bilaterally isolates the longevity risk of a portfolio of policies and then transfers the longevity risk to another party. This process separates the ownership and management of longevity risk from the other risks associated with a life settlement contract.
Underwriting	The insurance company's process for determining whom it will insure and for how much.
Universal Life	A form of permanent life insurance characterized by flexible premiums, flexible face amounts, and unbundled pricing factors.
Variable Life	A form of permanent life insurance in which premiums are fixed, but death benefits and other values may vary, reflecting the performance of the sub accounts in an insurer's separate account.
*Whole Life*	A type of life insurance that remains in effect, if the premiums are current, until the insured dies. Whole life insurance builds a cash value for the policy owner.