We want to partner with you to help your clients find the best solutions for their life insurance policy.
Before they lapse or surrender a policy, we should have a conversation.
Before they reduce the death benefit, we should have a conversation.
How did the secondary market for life insurance start?
The sale of a life insurance policy to a third party was established as a legal right for consumers in 1911 based on the Supreme Court ruling in Grigsby v. Russell, 222 U.S. 149 (1911). Mr. Justice Holmes said it best, “To deny the right to sell except to persons having such an (insurable) interest is to diminish appreciably the value of the contract in the owner’s hands.” This opinion placed the ownership rights in a life insurance policy on the same legal footing as more traditional investment property such as stocks, bonds and real estate. As with these other types of property, a life insurance policy can be transferred to another person at the discretion of the policy owner. This decision established a life insurance policy as transferable property that contains specific legal rights, including the right to: • Name the policy beneficiary • Change the beneficiary designation (unless subject to restrictions) • Assign the policy as collateral for a loan • Borrow against the policy • Sell the policy to another party Although this ruling established the right for life insurance consumers to sell or trade their life insurance policies, the practice did not become common until the late 1980’s with the start of the viatical settlement industry, which was the precursor to the life settlement market.