Life expectancies are a major factor for companies that invest in a stranger's life insurance. These businesses, such as Life Partners Holdings Inc., arrange to purchase life insurance policies from insured individuals. The company then sells a portion of the policy's interest to investors who can collect the death benefits of the insured person when he or she dies.
Take 84-year-old Marvin Aslett, an Idaho rancher. The Wall Street Journal reported Life Partners Holdings estimated in 2005 that Aslett had around two to four years left to live. Had the Idaho rancher died as the company projected, investors with a $2 million policy on Aslett's life would have gained a significant return. Instead, Marvin Aslett said he remains "as healthy as a horse" and continues to work on his ranch.
"There's going to be a lot of disappointed investors," he said.
Life Partners Holdings, a Texas-based company, has underestimated the life expectancies of numerous individuals whose policies its customers invest in, and the company's life-insurance deals have cost them huge fees. If life expectancy estimations on a group of people are properly calculated, half of the them should die by their projected date.
However, 95 percent the insured individuals in Life Partners' policies lived past the expected date of death. If an estimate is too low, the policy payout of its investors becomes delayed. Investors are then forced to continue paying the premiums of that policy as the insured individual lives on.
In New York, the Court of Appeals recently ruled that people may now buy life insurance policies and sell them to strangers for investment purposes. To learn more about life insurance options or what to expect when investing in someone else's insurance policy, seek legal counsel from a knowledgeable NY estate planning lawyer. For general information, visit the Related Resources links below.
- Stranger Originated Life Insurance (FindLaw's LawBrain)
- Get In Touch With A NY Estate Planning Lawyer (FindLaw)
- New York Court Rules On Arthur Kramer Life Insurance Case (FindLaw's New York Estate Planning News Blog)