Does the life insurance industry discourage or refuse to pay death benefits where policies have been part of a life settlement?
Life insurance policies are contracts between the policyowner and the issuing insurance company. The arrangement is simple – if the policyowner pays the premiums and does not allow the policy to lapse, the insurance company must pay the death benefit at the death of the insured. The Supreme Court in 1911 said that a life insurance policy is an asset that can be sold. With $13.8 trillion of individual life insurance in force, a $20 billion (2007 estimate) life settlement marketplace has little impact on a life insurance industry that is growing at 5% per year. Any changes in future life insurance contracts to attempt to preclude life settlements will not impact the industry in the near future.
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