DEFINITION of 'Transferable Insurance Policies - TIPS'

A life insurance policy which allows for the transferable assignment of the benefactor. In a Transferable Insurance Policy, the owner sells the policy to an investor at a discount to the face value of the insurance. The purchaser, who becomes the benefactor of the policy, will pay all subsequent premiums and receive the settlement value when the insured person becomes deceased.

BREAKING DOWN 'Transferable Insurance Policies - TIPS'

Transferable insurance policies have a guaranteed principal, similar to a bond, but an uncertain maturity. Since they are sold at deep discounts, TIPS often have high yields. While TIPS contain no external risks, such as interest rate fluctuations, they do have the risk of an extending maturity. The longer an insured person lives, the less return for the investor.

The two primary types of TIPS include viaticals and life settlements. Both types function in similar ways, however, have different expected maturities. Viaticals are policies on terminally ill people, which have a life expectancy of two years. Life settlements have senior citizens as the insured, which extends the life expectancy to an estimated two to 15 years.

RELATED TERMS
  1. Life Settlement

    The selling of one's life insurance policy to a third party for ...
  2. Term Life Insurance

    A policy with a set duration limit on the coverage period instead ...
  3. Life Insurance

    A protection against the loss of income that would result if ...
  4. Variable Life Insurance Policy

    A form of permanent life insurance, Variable life insurance provides ...
  5. Insurance

    A contract (policy) in which an individual or entity receives ...
  6. Key Person Insurance

    A life insurance policy that a company purchases on a key executive's ...
Related Articles
  1. Managing Wealth

    Profit From Unwanted Life Policies With Life Settlement

    With a life settlement you could cash in on your policy money now.
  2. Financial Advisor

    How Life Insurance Settlements Are Evolving

    The life insurance industry marches forward by offering more ways that consumers can access the death benefits in their policies. Here's one of the newest.
  3. Managing Wealth

    An Introduction To Life Settlements

    A life settlement is the trading of a life insurance policy under specific circumstances. Learn what it's all about.
  4. Financial Advisor

    Getting Life Insurance in Your 20s Pays Off

    Find out how Americans in their 20s can benefit from a well-thought-out life insurance policy, especially if they are able to build cash value for retirement.
  5. Financial Advisor

    Buying a Life Insurance Policy? Read This First

    Knowing who needs life insurance, how it works and the different types of insurance can help consumers make informed decisions about this product.
  6. Financial Advisor

    Is Life Insurance From Your Employer Enough?

    Covering the needs of the ones you would leave behind is not easy. But efforts to secure a life insurance policy outside of work should pay off.
  7. Financial Advisor

    Advising FAs: Explaining Life Insurance to a Client

    Life insurance was initially designed to protect the income of families, particularly young families in the wealth accumulation phase, in the event of the head of household's death.
  8. Insurance

    Bundle Your Insurance For Big Savings

    Bundling your insurance can save you money and time. Read on to see how get the most out of multiline insurance discounts.
  9. Insurance

    4 Things That Keep You From Getting Life Insurance

    We look at four common reasons people give for not applying for life insurance, and see if they're legitimate.
Hot Definitions
  1. Money Market

    A segment of the financial market in which financial instruments with high liquidity and very short maturities are traded. ...
  2. Block (Bitcoin Block)

    Blocks are files where data pertaining to the Bitcoin network is permanently recorded.
  3. Fintech

    Fintech is a portmanteau of financial technology that describes an emerging financial services sector in the 21st century.
  4. Ex-Dividend

    A classification of trading shares when a declared dividend belongs to the seller rather than the buyer. A stock will be ...
  5. Debt Security

    Any debt instrument that can be bought or sold between two parties and has basic terms defined, such as notional amount (amount ...
  6. Taxable Income

    Taxable income is described as gross income or adjusted gross income minus any deductions, exemptions or other adjustments ...
Trading Center