Transferable Insurance Policies - TIPS

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. Viatication

    The selling of a life insurance policy by a terminally ill person, ...
  2. Conversion Privilege

    An insurance policy in which the insurer is required to renew ...
  3. Cover Note

    A temporary document issued by an insurance company that provides ...
  4. Term Life Insurance

    A policy with a set duration limit on the coverage period. Once ...
  5. Personal Lines Insurance

    Property and casualty insurance products for individuals that ...
  6. Insurance

    A contract (policy) in which an individual or entity receives ...
Related Articles
  1. Options & Futures

    Profit From Unwanted Life Policies With Life Settlement

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

    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.
  3. Insurance

    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.
  4. Investing

    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.
  5. Home & Auto

    Intro To Insurance: Types Of Life Insurance

    By Cathy ParetoLife insurance protection comes in many forms, and not all policies are created equal, as you will soon discover. While the death benefit amounts may be the same, the costs, structure, ...
  6. Options & Futures

    Permanent Life Policies: Whole Vs. Universal

    If you're looking for life-long security, choosing between these two is the key.
  7. Home & Auto

    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.
  8. Home & Auto

    Intro To Insurance: Fundamentals Of Insurance

    By Cathy ParetoHow does insurance work? Insurance works by pooling risk.What does this mean? It simply means that a large group of people who want to insure against a particular loss pay their ...
  9. Options & Futures

    Making A Living On Death Bonds

    Find out if these macabre bonds are just the new blood your portfolio needs.
  10. 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.
RELATED FAQS
  1. What is term insurance?

    Term insurance is a type of life insurance policy that provides coverage for a certain period of time, or a specified "term" ... Read Answer >>
  2. What is the difference between term and universal life insurance?

    Term life insurance is the most basic of insurance policies. It is nothing more than an insurance policy that provides protection ... Read Answer >>
  3. What is a convertible insurance policy?

    A convertible insurance policy is a term usually related to life insurance. To understand a convertible policy, you must ... Read Answer >>
  4. Can your insurance company cancel your policy without notice?

    Learn about your rights as an insured when it comes to your insurance policy being canceled, including how to access your ... Read Answer >>
  5. What are some examples of when insurance bundling is a bad idea?

    Learn about situations where insurance bundling may not be a favorable option. Bundling insurance is often a good idea, but ... Read Answer >>
  6. What are some examples of industries that practice price discrimination?

    Understand the various types of insurance coverage offered in the insurance marketplace, and learn why each policy should ... Read Answer >>
Hot Definitions
  1. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  2. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  3. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  4. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  5. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
  6. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
Trading Center