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.

Investopedia explains '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.



comments powered by Disqus
Hot Definitions
  1. Marginal Analysis

    An examination of the additional benefits of an activity compared to the additional costs of that activity. Companies use marginal analysis as a decision-making tool to help them maximize their profits. Individuals unconsciously use marginal analysis to make a host of everyday decisions. Marginal analysis is also widely used in microeconomics when analyzing how a complex system is affected by marginal manipulation of its comprising variables.
  2. Treasury Inflation Protected Securities - TIPS

    A treasury security that is indexed to inflation in order to protect investors from the negative effects of inflation. TIPS are considered an extremely low-risk investment since they are backed by the U.S. government and since their par value rises with inflation, as measured by the Consumer Price Index, while their interest rate remains fixed.
  3. Gilt-Edged Switching

    The selling and repurchasing of certain high-grade stocks or bonds to capture profits. Gilt-edged switching involves gilt-edged security, which can be high-grade stock or bond issued by a financially stable company such as the Blue Chip companies or by certain governments.
  4. Master Limited Partnership - MLP

    A type of limited partnership that is publicly traded. There are two types of partners in this type of partnership: The limited partner is the person or group that provides the capital to the MLP and receives periodic income distributions from the MLP's cash flow, whereas the general partner is the party responsible for managing the MLP's affairs and receives compensation that is linked to the performance of the venture.
  5. Class Action

    An action where an individual represents a group in a court claim. The judgment from the suit is for all the members of the group (class).
  6. Retail Sales

    An aggregated measure of the sales of retail goods over a stated time period, typically based on a data sampling that is extrapolated to model an entire country. In the U.S., the retail sales report is a monthly economic indicator compiled and released by the Census Bureau and the Department of Commerce.
Trading Center