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.

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  1. Can I borrow from my annuity to put a down payment on a house?

    You can borrow from your annuity to put a down payment on a house, but be prepared to pay an assortment of fees and penalties. ... Read Full Answer >>
  2. What are the risks of annuities in a recession?

    Annuities come in several forms, the two most common being fixed annuities and variable annuities. During a recession, variable ... Read Full Answer >>
  3. What are the biggest disadvantages of annuities?

    Annuities can sound enticing when pitched by a salesperson who, not coincidentally, makes huge commissions selling them. ... Read Full Answer >>
  4. How can I determine if a longevity annuity is right for me?

    A longevity annuity may be right for an individual if, based on his current health and a family history of longevity, he ... Read Full Answer >>
  5. Can your life insurance company sue you?

    A life insurance company generally cannot sue you, but it can sue your estate. The company may do this in order to recover ... Read Full Answer >>
  6. Can your insurance company cancel your policy without notice?

    In most states, an insurance company must give a policyholder written notice of at least 30 days before canceling a policy. ... Read Full Answer >>

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