There is a concept of investing in insurance policies called SpinLife or Speculator Initiated Life Insurance in getting popular among High net worth Individuals.
It is also known as Stranger owned Life insurance (SOLI) or Investor Owned Life insurance ( IOLI ).
An Investor speculates on the Life of a Person and not on the cash value of the insurance product like in variable insurance policies.
Some smart financial planners observed that many rich old people had very huge life covers, which will ultimately go to their children and grandchildren who are usually well off.
Also nowadays, children are often distant from their parents and grandparents and it is easy to find neglected elderly people who are a prime target for these investors.
These smart financial planners approach these rich old men with a new offer.
They will buy the policy from the life insured for a lump sum, and they will pay future premium payments.
Their return is that they will get the insurance proceeds when the person is dead.
The speculation here is that the investor will get a good return if the person dies soon, but will continue to make the premium payments till the end of the premium paying term, and they will not get the money for long.
Since death is a certainty, the investors will get the death proceeds one day or the other.
This is slightly similar to an annuity contract where the annuitant is paid a certain sum as long as he lives, only here the annuitant is paid a lump sum in return for his death proceeds.
A term insurance can also be used for this transaction, but it becomes a very high risk, since there is a risk of the person outliving the term of the policy in which case the investor lose all.
Whole life Insurance policies are the most common and popular candidate for the Spin Life insurance contracts Since this usually involves a huge down payment, only very high net worth individuals can take part in such a transaction, but with other asset classes like stock markets giving lesser returns, the Speculator Initiated Life Insurance is becoming very popular amongst the HNI investors.
It is also known as Stranger owned Life insurance (SOLI) or Investor Owned Life insurance ( IOLI ).
An Investor speculates on the Life of a Person and not on the cash value of the insurance product like in variable insurance policies.
Some smart financial planners observed that many rich old people had very huge life covers, which will ultimately go to their children and grandchildren who are usually well off.
Also nowadays, children are often distant from their parents and grandparents and it is easy to find neglected elderly people who are a prime target for these investors.
These smart financial planners approach these rich old men with a new offer.
They will buy the policy from the life insured for a lump sum, and they will pay future premium payments.
Their return is that they will get the insurance proceeds when the person is dead.
The speculation here is that the investor will get a good return if the person dies soon, but will continue to make the premium payments till the end of the premium paying term, and they will not get the money for long.
Since death is a certainty, the investors will get the death proceeds one day or the other.
This is slightly similar to an annuity contract where the annuitant is paid a certain sum as long as he lives, only here the annuitant is paid a lump sum in return for his death proceeds.
A term insurance can also be used for this transaction, but it becomes a very high risk, since there is a risk of the person outliving the term of the policy in which case the investor lose all.
Whole life Insurance policies are the most common and popular candidate for the Spin Life insurance contracts Since this usually involves a huge down payment, only very high net worth individuals can take part in such a transaction, but with other asset classes like stock markets giving lesser returns, the Speculator Initiated Life Insurance is becoming very popular amongst the HNI investors.