Life policy holders cashing out before their times in increasing numbers. An increasing number of life-insurance policy holders view it as investment rather than a safety net, leading in the past five years to sharp growth in the "life settlement" industry.

The years 2001 through 2005 saw $15-billion in life-settlement transactions, with $20 billion to $30 billion projected for 2007 alone, according to the Life Insurance Settlement Association. These transactions involve selling an insurance policy to a third party, usually for more than the cash value but less than the face value.

All gone

Life policies are sold for a variety of reasons, including a need for liquid assets, a desire to take out a policy more suited to the policy holder changed coverage requirements, or a wholesale change in a policy holder's retirement-investment priorities.

"We work with the insured on one side and we represent them in the secondary life market where there are 32 licensed institutional funds and we work with these funds and we seek the highest and best offers," Jim Pugliese, a founder of Stamford, Conn.-based LifeOptions, tells the Fairfield County Business Journal also of Stamford, Conn.

But some caution against selling insurance policies. Cliff Rosenberry, co-owner of Tarrytown, N.Y.-based property and casualty insurance firm McCartney & Rosenberry, says often life insurance is used to pay taxes after the demise of an elderly person. A life settlement, pretty clearly, would rule out even that benefit to heirs. -FWR

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