GLOSSARY
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Accredited Investor
An investor who meets certain income or net worth thresholds, qualifying them to participate in private placements and other alternative investments like life settlements.
Asset Management
The ongoing management and optimization of a life settlement portfolio to maximize returns, minimize risks, and align with the investor's financial goals and strategy.
Cash Surrender Value
The amount of money that an insurance company will pay to the policyholder if the policy is surrendered before maturity, often lower than the policy's face value.
Discounted Cash Flow (DCF)
A financial valuation method used to estimate the value of future cash flows from a life settlement investment, considering the time value of money and expected returns.
Due Diligence
The thorough investigation and analysis of a life settlement investment opportunity, including financial, legal, and operational aspects, to ensure it meets investment criteria and regulatory requirements.
Exit Strategy
A plan outlining how an investor intends to liquidate or realize gains from their life settlement investment, whether through maturity, sale on the secondary market, or other means.
Face Value
The nominal amount of the life insurance policy that will be paid out upon the insured's death.
High Net Worth Individual (HNWI)
An individual with significant financial assets and resources, often targeted for investments such as life settlements due to their ability to deploy large amounts of capital.
Investor
An individual or entity purchasing a life insurance policy in a life settlement transaction with the expectation of earning a return on investment.
Life Expectancy (LE)
An estimate of how long the insured individual is expected to live based on actuarial calculations and medical assessments, influencing the value and duration of a life settlement investment.
Life Settlement
The sale of a life insurance policy by the policyholder to a third party for a lump sum payment, typically higher than the policy's cash surrender value but less than its face value.
Liquidity
The ease with which an investor can buy or sell a life settlement investment without significantly impacting its market price, influenced by factors such as market demand and regulatory environment.
Policy Origination
The process of identifying and acquiring life insurance policies suitable for a life settlement investment portfolio, including due diligence and legal considerations.
Policyholder
The individual who owns a life insurance policy and sells it in a life settlement transaction.
Premium
The periodic payment made by the investor to keep the life insurance policy in force until the insured's death.
Regulatory Compliance
Adherence to laws and regulations governing life settlements, which vary by jurisdiction and aim to protect investors and policyholders.
Risk Mitigation
Strategies and measures implemented to minimize risks associated with life settlement investments, including diversification, monitoring life expectancies, and managing policy premiums.
Secondary Market
The marketplace where life settlement investments can be bought and sold after the initial purchase from the policyholder.
Transparency
The clarity and openness in communication and reporting provided by investment firms to investors regarding the performance, risks, and terms of life settlement investments.
Underwriting
The evaluation process used by investors to assess the potential risks and returns of a life settlement investment, including analysis of medical records and life expectancy estimates.
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