Investing In Death

For several years now, there have been investors who have earned very good rates of return by purchasing the rights to life insurance policies from AIDS sufferers. It is actually a good idea in concept, because what good is a big windfall of money after you are gone? Since most AIDS victims don't have large families to leave their estates to, the money is much more needed in their final months & years. This started a fairly good sized viatical settlement industry, where investors reviewed T-cell counts and other indicators of declining health. The returns for investors could be quite lucrative. Say you paid an AIDS sufferer $250,000 for the rights to his $500,000 life insurance policy. If he dies shortly thereafter, you've doubled your money.

What brought this up was this article in today's Wall Street Journal on the next evolution of this kind of investment, which they have called Death Bonds. Basically, the number of AIDS sufferers with investment grade life insurance is dwindling, so other persons with limited life spans are becoming more attractive. They are being marketed with expected deaths within 10 years. This makes me wonder what investors will do if their insured parties outlive the 10 year or other predicted lifespan. Will there be a motive to help nature along?

KMK
- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/18/2002 01:44:00 PM Send this post: