Article in the New York Times today talked about how bankers are starting to put together investment packages where cashed in life insurance bundles are securitized. Ultimately the rate of return for these is dependant on whether the insured live longer or die earlier than expected. The one thing for sure, is that death does not ever end in foreclosure, so to speak, so these securities will never collapse the way sub prime mortgages did.
In some ways it is a good thing for elderly holders of these policies, since there will be a market that will let them cash in for more than what the surrender value would be. It will end up costing Insurance Companies more, since part of their rates is based on a certain number of these policies lapsing before the death of the insured.
I guess, if the policies have double indemnity clauses for accidental deaths, there could be some windfall gains. Makes you wonder if the proliferation of these securities would influence bankers to support public health care? Also, if you buy a lot of these and people start living longer, you could be tempted to ....
Well, bankers and investors aren't quite at that level yet, at least I hope not.
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