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The U.S. secondary market for life insurance policies has experienced phenomenal growth over the last several years. While some $50 million in policy face value was the subject of viatical settlements in 1990, according to some estimates that figure rose nearly sixty-fold to approximately $3 billion in 1999.
This growth is likely to continue for several reasons:
- Nearly five out of every six life insurance policies lapse or otherwise are cancelled before payout. This frequently happens after years or even decades of faithful premium payments.
- The cash surrender value of a policy available through an insurance company may be as little as 3% of the policy face value.
- More life insurance continues to be underwritten. While more than six billion policies with a total face value in excess of $1.1 billion were underwritten in 2000, that total swelled to more than $16 billion by the end of 2002*.
- The American Council of Life Insurers anticipates a further rise in underwritten life insurance policies in the future.
These factors highlight the tremendous potential for continued growth of viatical and life settlements.
*American Council of Life Insurers, Life Insurer's Fact Book 2003.
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