Life settlements generally involve long-standing "permanent" universal life and variable universal life insurance.
(Life settlements involve the sale of a life insurance policy from the ill or elderly person to someone else at a negotiated price that is less than face value).
Life settlements are meant for people in immediate financial need; she can afford to hold off for a few years.
Mr. Terrell was the co-head of Bear Stearns's longevity and mortality desk — which traded unrated portfolios of life settlements — and later worked at Goldman Sachs's Institutional Life Companies, a venture that was introducing a trading platform for life settlements.
LIFE SETTLEMENTS The notion of selling one's life insurance policy for cash originated in the 1980s with the advent of AIDS.
There is "a legitimate purpose in viaticals and life settlements," said Kim Holland, the insurance commissioner of Oklahoma, which passed a law in 2008 regulating settlement buyers.
Advocates of life settlements say that they offer fiscal relief in hard times, especially to seniors whose retirement portfolios have tanked.
Life settlements have a dubious past indeed; as relatively new, poorly understood and, until recently, minimally regulated transactions, they have been prime terrain for fraud.
New rules being drafted by state insurance regulators would explicitly allow agents to talk to clients about life settlements, but would not insist on it.
Viatical settlements are not subject to income tax, Mr. Massey said, but life settlements are, and the amount depends on whether the policy has a cash value.
"When they set their premiums they were basing them on assumptions that were wrong," said Neil A. Doherty, a professor at Wharton who has studied life settlements.
