Life Insurance in United States

Life Insurance Definition

A contract of Insurance wherein the insurer agrees to pay a specified sum (according to the definition of Life Insurance based on the Cyclopedic Law Dictionary) in the event of the death of a particular person, if it occurs at a time and under circumstances within the terms of the contract. See more about the definition of Life Insurance in the legal Dictionaries.

Life Insurance Policies

The idea of third-party investment in life insurance policies surfaced in the 1980s during the U.S. AIDS epidemic. Companies offered to buy the policies of HIV/AIDS patients who needed cash for medical and living expenses. California statutes permitted these so-called viatical settlements, though critics found the transactions ghoulish and macabre. To protect buyers, the Legislature in 1990 required that anyone selling the agreements be licensed. The market declined as the survival rate for HIV patients improved, but there was now an option for people with terminal illnesses and others to cash out their life insurance.

By 1998, life insurance policies worth $200 million were sold to investors – up from just $5 million in 1989. The California Department of Insurance cited an estimated $13 billion in policies less than a decade later, driven by well-funded corporate entities that transformed the life settlement concept into a wealth-management tool. Investors targeted the wealthy, offering signing bonuses, ship cruises, and even luxury cars to entice them to sell their life insurance policies. One of those who saw an opportunity in managing life settlement portfolios was Martin E. Fleisher, a New York City attorney who founded Life Product Clearing LLC (LPC) in 2005. “We figured out the economics of it,” he recalls. “We thought we could raise money to do it.”

Definition in Plain-English Law

A contract under which an insurance company agrees to pay money to a designated beneficiary (according to the entry Life Insurance as defined by Nolo’s Encyclopedia of Everyday Law, page 437-455) upon the death of the policyholder. In exchange, the policyholder pays a regularly scheduled fee, known as the insurance premiums.

Practical Information

Note: Some of this information was last updated in 1982

A contract (in U.S. law) under which the insuring company agrees, in consideration for the payment of premiums, to pay a stipulated sum of money to a designated beneficiary upon the death of the insured. The flexibility of the life insurance contract makes it possible for insurance to perform a number of useful functions in estate planning. Life insurance gives financial security to dependents. It can serve as a savings program, affording a plan involving the growth c cash value over the years without income tax (in U.S. law) liability. Finally, life insurance can assure estate liquidity t . making a cash fund available to the insured’s legal representatives for the payment of debts, expenses, and taxes which will eliminate or reduce the need for the forced sale of nonliquid assets.

(Revised by Ann De Vries)

What is Life Insurance?

For a meaning of it, read Life Insurance in the Legal Dictionary here. Browse and search more U.S. and international free legal definitions and legal terms related to Life Insurance.

Life Insurance USA

Life Insurance in Foreign Legal Encyclopedias

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Finding the law: Life Insurance in the U.S. Code

A collection of general and permanent laws relating to life insurance, passed by the United States Congress, are organized by subject matter arrangements in the United States Code (U.S.C.; this label examines life insurance topics), to make them easy to use (usually, organized by legal areas into Titles, Chapters and Sections). The platform provides introductory material to the U.S. Code, and cross references to case law. View the U.S. Code’s table of contents here.

Life Insurance

In Legislation

Life Insurance in the U.S. Code: Title 5, Part III, Subpart G, Chapter 87

The current, permanent, in-force federal laws regulating life insurance are compiled in the United States Code under Title 5, Part III, Subpart G, Chapter 87. It constitutes “prima facie” evidence of statutes relating to Government Employees (including life insurance) of the United States. The reader can further narrow his/her legal research of the general topic (in this case, Government Employment Insurance and Annuities and Insurance of the US Code, including life insurance) by chapter and subchapter.

Resources

Further Reading

• Information about Life Insurance in the Gale Encyclopedia of American Law.