Understanding the risks of traded life policies

Traded life policies, which are life policies purchased from the terminally ill, are arriving in the UK. However, investors and advisers need to be aware of the tax and ethical implications of these investments

The latest investment idea to be imported from the US will be seen by many as an unwelcome and morbid development. However, traded life policies are bound to be popular with some looking for a new way to make good returns in an uncertain market. These life insurance policies are sold on the secondary market for 'viatical settlements'. These settlements allow the terminally ill to unlock the benefits of their life insurance policies prior to their death. They effectively sell their policy at a discounted rate when they are diagnosed as terminally ill to release the value while they are a...