Second hand policy

Life assurance contracts are known as second hand policies, where the policyholder’s entitlements against the insurance undertaking are sold to an investor prior to expiry of the contractual period. The term “used life assurance” has also become a popular way of referring to the disposal of entitlements from a life assurance contract.

The insurance policyholder hopes to sell his entitlements from the contract for a price that is higher than the surrender value calculated by the insurance company. The purchaser, on the other hand, considers it as an investment. He acquires the entitlements by paying a purchase price that is above the surrender value, but as a rule is below the economic value of the policy. Consequently, the investor continues to pay the premiums until the end of the contractual period. Upon maturity on in the event of death, the investor receives the sum insured including any shares in the profits. The used policy therefore does not constitute a form of insurance, but instead constitutes a capital investment. Even after this transaction, the life of the originally insured person remains insured.