Accounting for the Purchase of Life Settlement Contracts

By Alan Reinstein and Cathleen L. Miller

SEPTEMBER 2007 - Purchasing life insurance policies from the elderly or terminally ill is becoming an increasingly popular investment tool (see Charles Duhigg, “Late in Life, Finding a Bonanza in Life Insurance,” New York Times, December 17, 2006). These policies are often called speculator-initiated life insurance (spin-life) policies, life settlement contracts, or viaticals. In response to the growth in these investments, FASB issued new authoritative guidance relevant to accountants, financial planners, investors, and insurance professionals.

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