This is one of the latest investment vehicles that is being studied in the US. Have you heard of this freaking investment called “DEATH BONDS”?

With the investment banking industry are all in collapse because of the credit crunch brought about by the subprime mortgage crisis, the next investment wave being studied and devised by Wall Street are death bonds.

While subprime mortgage preys on debtors with high credit risk, death bonds prey on life-settlement backed securities. It means that the security on these type of investment is not a house, a car, or anything that has material value but our own LIFE.

A lot of americans have their own life insurance but many of them find the premiums to be expensive. Others would simply not finish paying these premiums and would just opt to cash in early especially when emergency needs arises. Now because of these cases, life settlements are now securities where insured persons now have a chance to sell their policies to investors. These investors will now be the one to continue paying premiums for the insured person until such time that when the insured person dies, they will be the one to benefit and collect the sum insured.

These insurance policies will then be pooled much like a mutual fund then sold it on bulk to a hedge fund. The only risk in holding on to this kind of investment lies with the life of the insured person. The longer the person lives, the lower the death bond’s yield will be.

One thing though I think is risky about these types of investments. The investors might hire a group of killers to kill the insured person so that they can stop paying the premiums and therefore collect the sum insured from these policies.

So why are they called death bonds? It’s a bond that profits from another person’s death. Pretty morbid and freaking type of investment. Would you invest in these types of investments? Personally, I would not.

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