Is there a company out there that will be able to turn life insurance policies into bonds?

There is, in fact, a company that will be able to turn life insurance policies into bonds. Life Partners Holdings Inc., based in Waco Texas is a company that will do this.

They recently unveiled a special plan that will be able to transform the contracts of healthy seniors into ten-year bonds that can later be sold to investors.

The new sales operation were up and running from November or December, according to Michael Beste, president of the Life Partners' institutional investment division.

For those who don't know what Life Partners is, it is a viatical and life settlement broker. A viatical is basically a contract where a terminally ill policyholder sells his or her life insurance policy to an investor.

The premium on the policy will be paid by the investor who will later collect the death benefit when the seller dies. A viatical broker is usually the one who arranges the deal. Terminally ill policyholders will be linked with investors looking to purchase a policy by viatical brokers.

Beste claims that people who sell their policies "don't need the coverage any more and don't pay increasing premiums. They need the cash today vs. tomorrow for some immediate need.'

A "strategic alliance' with an investment firm that specializes in "securitization' is currently in action by Life Partners, according to Beste.

Life Partners was provided with $100 million from a company that Beste would not name. This money was given to them to purchase life insurance policies from health seniors aged 70 years or older.

However, Beste's company will only purchase life insurance policies with a minimum face value of $500,000 and a maximum of $5,000,000. The amount that a policyholder will receive depends on one large factor - life expectancy.

The longer a policyholder has to live, the less she or he will receive for the policy because of the fact that the trust company will have to pay more in premium to keep the policy in force. According to Beste, Life Partners won't purchase policies from people who have a life expectancy of longer than 10 years.

The investment firm will transform the assets into bonds that will mature and pay out in ten years after the policies are purchased. Then, the bonds will be sold on the open market.