Buzzword: Death bonds

Marketplace Staff Feb 23, 2007

A rather “morbid” investment brings us this week’s Marketplace Money buzzword: death bonds.

A death bond isn’t a contract you sign with a hitman. It’s a bond issued by . . . a life insurance company. You loan them your money. If the world’s a safe place, and the company pays off very few claims, then you get the money back — with interest! But if there are lots of claims, like after a catastrophy, then the company can use your loan to pay off policyholders — and you might need some financial CPR.

Death bonds are one way to diversify a lifeless profolio. Though, unlike death itself, they’re not for everyone.

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