What Does Put Option Mean?
A put option is a contract that allows an investor to sell a particular security, or other investment at a particular price for a specific amount of time. In the context of insurance, put options exist for life insurance policies. Such put options allow life insurance policyholders the option to sell their policies for a specified price for a certain period of time.
Insuranceopedia Explains Put Option
The reason why put options are appealing to many investors and life insurance policyholders is because they can offset the risk of market volatility. In other words, if the stock market goes down and a life insurance policy is suddenly worth significantly less, a put option on a life insurance policy would still allow the policyholder to seek the policy for the pre-agreed amount. Put options for life insurance policies essentially act as insurance for the policies themselves.