VIATICAL SETTLEMENTS

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VIATICAL SETTLEMENTS: (1997) Most of these require that you be terminally ill.

• Contact several firms. Prices vary tremendously.
• Check to see if the company is licenses by the state
• If someone tries high pressure, run away. And then contact your state department of insurance.
• Verify that the company REALLY has the money to pay out
• Set up an escrow to deposit the policy and the money.
• Insist on a timely payment. By the time you notify them initially, there should only be a couple months till "closing".
• Ask about tax consequences of the payments- particularly as they may effect social services.
• Ask about privacy since, if the policy is sold through a broker, the privacy may be lost.

But if you are selling, someone else is buying. And this is how "well" buyers can do.

HYPOTHETICAL YIELDS

Life Expectancy

% of Actual Life Span/Months and Yield

25%

50%

75%

100

125

175

12 mos	3 mo 48%	6 mo 24%	9 mo 16%	12 mo 12%	18 mo 8%	21 mo 6.9%
18 mos	4.5 56%	9 28%	13.5 21%	22.5 11.2%	27 9.3%	31.5 8%
24 mos	6 56%	12 28%	18 21%	30 11.2%	36 9.3%	42 8%
36 mos	9 56%	18 28%	27 21%	45 11.2%	54 9.3%	63 8%

So, if you bought a policy of an individual with 24 months to live (as determined by an independent physician) and the person actually lives the 24 months, your return on the investment would equal 11.2%. If he/she died in 6 months instead, the return is 56%. If they outlived their expected lifetime to 42 months, the return drops to 8%. You become the irreversible beneficiary and are guaranteed payments upon death.

Remember, the seller effectively disinherits his/her beneficiaries, so think before doing.

ACCELERATED DEATH BENEFITS: (1997)If you are terminally ill, some life insurance companies may pay you part of the policy during the last 6 months (perhaps 12 months of your life). The cap is usually set at $250,000 by many companies. Some policyholders may opt to sell their policies instead. These are called viatical settlements and the cost to the seller can be 20% and more. It's much cheaper and easier to simply use your own insurance company, so why don't the ill do that? Basically since the policyholders don't know about accelerated death benefits. So who's responsible for notifying them? It would seem that the agent would be the logical choice, but since there is no commission involved, many may not make the effort. California's Department of Insurance requires viatical licensees to disclose or advise any applicant for a viatical settlement contract at the time of solicitation, but some viatical licensees just use only a one line disclosure format- hardly a significant disclosure.

One benefit, however, of the viatical settlement is that some will go out as far as two, three, four and even five years in allowing a sale. But since an accelerated death benefit is probably not allowed till just a year before death, the policyholder may have already incurred massive debt, lost a house or been found financially unable to take some medical tests.

Another aspect is the two year inconvertibility period. Should a claim be brought within this time frame, the insurance company may balk at paying. They might also be able to prove that the questionnaire was fraudulent if a claim was placed so soon. Dying is not fair nor easy, but these opportunities do provide some financial flexibility if used properly. The trick is to know what to use and when.

Viatical Settlements (2000)- extensive commentary from Trusts and Estate

Life Settlements: (2005) Consumer reports indicated that 33 or the 73 viatical companies operating in 2000 had problems with the securities or insurance regulators in the previous two years.

Understanding What A Viatical Settlement Is

A viatical settlement is a financial option that allows you to sell your life insurance policy and receive a portion of the benefits today. The company that purchases your policy will take over ownership of your life insurance policy and also become the beneficiary. In exchange you will receive a cash settlement based on numerous factors such as your insurance premiums and health. Here are four facts that you will find useful when determining if you want to proceed with a viatical settlement.

Your beneficiary will not receive any of the death benefit.

You will not have to pay any premiums after you sell your life insurance policy.

You will receive your settlement federal income tax free.

ANY TYPE of life insurance can be sold at all. This means Term, Group, and FEGLI, etc.

Evaluating The Needs of You, Your Beneficiary, And Your Family

Since your beneficiary will not receive your life insurance proceeds, its important to really evaluate the needs of your beneficiary. For some families a life insurance policy can become expendable because of other funds available. For others the proceeds from that life insurance policy will be needed after the passing of that family member. Discuss the importance of the life insurance proceeds and decide if a discounted percentage of that money would be more useful for your loved ones now. In some cases there may be debt incurred that would be easier to eliminate now then wait to eliminate in the future. Even if you are not sure if you want to take part in a settlement consider speaking with a viatical settlement broker to get an idea of what takes place.

Know The Time It Takes To Complete A Viatical

A viatical settlement is not an instant transaction, it can take four to five weeks to get offers to purchase your policy and up to three weeks after that to actually get the money for policy. It is important to keep this in consideration if you are keeping a viatical as an option, but want to wait and possibly apply at a later date. Remember submitting your information can save time if you plan to make a decision at a later date. Just remember to let the broker know you are keeping a viatical settlement as a secondary option so they do not do unnecessary underwriting.

Seeing If You Qualify For A Viatical Settlement

The typical viatical settlement client (viator) has some type of life threatening illness that is going to limit their life expectancy by less than two years. However over the last several years, viatical companies have been providing viatical settlements to people that have life expectancies of up to five years. These clients receive less money and may be subject to state and federal taxes on their settlement. For someone with a life threatening illness like cancer that cannot afford to pay premiums or is in desperate need of money, a viatical settlement can be a viable option. In regards to your life insurance policy, companies require that your life insurance policy have a minimum of $20,000 in death benefit and be from an insurance company with a well known.

Choosing A Viatical Broker

There are many viatical brokerage firms right now that are actively seeking your business. When choosing a viatical broker, follow the same basic principles as choosing a mortgage broker or insurance agent. Select someone that you are comfortable with or someone that you are recommended to. Here are a few tips you can use when you are in the process of a viatical settlement. There are a good amount of viatical companies that purchase policies so it is not necessary to work with a company that uses private funding sources. Second, for any viatical settlement transaction, you as the client (viator) should never incur any fees at all. Finally, viatical settlements are setup so you can change your mind at any time, you should never be told you are required or obligated to complete a viatical settlement. The ultimate decision to complete a viatical is your decision.

The stress that a serious illness puts on you mentally and financially can sometimes lead to you not thinking with a clear head. Always take the time to make an informed decision about what company you want to work with. There are many good companies that serve your needs and that can take the time to get the job done right. Also take into consideration the viatical industry is not that large, most of the companies all work with the same funding sources, so it is important not to send your policy out to every company you see. This can lead to your policy losing value because of a lack of interest in who is actually handling your settlement. Try working with one or two reputable viatical brokers, this will save you time and stress of multiple companies being in contact with you.

When Its Time To Get Paid For Your Viatical Settlement

Use these important tips when you are considering an offer you receive through a viatical settlement.

Expect to be paid for your settlement with in three business days after the transfer of your life insurance policy

Ask the name of the Escrow Company or Escrow Agent that will handle the transfer of your life insurance policy.

Remember that even after you sign contracts you can back out of the transaction if the funding company will not provide the name of the Escrow Company or Escrow Agent.

Implications On Your Benefits

Since a viatical settlement can be considered income it may affect any public assistance programs you are receiving that are income based. This means that programs like Medicaid could be affected if you receive income through a viatical settlement. The income you receive on a viatical settlement is based on the amount you receive through your viatical settlement minus any premiums that you have paid into your life insurance policy. The best recommendation is to speak with someone knowledgeable who works for that program to see how a viatical settlement would affect your benefits.

Other Options

A viatical settlement is a viable option, however it is not the only option. Consider the following options as alternatives to a viatical settlement.

Borrowing money from a friend or family member.

Borrowing money from the beneficiary of your life insurance policy.

Take an accelerated death benefit (ADB) on your life insurance policy. ADB's provide a portion of the death benefit to you with the remaining death benefit going to your beneficiary. You are required to continue paying premiums, you must prove via a letter from your doctor that your life expectancy is less than twelve months, and there must be an ADB rider in your life insurance policy.