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For what reason would a terminally-ill person
choose to viaticate a life insurance policy?
A terminal illness or catastrophic life threatening
illness not only deprives a person of the ability to work and
earn income to take care of themselves, but it also rapidly exhausts
any savings that may have been put aside. When this happens, a
viatical settlement allows a person to:
A
survey of sellers revealed that they had used their proceeds for
a broad spectrum of different purposes including:
- continuing the highest
quality health care possible.
- relieving the financial
stress concerning bills, rent, or mortgage payments, car payments,
and in many instances retiring all of their debts.
- distributing the
proceeds of their viatical settlements to whom they wish: friends,
life partners, loved ones,
spouses, charitable institutions, to name a few.
- having the peace
that comes with knowing the proceeds are distributed according
to the seller’s wishes, while allowing the seller to share
in the joy of those receiving the gifts.
Every individual will be different when it comes
to the use of the proceeds. However, all experience a relief of
stress which enables them to live a better quality of life.
Can a person sell only a portion of a policy
while maintaining selected benefits for a primary beneficiary?
Yes. The seller may request an irrevocable beneficiary
designation for a portion of the proceeds to be assigned to seller's
beneficiary or beneficiaries of choice. In this case, upon the
death of the seller, the insurance company would pay the benefits
directly to the sellers' designated beneficiary(ies).
What types of life insurance policies qualify?
In general, any type of life insurance can be sold:
whole life, universal, term as well as all individual and some
group policies.
What provisions in a policy
could prevent a sale?
A policy must be beyond all contestability and
suicide exclusion periods. Additionally, a policy that would not
allow for the transfer of ownership to a third party would be
impossible to sell. Also, group policies with conversion restrictions
would be very difficult to underwrite.
What are the purchasing requirements of viatical
settlement funding companies and how much can the seller expect
to receive in viatical settlement proceeds for his/her policy?
Each funding company has its own set of underwriting
criteria upon which it bases its offers. However, the purchase
price paid by a funding company will be based upon the estimated
life expectancy of the insured: the shorter the life expectancy,
the higher the offer. Important elements of the offer are the
required annual premium, the type of policy and rating of the
life insurance company and the market rate available on similar
investments.
Does the seller continue to pay the premiums
after the viatical or senior life settlement sale is complete?
No. Upon completion of the viatical or senior life
settlement transaction, the seller's rights and responsibilities
for premium payments on the policy will cease.
Does the selling of a policy affect other benefits
of the seller such as disability income or health insurance?
As a general rule it does not. However, we encourage
each situation to be checked on an individual basis. Means-based
assistance, such as Supplemental Social Security Benefits may
be affected.
Does the seller have similar benefits available
from his/her own insurance company?
In some cases the seller's insurance company may
offer accelerated benefits. If the seller qualifies, the insurance
company will pay a certain percentage of the total death benefit.
Usually, the criterion for an accelerated benefit requires the
seller to have a life expectancy of six to twelve months.
Do all viatical or senior life settlement funding
companies offer the same net proceeds?
No. Offers will vary as result of the investment
company's life expectancy estimate, ratio of premiums to proceeds
and other criteria particular to each investment company.
How long does it take a seller to receive the
proceeds of a viatical or senior life settlement sale?
Generally, the process takes 4 to 8 weeks, depending
on the completeness of the information required.
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