| Viatical Settlements |  |
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| Viatical Settlements |
A "viatical settlement" is not insurance. It is a contract in
which the terminally-ill owner of life insurance (the "viator")
sells the death benefit to a third party in return for immediate cash.
This cash will be a percentage of the expected death benefit. For example,
the viatical settlement company buys a life insurance policy that will pay
a $100,000 death benefit, for $80,000.
If you sell your life insurance to a viatical company in a viatical
settlement, that company will pay future premiums and will be the owner
and beneficiary of your life insurance. Once you die, your original
beneficiaries will get nothing from that life insurance policy.
The viator may also contract for a "viatical loan" with a
viatical loan company. In this instance, the loan is secured by the value
of the life insurance policy. You will be expected to make regular
payments on the loan and continue to pay your life insurance premiums, but
you will retain ownership of the life insurance policy.
The percentage you can expect to receive from selling your policy, or the
amount and terms of the loan may vary widely from one viatical company to
another. You should seek offers from several companies in order to
get the best result.
In determining the sales price or loan amount, the viatical settlement or
loan company considers several factors, including the life expectancy of
the person whose life is insured. The shorter the life expectancy, the
higher the payment.
Payments generally vary between 50 to 90 percent of the policy's expected
death benefit, but can be even less than 50 percent of the expected death
benefit.
If you are considering a viatical contract you may want to consult with
your lawyer, doctor, life insurance agent or company, and accountant or
financial planner. These contracts are very complicated, and may affect
other issues such as Medicaid eligibility. You may not be able to back out
of a viatical contract once you have signed it, so you will need to be
very certain of what you want to do before you sign. |
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Source: Massachusetts Department of Insurance
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For information about Lynch Insurance please contact:
William Lynch |
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