What to do when you outlive your life insurance policy
Viatical settlements are used to provide a lump sum payment by selling a life insurance policy for its partial value to an investor
group. The insured usually has a terminal illness and is not expected to live more than 2 years. Viatical settlements were especially important during the early years of the AIDs epidemic. Afflicted
patients needed cash to pay for medical and end of life costs. Medicaid rules considered life insurance as an asset. To be eligible for benefits, policies in excess of a certain face amount-$1,500
for instance- had to be surrendered for their cash value. However, in a viatical settlement, the policy could be sold for a portion of the face amount which realized a larger cash settlement. When
the insured died, the investor would receive the life insurance proceeds and the profit would be the difference between the purchase amount and the death benefit. Life insurance companies added
accelerated benefit provisions to their contracts in order to provide a portion of the policy's face amount be paid prior to death if the insured was diagnosed with a terminal
illness.
Life settlements are an expansion of viatical settlements. Actually, since the early 1900s, life insurance policies were legally
considered private contracts which could be used as trade in financial transactions. Most often, the insured used a collateral assignment of the policy to cover temporary debt which would pay the
assignee his interest as it appeared if the insured/debtor died before the debt was settled. In other words, you as the owner/insured of a life insurance policy have the right to legally sell the
contract to a third party for the highest settlement amount to be negotiated. Why would you sell your life insurance policy and who would buy it?
The same investment groups or syndicates that purchase viatical settlements buy many different types of life insurance policies; term (if
convertible), group, whole life, universal life, when face amounts exceed $100,000 from insureds usually over the age of 70 (sometimes called senior settlements). Among the reasons to sell a life
policy are; premiums are too high, the policy will soon lapse or term period will end, there is no need for coverage if a business is sold or insurable interest ends, as in a divorce, for whatever
reason the policy is no longer needed or wanted. A life insurance settlement could provide cash to pay for long term care costs, medical expenses, to supplement retirement income, or fund a
charitable endowment. Are life insurance settlements regulated? In California, and many other states, they are regulated by law and industry standards and practices. If you think you are a candidate
for a life insurance policy settlement, contact me for additional assistance.
CLICK HERE TO GET A LIFE SETTLEMENTS BROCHURE
Term Insurance Agency-Calif. Insurance License #0563687
Phone 877-487-8376 (877-itsterm)
"Insurance Designed To Last A Lifetime"
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