What is it?

Most people today consider life insurance as the most common means of protecting loved ones after death, however, life insurance can also be used as a financial instrument in life. A life insurance policy is considered an asset just as are homes, cars, works of art and other types of collectable's. The monetary value of a life insurance policy can bring the seller resources to use for many reasons. The policy that brings ready cash to the seller, becomes an investment for a buyer, and both persons benefit from this single transaction. The buyer can purchase all or part of a policy, and at the time of death of the seller, the buyer becomes the beneficiary of the policy and the benefits become his. The amount of the buyers return depends on the seller’s life expectancy and the date of death. If the seller dies before his or her life estimated life expectancy, the return may be higher. If the seller lives longer your return will be lower. A part of the principal investment can be lost if the person lives longer that you expected and the need to pay premiums for policy maintenance becomes necessary. There are different types of settlements that qualify a persons eligibility.

Who is eligible for a viatical settlement?

Only a person with a terminal illness, usually with 2 years to live, is eligible. A person with a terminal illness may consider selling his or her insurance policy to a settlement company. This would give the insured a one time lump sum payment to use for non covered medical treatment, their hospice care or just to take a vacation. The settlement company receives a percentage of the face value and has the option to sell the policy to a third party. The original beneficiary of the life insurance policy is no longer involved, and the settlement or investor continues to pay the premiums and collects the face value upon the death of the insured. Financial planning is important, and anyone with a terminal illness who is considering a viatical settlement should seek the advise of a professional in that field.

What types of life insurance policies qualify?

All types of policies qualify including, whole life, term, universal life, group or corporate owned policies, and joint survivorship policies. The policy, no matter the type, must be at least two years old. And have a minimum face value of $50,000, there is no maximum. If the policy is a part of an employers group policy, it must be able to be converted to individual. Your policy must be at least two years old and your beneficiary must be available to sign a waiver.

How Does it work?

A person with a terminal illness, with a life span of about two years first contacts a life settlement agency. An agent will be assigned to you and he or she will talk to you to see if you might qualify. Then you will be given a application and medical release forms to complete. Once all your forms are completed and you have turned them in the process begins. Your medical history is obtained and your history and application are analyzed, and if your quantification is established the process begins. Your agent will also determine if your policy is eligible. A very important requirement is the company that issues the insurance policy must be financially sound. Not all insurance policies issued by employers are eligible unless it can be converted into an individual policy or guaranteed to remain in force in order to be assigned. If the policy is sound and everything is in order, the agent will attempt to find a buyer for your policy, and when that happens the negations begin until the deal is complete. . Always contact a lawyer who deals with probate and wills, before you make a viatical settlement, also you must understand, that once you sell your policy, there is no payout for the previous beneficiary.

When do I collect?

If you as the seller accept the buyers offer, the closing procedure begins and all necessary documents are sent to the seller. The forms all need to be signed, notarized and witnessed and then returned to the settlement company. The next step is to submit the policy change forms to your life insurance company, so that they can then transfer the policy to the buyer. Once verification of the policy transfer is in place, payment from a private escrow account is made to the seller, usually within three to five business days. by way of bank check, or can be wired to your bank. The time period might differ from state to state. It is important to check with your settlement agent about tax consequences and find out if your payout interferes with public assistance. Only some states require a company to disclose these facts.

Can I change my mind?

You should always keep in mind you do not have to accept any offer you are not comfortable with, you can always change your mind. As the seller. you have 15 to 30 days, depending in which state you live in, from the date your funds were received, to change your mind. At that point forms would have to be filled out to reverse the process. You need to consider how this move will change your life as far as medical expenses and care are involved or perhaps just to take a vacation with lasting memories. Again if you are considering this move, you should check, according to the state you live in, what your time limit is. Your experienced agent at Cambridge settlements will be able to advise you.

Why sell?

Due to the daily stress and financial burdens that put the demands of dealing with a terminal illness to the point of being unthinkable and overwhelming, a consumer should have alternatives to ease their care. A consumer can make choices that are in their best interests and help with the financial burden.

Selling your policy to a settlement company is tax free if your life expectancy is less than two years, depending on where you live you may or may not be responsible for state taxes. Most states consider these payments as tax exempt. You also need to check on your states Medicaid policies, to see if selling your policy is counted as income.

Before investing:

Before you consider investing in viatical settlements, you should investigate completely, because this type of investment is quite risky. A person with a terminal illness is very often interested in selling his or her life insurance policy because of the need of a lump sum payment to facilitate their medical needs. The investor then pays the premiums and becomes the beneficiary at death.

Each company that deals with viatical settlements sets its own rules for making a decision about which insurance policies are of interest for them to buy. There are different requirements involved and each company is able to set their own standards. The first standard set forth by almost all settlement companies is the policy must be at least two years old. In all situations the beneficiary of the life insurance policy must be available to sign a release or waiver relieving them of their rights. Some life settlement companies will only buy a life insurance policy if the insured’s life expectancy is less than two years, there are some that might consider up to four years. All settlement companies require a release that is necessary to allow access to the policy holders medical records.