Although the concept of investors making money from someone's shortened life span is unusual, and even uncomfortable for some, "
viatical settlements," the purchase of the life insurance policies of persons with life threatening illnesses, can be an important source of cash for many people. However, since a life insurance policy can only be sold once, it is important that it be sold for the highest possible price. To do that you must know something about the process.
These companies, which include investment companies and brokers, pay a discounted price to the insured for the right to take over the ownership of the policy through assignment and name themselves beneficiary. Because their profits are made when they collect the death benefits, almost all types of life insurance policies are eligible for these sales: whole life, term, universal and even group life insurance from an employer, as long as the policy allows for assignment of the policy to the viatical settlement company.
The amount the viatical settlement companies (providers) will pay is based on the length of time between the sale and the payment of the benefits, i.e., how much longer the insured is expected to live. It could be 50 to 60 percent of the face amount of the policy for a two-year life expectancy, but could be substantially higher or lower if the insured's life expectancy is shorter or longer, respectively. Companies also pay a lower percentage if the policy is small, such as $10,000. The amount paid is based on a review of the policy and the medical records of the person insured. The most important factor in determining the amount to be paid is the life expectancy of the insured, the longer it is, the smaller the offer. The payout will fluctuate, dropping as more and better medical treatments are introduced, rising as competition heats up.
The process can take six to eight weeks to complete and involves several steps. First, you need to complete some paperwork which gives the details of your insurance and your healthcare providers. You also sign forms giving the proposed buyer permission to contact the insurance company to confirm the status and type of the life insurance policy, and will obtain your complete medical record from your physician for review by the company's medical consultants.
Based on the medical information and the policy data, the company will make you an offer, indicating how much they are willing to pay for the policy. Once the offer is accepted, the final papers are signed which includes the purchase agreement, closing documents and assignment of ownership of the life policy. Once those papers are processed and the insurance company has recorded the transfer, the money is released to you. Many companies will set the money aside in an escrow account as proof of their ability to purchase the policy while this is being transacted.
Most companies (providers) also provide a 10 to 15 day grace period after releasing the money during which time you can return the money and cancel the sale should you change your mind about selling the life policy. Companies licensed in California are required to give you 15 day grace period.
Speak with a Viatical Settlment Specialist by calling 1-888-973-8377 or
emailing us.
