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Viatical Settlement Information

A viatical settlement allows you to invest in another person's life insurance policy. With a viatical settlement, you purchase the policy (or part of it) at a price that is less than the death benefit of the policy. When the seller dies, you collect the death benefit.

People have been selling or trading their ownership of life insurance policies since the beginning of the insurance industry. This was a relatively unknown practice, however, until the AIDS epidemic heightened in the late 1980's. As insurance policy holders stricken with the disease learned that there was a living value to life insurance, the Viatical Settlement Industry was born. After a decade of growth in the industry, legislation and regulation, viaticals have become an important financial option to many terminally-ill individuals. By selling a life insurance policy, many of these policy owners can ease the financial burdens brought on by increased medical costs and compensate for a loss of income due to illness.

Benefits of Viatical Settlements To Insured Policy Holders:

* Lowered or Complete Relief From Monthly Premium Expenses
* Settlement Income May Be TAX-FREE
* Immediate Cash to Ease Financial Burdens
* Additional Money to Compensate for Loss of Income
* Funds to Seek Treatments Not Covered by Health Insurance
* Funds to Pay off Debts Now, Instead of Burdening Family Members in the Future

Your return depends upon the seller's life expectancy and the actual date he or she dies. If the seller dies before the estimated life expectancy, you may receive a higher return. But if the seller lives longer than expected, your return will be lower. You can even lose part of your principal investment if the person lives long enough so that you have to pay additional premiums to maintain the policy.

Guidelines for Consumers:

If you are considering making a viatical settlement on your life insurance policy, or if you are helping someone to make this decision, these consumer guidelines may help you avoid costly mistakes and make the right choice.

* Contact several viatical settlement companies to make sure offers are competitive, and be aware of prevailing discount rates. A viatical settlement company may pay 80 percent of the face value of a policy to a person whose life expectancy is six months or less.
* Check with your state insurance department to see if viatical settlement companies or brokers must be licensed. If so, check the status of the companies with whom you are considering doing business.
* Don't fall for high pressure tactics. You don't have to accept an offer, and you can change your mind. Some states require a 15-day cooling off period before any viatical settlement transaction is complete.
* Verify that the investor or the company has the money for your payout readily available. Large companies may have cash on hand; smaller ones may have uneven cash flows or may be "shopping" the policy to third parties.
* Insist that the company set up an escrow account with a reputable, independent financial institution before the company sends the offer papers for your signature. An escrow account will let you be sure that the funds are available to cover the offer.
* Insist on a timely payment. Once the insurance company has made the necessary changes, you should get your money within two to three business days from the escrow agent. No more than a few months should go by from the initial contact with the company to the closing. Check with your state Attorney General's office or department of insurance to see if there are complaints against the company before you do business.
* Ask the company about possible tax consequences and implications for public assistance benefits. Some states require viatical settlement companies to make these disclosures and tell you about other options that may be available from your life insurance company.
* Ask about privacy. Some companies may not protect a policyholder's privacy when they act as brokers for payouts from potential investors.
* Contact a lawyer to check on the possible probate and estate considerations. If you make a viatical settlement, there will be no life insurance benefits for the person you originally designated as beneficiary.

A good resource for learning about Viatical Settlements is the United States Securities and Exchange Commission.