Here's
a new term to many: "Viatical settlements." But
it's a term you are more and more likely to encounter -- as
an investor, or if you should become terminally ill.
Viatical settlements involve the sale of a life insurance
policy by a person who is terminally ill. A terminally ill
person may sell his or her life insurance policy to a "viatical
settlement company" for a lump sum cash payment that
is a percentage of the policy's face value. The ill person
receives needed money before death, and the company obtains
an investment upon which it will collect when the person dies.
Example:
a viatical settlement company might pay 60% of the face value
of a policy to a person whose life expectancy is under two
years, and 80% to someone whose life expectancy is six months
or less. The buyer becomes the policy beneficiary, pays the
premiums, and collects the face value when the original policyholder
dies.
Viatical
settlement companies often solicit individual investors to
buy an interest in these life insurance policies, sometimes
offering the investors attractive rates of return. Iowans
need to be careful no matter which role they are in -- whether
they are terminally ill and selling their policy, or whether
they are an investor buying an interest in a viatical settlement.
For the
terminally ill: Before you make any major changes regarding
your policy, talk to someone whose advice and expertise you
can count on, such as an accountant, lawyer, or good friend.
Be sure you are dealing with a reputable viatical settlement
company. Are they licensed or regulated by any state or federal
agency?You may desire to discuss the matter with your own
insurance company. Some insurance companies will buy back
the policy directly or allow accelerated death benefits.
| For
potential investors in viatical settlements: |
