Life settlement

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Viatical Settlement

A transaction in which a life insurance policy holder sells his/her policy to a third party. The situation occurs when the policy's fair market value exceeds the cash surrender value that the insurance company offers. The third party is known as a life settlement provider, who, in the United States, must abide by applicable state regulations. The life settlement provider becomes the policy's new beneficiary, is responsible for maintaining premiums, and upon the death of the insured person, receives the benefit. The secondary market for life insurance began growing in the last part of the 20th century. In a viatical settlement, the life settlement provider is speculating on how long the insured person will live; indeed, it is in the life settlement provider's financial interest for the insured person to die as soon as possible. A viatical settlement is also known as a life settlement.

Life settlement.

If you are over age 70 and no longer need your life insurance policy, you may be able to sell it to a third party in what's called a life settlement.

You're paid a cash amount less than the death benefit but typically greater than the surrender value, and the party that buys your policy will get the death benefit when you die.

Similar to viatical settlements, in which terminally ill people may sell their life insurance policies, generally to use the cash to pay for healthcare, life settlements let you forgo a death benefit and use the cash in your policy while you're alive.

However, life settlements are for people who are healthy and expect to live more than a couple of years. Specific rules for life settlements are set by the state where a specific transaction takes place.

Some businesses specialize in buying life insurance policies from older or terminally ill individuals and reselling them as investments.

However, because these insurance arrangements are controversial and most investors understand them poorly, both people considering selling policies and people considering investing in them are advised to proceed with caution. For example, there may be complex estate-planning and tax consequences to life settlements.

References in periodicals archive ?
128) See Viatical Settlements Model Act [sections] 8 (National Ass'n of Ins.
at 87 (noting that state regulations will increase the cost of doing business thereby decreasing the amount viatical companies pay for policies).
Some argue there is no need for the group to exist any longer except as a springboard from which to criticize the viatical industry, which started as a way to provide AIDS sufferers with life settlements they could use while still alive, taken as a portion of their life insurance policies.
The NAIC passed the Viatical Settlements Model Act in 2007 and created protections against STOLI.
A statement that "More than 700 agents of Benefits America and its related companies sold viaticals to POA investors .
The Arkansas Securities Department is now regulating viatical contracts because of a rash of abuse in the industry.
Lisa Karam Middleton, Death Watch: Viaticals Under Fire, available at http://www.
The major risk with "investing" in viaticals or purchasing a fractional interest in a viatical trust agreement is that the insurance policy may not exist.
Viaticals were particularly appropriate for People With AIDS (PWAs) because they had a life-limiting illness, which, at the time, had a very predictable term.
A viatical settlement transaction may be the answer for these people.
9913 Viatical settlement provider license continuance; annual report; fees; deposit.