Receipt of
viatical settlement proceeds could disqualify the recipient's eligibility for certain means-based entitlement programs such as Medicaid or other government benefits.
In
viatical settlements (and in the early history of life settlement pricing), the life expectancy (9) of the insured was considered the most critical (often the only) variable used in determining the secondary market price of the policy as this represents the expected life length of the insured when the life insurance policy was sold to the third party as a life settlement (the time to payment for the investor).
(3) Although New York has not yet implemented regulations governing life settlements, at least twenty five other states regulate both
viatical settlements and life settlements.
A
viatical settlement is a transaction involving a terminally or chronically ill insured.
Since most residents and their families are probably unfamiliar with
viatical settlements, it is in their best interests - and those of management, social workers and others in direct contact with residents - to make them aware of this financial resource.
TABLE 1 VLSI Companies Contributing Observations to Index Annual Report Range VLSI Company From To American Life 1994 1996 Dignity Partners 1993 1995 Habersham 2007 2008 Kelco 1995 2001 Legacy Benefit 1992 2005 Life Benefactors 1993 1997 Life Funding 1993 1996 Life Settlements 1999 2002 Lifetime Entitlements 1994 1996 Lifetime Options 1993 1995 National Benefit 1994 1995 Neuma 1993 2009 Portsmouth 1996 2008
Viatical Settlements 1993 1996 Viaticare 1994 2001 Viaticus 1994 2001 WM Page 1995 2009 Note: This table lists the 17 Viaticals-Life Settlements (VLSI) companies that filed annual reports with the New York State Insurance Department from which we extracted data on their individual VLSI holdings.
Currently, 39 states and Puerto Rico regulate life settlements, and the National Association of Insurance Commissioners (NAIC) recognizes them as a viable solution (NAIC, "NAIC Adopts
Viatical Settlements Model Act Revisions," News Release (June 4, 2007), www.naic.org/Releases/2007_docs/viatical_settlements_model.htm).
Life settlements are also variously referred to as "senior settlements," "high net worth settlements," and "high net worth transactions." In contrast, the term "
viatical settlement" is used to describe the sale of life insurance contract when the insured is terminally or chronically ill and expected to die within two years (see below).
The law currently regulates
viatical settlements, transactions involving the sale of life insurance policies by insured individuals who have a catastrophic or life-threatening illness or condition.
(91) The selling of a life insurance policy by a terminally ill policyholder on the secondary market became known as a "
viatical settlement." (92)
Viatical settlement transactions, however, are not insurance contracts, and as such, are not part of the "business of insurance." (93) For the purposes of the Securities Act, the Securities and Exchange Act, and federal securities regulation,
viatical settlements in certain instances qualify as investment contracts, and therefore as securities.
HOW LIFE SETTLEMENTS DIFFER FROM
VIATICAL SETTLEMENTS