Viatical-Fraud.com
You can't take it with you...but don't get taken
Useful terminology
What to ask
Investment Tips/safeguards
Where to get a license
Common
Misrepresentations
and/or omissions
Rate of return
Zero risk to principal
Deceptive advertising
Clean sheeting
Long life = low return
Other risk factors
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Viatical-Fraud.com
You can't take it with you...but don't get taken
Useful terminology
What to ask
Investment Tips/safeguards
Where to get a license
Common
Misrepresentations
and/or omissions
Rate of return
Zero risk to principal
Deceptive advertising
Clean sheeting
Long life = low return
Other risk factors
Home

Ever heard of a "Viatical Settlement?"

 

No, this isn't a religious commune, it's an insurance benefit that many people have never heard of. A viatical settlement is, simply stated, a method for an insured person with an abbreviated life expectancy to "cash out" of a life insurance policy, prior to death. Stated another way, it is a "living benefit" or lifetime settlement option. In technical terms, this procedure is the sale of an insured's life insurance policy death benefits to a third party in consideration for an immediate cash payment. Viatical settlements were first implemented around 1989.

If you are terminally ill, you can assign your Federal Employees' Group Life Insurance (FEGLI) coverage to a viatical settlement firm in exchange for cash. Some viatical firms also accept assignments if you are chronically ill. While living benefits payments come from your life insurance fund (part of the U.S Treasury), viatical settlement firms are private firms not connected with the Federal government.

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.

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.

Viatical settlements can be risky investments. For these reasons, you should exercise caution and thoroughly investigate before you consider investing in a viatical settlement.

Many state insurance commissioners license the companies that buy viatical settlement to sell to investors and may have information about a specific company or viatical settlements in general. To find out who your state insurance regulator is, please visit the website of the National Association of Insurance Commissioners. The Federal Trade Commission also has information for those who are considering selling their life insurance policies.

It is important to weigh the relative risks of different investments before making the investment decision that is most appropriate for you. Some investors have cashed in relatively safe, but low paying annuities, only to find the high paying viatical investment that they purchased was in fact too good to be true. They then have faced the possibility of losing their entire investment. In some cases, investors have compounded this problem due to the fact that they had to pay a penalty for cashing in an annuity early and pay income taxes on a portion of the distribution. While investing in viatical settlements can be a profitable venture, make sure that you have done all that you can to ensure that you understand the viatical investment product and the risks associated with it.

 


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