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VIATICAL
SETTLEMENTS
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- What is a
Viatical Settlement?
- How
do viatical settlements work?
- Do I
have to sell all of my policy?
- Is
there a difference between a broker and a provider representative?
- Is
the provider, provider representative, or broker required to keep my
information confidential?
- If I
enter a viatical settlement contract, when will I get my money and
from whom?
- What
if I change my mind?
- What
if I die shortly after selling my policy?
- What
happens after I get my money?
- What
if I don't want to be contacted about my health status?
- How
will I know who will be calling me or my contact person about my
health status and how often can they call?
- Will
the provider be calling my doctor to check on my health status?
- How
will I know if my policy includes extra coverages like accidental
death, future increases in the death benefit, or covers other family
members? Do these affect my settlement?
- Are
there other options available besides selling my policy?
- What
other things should I know about a viatical settlement contract?
- What
if I have a complaint?
What
is a viatical settlement?
A viatical settlement is the sale of a life insurance policy or
certificate (hereafter referred to as policy) issued on the life of a
person, who has a catastrophic or life threatening illness or condition that
is likely to result in death within 84 months, for a dollar amount that is
less than the policy's face value. The person with the catastrophic or
life-threatening illness or condition who is insured under the policy is
called a viator. This person may or may not be the owner of the policy. Only
the owner of the policy has the right to sell the policy. If you do not own
the policy, the owner cannot sell the policy without your consent. The
entity that buys the policy is called a viatical settlement provider
(hereafter referred to as provider), additionally, there are persons called
brokers or provider representatives, who help with the sale of the policy. A
viatical settlement offers you the opportunity to receive a portion of your
policy’s death benefit while you are still alive, giving you a chance to
ease the financial stress that sometimes goes with an illness or condition.
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How
do viatical settlements work?
Most providers, provider representatives, or brokers will ask you to
complete an application and medical release forms so that they can gather
information from your life insurance company and your doctors. All
information gathered must be kept confidential and cannot be given to anyone
without your written approval. If you qualify, the provider will make you an
offer for your policy. The amount offered for your policy will be based on
facts such as how long you are expected to live, the amount you pay for
premiums, the rating of your insurance company, and your policy’s
provisions (e.g., a waiver of premium). If you accept the offer, you will be
asked to sign a viatical settlement contract.
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Do
I have to sell all of my policy?
No. You can sell all of your policy or you can sell only a part of
your policy. If you sell only a part, you will be required to assign or
transfer only the part being sold. The provider will become the new owner of
the policy and your chosen beneficiary will retain the rights to the unsold
portion.
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Is
there a difference between a broker and a provider?
Yes. Although both a broker and a provider will help you with the
sale of your policy, there are important differences between them. A broker
works for you. A broker will check with several providers to find the best
offer for you. A provider represents the investors. A provider will only
make one offer for the policy, based on their internal funding parameters.
If you use someone to help with the sale of your policy, you may want to ask
whether they are a broker or a provider.
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Is
the provider or broker required to keep my information confidential?
Yes, any financial, medical, or personal information obtained by a
provider or broker about you, including your family members, a spouse, or a
significant other, may not be shared with anyone unless you have given
written approval that the information may be shared. Any written approval
for the sharing of this information must show who may get the information
and why it will be released.
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If
I enter a viatical settlement contract, when will I get my money and from
whom?
The answer to this question depends on how the provider runs its
business. Some providers use an escrow agent or trustee to handle the money
that will be paid to you. The escrow
agent or trustee will send you the money within three business days of the
date the insurance company confirms to the provider that the transfer of
ownership has been completed.
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What
if I change my mind?
If
you change your mind about selling your policy, you can cancel the life
settlement contract at any time up to the 15th day (30 days in some states)
after you receive the money from the provider. If you change your mind, remember to arrange with the
provider to have the insurance company transfer the ownership of the policy
back to you. The guidelines for the rescission period will be
explained in detail in the Viatical Settlement Purchase & Sale
Agreement, which can vary on a state by state basis.
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What
if I die shortly after selling my policy?
If you die at any time up to the 15th day (30 days in some states) after you
receive the money from the provider, the settlement contract will
automatically cancel. The provider will pay the owner of your policy or
beneficiaries designated by the owner in the viatical settlement contract
any proceeds it receives from your policy, minus any money it already paid
for the purchase of your policy and any premiums it paid to the insurance
company to keep your policy current. The insurance company or the provider
should refund any unearned premiums paid.
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What
happens after I get my money?
After the provider has paid the owner for the sale of the policy,
they may begin calling to check on the health status of the viator.
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What
if I don’t want to be contacted about my health status?
If you do not want to be contacted about your health status, you may appoint
an adult person or persons to be contacted on your behalf. That person must
be in regular contact with you and you must give the provider their name,
address and phone number. Once you give the provider this information, they
may not contact you unless they have tried and have not been able to reach
the contact person for more than 30 days. If you need to, you can change
your contact person at any time by sending a written notice to the provider.
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How
will I know who will be calling me or my contact person about my health
status and how often can they call?
The provider must give you the name, address, and phone number of the
person who will be contacting you or your contact person(s) about your
health status. If your life is expected to end in one year or less, contacts
to check on your health status are limited to once every 30 days. If you are
expected to live for more than one year, contact is limited to once every
three months.
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Will
the provider be calling my doctor to check on my health status?
Some providers will use your signed medical release form to check with your
doctor, for updates on your health status. The medical release form tells
your doctor that you want your doctor to give your medical information to
the provider, their broker, or provider representative. If you decide you do
not want the provider to contact your doctor, you have the right to withdraw
your medical consent in accordance with law.
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How
will I know if my policy includes extra coverages like accidental death,
future increases in the death benefit, or covers other family members? Do
these affect my settlement?
Some policies contain extra coverages. You may want to contact your
insurance company or agent to see if your policy contains a provision or
rider providing extra coverages. If your policy includes a benefit for
accidental death, the additional death benefit may not be included as part
of your settlement. The additional death benefit will remain payable to your
beneficiaries or your estate. If your policy provides future increases in
the death benefit, you may want to ask how much the provider is paying you
for the purchase of this benefit. If your policy is a joint policy, or
provides coverage on the lives of other family members or anyone other than
yourself, there may be a possible loss of coverage.
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Are
there other options available besides selling my policy?
Your insurance company may offer options, such as accelerated death
benefits, loans, and surrender of the policy for its cash value. Before
entering into a viatical settlement, you should contact your insurance
company or agent to see what options are available.
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What
other things should I know about a viatical settlement contract?
Some things that may be affected if you enter a viatical settlement
are:
-
There may be a loss of life
insurance coverage on your spouse or other family members, if the policy
(or any riders attached to it) covers their lives;
-
The amount of premiums you
pay;
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Policy cash values or
dividends, if provided for in the policy;
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A loss of other rights or
benefits, including conversion rights and waiver of premium benefits
that may exist under the your policy;
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You may incur tax
consequences;
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Your ability to receive
supplemental social security income, public assistance, and public
medical services including Medicaid; and
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The money you receive for
your viatical settlement could be taken away from you by creditors,
personal representatives, trustees in bankruptcy, and receivers in state
or federal court.
Because of the above, you should
contact an attorney, accountant, estate planner, financial planning advisor,
tax advisor, social services agency, your insurance company, or agent, as
applicable, to find out what effect selling your policy will have on you.
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What
if I have a complaint?
You may file a complaint with the Department of Insurance in your
state of residence. Click here to link to your state’s Department
of Insurance website.
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