{"id":32260,"date":"2008-03-26T16:35:41","date_gmt":"2008-03-26T21:35:41","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-legal\/uncategorized\/viatical-settlements-a-guide-for-people-with-terminal-illness.html"},"modified":"2008-03-26T16:35:41","modified_gmt":"2008-03-26T21:35:41","slug":"viatical-settlements-a-guide-for-people-with-terminal-illness","status":"publish","type":"corporate","link":"https:\/\/corporate.findlaw.com\/corporate-governance\/viatical-settlements-a-guide-for-people-with-terminal-illness.html","title":{"rendered":"Viatical Settlements: A Guide for People With Terminal Illness"},"content":{"rendered":"
\n
\n

This article was edited and reviewed by FindLaw Attorney Writers<\/a><\/em><\/p>\n\n | Last reviewed\n

\n \n <\/i>\n Legally Reviewed\n <\/summary>\n\n
\n

This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with our editorial standards<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n\n

\n \n <\/i>\n Fact-Checked\n <\/summary>\n\n
\n

The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n\n\n\n

Viatical Settlements<\/strong><\/font><\/td><\/tr><\/table>

May 1998<\/font><\/p>

I<\/font>f you have a terminal illness—or if you are caring for someone who is terminally ill—chances are you're giving a great deal of thought to time and money. You may be thinking about life insurance, too. It's in that context that you may hear the phrases "accelerated benefits" and "viatical settlements."<\/font><\/p>

Accelerated benefits sometimes are called "living benefits." They are the proceeds of life insurance policies that are paid by the insurer to policy holders before they die. Occasionally, these benefits are included in policies when they are sold, but usually, they are offered as riders or attachments to new or existing policies.<\/font><\/p>

Viatical settlements involve the sale of a life insurance policy. If you have a terminal illness, you may consider selling your insurance policy to a viatical settlement company for a lump sum cash payment. In a viatical settlement transaction, people with terminal illnesses assign their life insurance policies to viatical settlement companies in exchange for a percentage of the policy's face value. The viatical settlement company, in turn, may sell the policy to a third-party investor. The viatical settlement company or the investor becomes the beneficiary to the policy, pays the premiums, and collects the face value of the policy after the original policyholder dies.<\/font><\/p>

Decisions affecting life insurance benefits can have a profound financial and emotional impact on dependents, friends, and care-givers. Before you make any major changes regarding your policy, talk to your friends and family as well as to someone whose advice and expertise you can count on—a lawyer, an accountant, or a financial planner.<\/font><\/p>

Investigating Your Options<\/font> Many options exist for people with terminal illnesses when financial needs are critical. For example, you may consider a loan from someone such as the original beneficiary of your life insurance policy. Or, if you've already ruled out less expensive alternatives to raise cash, you might sell your life insurance policy through a viatical settlement.<\/font><\/p>

Many life insurance policies in force nationwide now include an accelerated benefits provision. Companies offer anywhere from 25 to 100 percent of the death benefit as early payment, but policyholders can collect these payments only under very specific circumstances. The amount and the method of payment vary with the policy.<\/font><\/p>

If you own a life insurance policy, call your state Insurance Commissioner or your company's Claims Department to find out about alternatives. Ask whether your life insurance policy allows for accelerated benefits or loans, and how much it will cost. Some insurers add accelerated benefits to life insurance policies for an additional premium, usually computed as a percentage of the base premium. Others offer the benefits at no extra premium, but charge the policyholder for the option if and when it is used. In most cases, the insurance company will reduce the benefits advanced to the policyholder before death to compensate for the interest it will lose on its early payout. There also may be a service charge.<\/font><\/p>

In addition, you may consider selling your life insurance policy to a viatical settlement company, a private enterprise that offers a terminally ill person a percentage of the policy's face value. It is not considered an insurance company.<\/font><\/p>

The viatical settlement company becomes the sole beneficiary of the policy in consideration for delivering a cash payment to the policyholder and paying the premiums. When the policyholder dies, the viatical settlement company collects the face value of the policy.<\/font><\/p>

Viatical settlements are complex legal and financial transactions. They require time and attention from physicians, life insurance companies, lawyers, and accountants or financial planners. The entire transfer process can take up to four months to complete.<\/font><\/p>

Eligibility for Viatical Settlements<\/font> Each viatical settlement company sets its own rules for determining which life insurance policies it will buy. For example, most viatical companies will require that:<\/font><\/p>