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Sell Insurance Policy - Viatical Life Settlements

There are options for people who do not want their existing life insurance policy anymore and want to get cash for selling or transferring it to a another person. A viatical sale is available to people who wish to cash out of a life settlement.

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Expert written pieces and articles on all areas of Viatical policy settlements. Information is the key when considering life insurance restructuring and settlement options.

Senior Life Settlements- A New Financial Dawn Emerges
By Jon Thomas

When delving deeper into the market-driven research on the myriads of reasons, motivations, and/or rationales for senior life settlements - seniors selling their life insurance policies have surfaced in recent years. According to studies by key industry players, policyholder rationales for selling life policies are to be identified on one of three levels, due to a combination of them OR influencers from all three levels working together to result in senior life settlement transactions:

Individual: cash-need for major expenses, outlived need for coverage, needing different coverage or features, financial distress

Family / Estate: Change in beneficiaries (e.g., divorce, death of dependents), Second-to-die policyholder (i.e., spouse) has passed away, material change in the value of estate

Business: Change in key executives / partners, change in succession plan (e.g., family business) or needing cash / seeking to monetize assets

(Source: Bernstein Research Call, Sanford C. Bernstein & Co., LLC, a subsidiary of Alliance Capital Management, 2005)

Other sources (Milestone Settlements, 2004) confirm that senior life settlements appeal as solutions to individuals most likely to consider a life settlement, because they, for one reason or another, no longer need the insurance they purchased. A number of reasons may include:

* Seniors whom have insurance and/or estate needs that have changed, making their current policy(s) inadequate or exceedingly adequate for their current or future needs

* Seniors who are not satisfied with the performance of the insurance product(s) they have chosen, or are aware of newer, better performing insurance products

* Seniors who choose to realize the value of their policy(s) now, rather than continuing to pay on a policy they will never receive the benefits of

* Individuals, or owners of a company, who own key man policies that are no longer needed, or elect to use the sale of the policy(s) to enhance a buy-out or create severance packages

* Seniors who wish to live out the remaining years of life without a change in lifestyle

* Individuals who need capital to pay for medical treatments or procedures

* Any senior who realizes that there is now a greater tangible asset value to their life insurance policy, and wishes to take advantage of this added value

A cautionary note seems appropriate here. Senior Life Settlements is definitely not territory to approach without the advice and assistance, counsel and due diligence of a well-versed, experienced player in this secondary market. A financial advisor with exposure and experience could advise you and assist you in become aware of any tax liabilities you may face should you sell your policy. Most times a life settlement is taxed on the income above and beyond the basis (what you've paid into your policy to date) of your policy. Each senior life settlement case is different and if seems prudent to have a consultation with a tax advisor or your financial planner prior to proceeding down the path of Senior Life Settlements.

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Jon Thomas has been involved in finance and insurance, specializing in emerging growth markets since 1979. He continues to write articles concerning the public and their pressing financial concerns.

The following life article was recently added.

Viatical Settlements Offer Comfort for Individuals Facing Terminally Illness
By David Springer

Terminal illnesses not only destroy lives, but they can also erode the financial stability of individuals and their families. A viatical settlement, however, can provide financial support and emotional comfort to those with serous diseases.

A viatical settlement is simply the sale of the benefits of a life insurance policy to a third party. Viatical settlements, also called “viaticals”, allow individuals facing a terminal illness to use the present day value of their life insurance policy to ease the financial burdens.

The viatical settlement business originated in the 1980s as a way to give terminally ill AIDS patients early access to their life insurance benefits. Since then, the use of viatical settlements has broadened significantly. Viaticals now include policy holders suffering from Lou Gehrig¹s disease, cancer, heart disease and other life-threatening illnesses.

The Importance of Viatical Settlements

Viatical settlements can provide an important source of funding for terminally ill people battling the high costs of medical care. An estimated 40 million Americans are not covered by health insurance, and many are often unable to earn a living because of their illness. These individuals must cover their medical costs out-of-pocked on top of daily living expenses such as food, shelter, utilities and transportation. Viatical settlements allow people in these circumstances to maintain a level of financial security during their final months or years.

Viatical settlements are completely legal transactions based on this concept: Investors buy life insurance benefits from insured individuals for a percentage of the face value of their policies. Then they collect the full amount of the death benefit on the policy when that person dies. For terminally ill people, viatical settlements allow them to receive a partial payment on their policies while they are still alive. They can use these funds to pay for their health care, to meet daily living expenses, or even take a well-deserved vacation with their families. The bottom line is: Viatical settlements enable individuals to take advantage of their life insurance benefits before they die and enhance the quality of the life they have remaining.

How Viatical Settlements Work

Viatical settlements are relatively common. Here’s how they work. The owner of the life insurance policy sells the policy for a percentage of the death benefit. The discounted price received is typically 60 to 70 percent of the policy’s face value.

The viatical settlement buyer becomes the new policy owner and/or beneficiary of the life insurance policy and is responsible for paying all future premiums. The buyer also collects the death benefit of the policy when the insured dies. The original owner of the insurance policy, incidentally, may not necessarily be the individual with the life-threatening illness.

The approval process for viatical agreements is generally based on the nature of the illness or condition and a doctor’s review of the insured’s medical records. Usually the viatical settlement transaction is facilitated through a broker or a trusted insurance agent—without the buyer ever meeting the ill person.

Guidelines for the Sale of Viatical Settlements

Almost any type of life insurance can be sold through a viatical settlement as long as the policy doesn’t prohibit transferring ownership rights. Universal, whole, term, and even group life insurance policies are usually accepted.

However many policies include a “contestability clause” that allows an insurance company to cancel a policy if it discovers that the policy holder had a preexisting condition. Therefore, most settlement companies will only buy policies that are at least two years old.

There are generally two types of companies that purchase viatical settlements. The first type buys life insurance policies directly from ill people, using either private funds or proceeds from the sale of company stock. These companies, themselves, hold all the rights to the insurance policy and act as the designated beneficiary of the policy. These are considered to be "non-brokered" transactions because the viatical settlement provider purchases the policies directly.

The second type of viatical settlement company acts as a broker or intermediary—the category into which most settlement companies fall. They match a group of potential buyers with a life insurance policy available for sale, rather than directly purchasing the policy. As the broker, the viatical settlement company doesn’t own the policy. Instead, it is entitled to a percentage of the death benefit or purchase price—usually 4 to 6 percent—as compensation for its services.

Each settlement company has its own set of rules and limitations that govern the purchase of viaticals. The death benefit percentage that individuals receive when selling their policies is largely determined by their life expectancy. The shorter the life expectancy, the more they can expect to receive for their insurance benefits.

For example, an individual with just eight months to live may receive more than 90 percent of a policy’s face value. Someone expected to live for two years, on the other hand, may only be able get 50 percent of the death benefit.

State Regulations

Regardless of how much the policy holder receives from the insurance policy, viatical settlement payments are generally tax-free. However, to qualify for tax-favored treatment, the individual must be terminally ill and live in a state that regulates viatical settlements. Residents of other states may receive a tax benefit if the company buying the policy satisfies viatical settlement guidelines outlined by the National Association of Insurance Commissioners.

There are a variety of limitations involved with viaticals sales, depending on the state involved. Therefore, anyone considering a viatical settlement should consult with a qualified tax and legal professionals.

As another piece of advice: Before finalizing a viatical settlement, policy holders should also explore options that their life insurance firms may offer. Increasingly, companies allow policy holders to borrow against their policies. And some policies offer a cash value separate from the death benefit and accelerated death benefits that can offer access to cash. If no feasible options are available, viatical settlements may be the ideal option for terminally ill individuals and their families.

Sovereign Funding Group is an experienced, reputable company that offers convenient, no-risk services to help you with the selling of your deferred payments and business financing, including viatical settlements.

Text and Insurance article content written by expert authors.

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