Viaticum is the Eucharist given to a person on the verge of death, or to one who is facing a possibility of death. It is no wonder, then, that this Latin word would be the root of the term – Viatical Settlement.
Viatical Settlement involves the sale of a life insurance policy to an investor. A Viatical settlement is usually carried out by the terminally ill – those who face penury by the cost of maintenance alone, those who expect to live not longer than two years. That being said, a Viatical settlement is purely a financial transaction. The viator, the one selling the life insurance, sells the policy at a discounted price of the death benefit of the policy and is provided with immediate cash settlement. This usually helps in paying the medical bills of the aged person.
The investor is the buyer of the policy. The investor has two options. One is to sell the policy to a third-party, or to stash the policy as a company investment. Viatical settlements are especially attractive to investors and the rates of return, though not guaranteed, are potentially high. As with any kind of deal, risks are always present for both parties. For the Viator, the primary risk is settling for a low price. Of course, compared to the future premiums, the price would be lower, but there is still the danger of the policy being bought at a song.
For the investor, the risks are greater. There is the probability that the investor will not receive the full death benefit should unfortunate circumstances cause the insurance company to go bankrupt. There could also be the ghost of a chance that the Viator may have committed fraud upon signing insurance forms. Or the Viator may have a miraculous recovery and go on to live for another twenty years.
Viatical settlement should be thought more than twice before being engaged into. This is not a regulated investment and crooks abound, waiting to pounce on the gullible and the dying. Here are sound advices, both for potential Viators and investors:
For Potential Viators:
· Check with your insurer to find out if your policy includes Accelerated Death Benefits. This will get you much more money and you will be paid much faster.
· If you are a member of a Credit Union, seek information about licensed Viatical providers.
· Apply to more than one Viatical settlement company.
For Potential Investors:
· Do not use your IRA for Viatical investments. It is prohibited by the Internal Revenue Code.
· To be safe, do not buy a policy that is within the contestability period. That way, if the viator committed fraud on his application and was discovered, you won’t be left with just a return of premiums.
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Robert co-founded Insurance4USA.com, an insurance quote shopping service, in 1999. He has been a licensed insurance agent in New York State since 1990.
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