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Death and taxes may be the only sure things in life, and speculating on the former may sound disconcerting to many. Viatical settlements involve selling the life insurance policy of a terminally ill person to a company which pays a lump sum cash amount to the policy owner in return for the policy. The companies buy the policy at a reduced rate of the face value, sometimes as much as 50% of the face value, and then collect the death benefits after the person's demise. Viatical settlements are basically a high-risk transaction for the investor, as life expectancy is totally unpredictable. The viator (seller of the life insurance policy) may outlive the predicted life expectancy assigned to him by his doctors. If so, the investor who buys the policy will stand to lose, or at a minimum see his rate of return greatly reduced. The longer the person lives, the lower is the return value of the policy. A terminally ill person may wish to sell his policy to raise cash to in order to ease the financial strains of his final days. For many people with terminal diseases, this is the only method they have to be able to provide for their healthcare treatment in their final months. While it may sound like investors prey on these people who in turn become victims, that is not what actually happens. There are many private companies as well as individual investors who purchase life insurance policies. They then become the beneficiaries on the demise of the original policyholder. Each company will have their own rules for buying the policies. They will likely run a checklist on your policy. For example, most companies prefer that a policyholder has had the policy for at least two years. They may also ask you to sign a release allowing them to access your medical records. This is normal as they need to know the medical life expectancy in order to determine the present value of the future payment. Let's assume that your policy has a face value of $100,000. That money will be worth far more next year than it will 15 years from now. You should not accept payments on installments. As per New York State law, all funds must be received at the time of sale. Also, there should be no hidden fees involved at the time of sale. If a fee is undisclosed until the final transaction occurs, it should be taken as a red flag. Why wasn't the fee disclosed initially? If the fee was disclosed earlier, would that have made another company's offer more attractive? These are questions you should consider. Remember, when selling your life insurance policy, the same guideline applies as buying a new car: never accept the first price quoted, and always shop around for price comparisons. Only then will you be sure to receive the best price on your viatical settlement.
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