Viatical Settlement

In a viatical settlement, the consumer sells his or her life insurance policy to a viatical settlement company for a lump sum payment that is a percentage of the policy's face value. The viatical provider then becomes the beneficiary of the policy and is responsible for making the premium payments. When the viator dies, the viatical provider collects the full face value of the policy. So basically, someone with a terminal disease, such as AIDS or cancer, sells his life insurance policy for less than face value. The buyer then cashes in the full amount at the original owner's death. The longer the life expectancy, the cheaper you can buy the viatical policy.

Here is some useful terminology for those interested in viatical settlements:

• A viator is the owner of a life insurance policy, who seeks to sell a policy. The insured may or may not have a catastrophic or life threatening condition.

• A viatical settlement provider is a person or company who purchases a life insurance policy from a viator. A viatical settlement provider must be licensed by the Department.

• A viatical settlement broker is a person who negotiates an agreement between a viator and a viatical settlement provider. The broker has a fiduciary responsibility to act according to the viator’s instructions and in the viator’s best interests and must be licensed by the Department.

• An escrow agent or trustee is the party who holds the documents and the money until ownership rights of the policy have been transferred from the viator to the viatical settlement provider. In some cases they retain investor’s funds until they have been placed on a life insurance policy and could be the party responsible for insuring payment to the investor. Escrow agents or trustees are not licensed by the Department.

• A viatical life settlement purchaser is a person who invests money to purchase an interest in a life insurance policy as part of a viatical settlement purchase agreement.

• A viatical settlement sales agent is the person who solicits viatical settlement purchasers to invest their money in insurance viatical settlements and must be licensed by the Department.

Selling your life insurance policy or investing in a viaticated policy with a viatical company are important decisions that require careful thought and planning. Before selling your insurance policy, or investing in another person’s life insurance policy, be sure to consult with a trusted financial advisor.