Viatical and Life Settlement Contracts

Viatical and life settlement contracts enable you to sell your life insurance to a third party in exchange for a reduced amount of the face value. The amount you receive depends on your age, health, death benefit, and number of years your policy has been in force.

The viatical business began in 1989 as a way to give terminally ill AIDS patients early access to their life insurance, but has expanded to include policyholders suffering from cancer, heart disease, or other life-threatening illnesses, or as life settlements for policy holders who longer want a particular policy. Today, some viatical companies unabashedly target people who may simply have high blood pressure and carry hefty death benefits.

In addition, life settlements are being offered as a way to use insurance you may no longer need for estate planning or family protection, as a way to get a return larger than the cash value of the policy.

There are many legitimate viatical and life settlement companies. But, unfortunately, there are also viatical scam operators urging people to liquidate their life insurance without explaining the implications, as well as life settlement companies who do not follow state guidelines. Be careful in selling your life insurance policy.

Know your options

If you're thinking of buying a viatical or life settlement you should:

• Understand the details and the risks before deciding.
• Consult your own professional financial advisor who knows your personal financial circumstances, investment objectives, age, and other considerations. You may want to consider other investment choices.
• Ask your tax advisor about any possible tax consequences of buying a viatical settlement. Find out if it's appropriate to use 401(k), IRA, Keogh, or other qualified retirement plan funds to buy a viatical settlement.