Top Ten Questions Consumers Should Ask About Viatical Settlements

From the New York State Insurance Department

Viatical settlements are sales of life insurance policies on terminally ill people to unrelated investors. Viaticals arose during the early years of the AIDS epidemic, but are now available to other terminally ill individuals. Licensed viatical settlement brokers typically offer suitable policies to viatical settlement companies. The terminally ill insured individual receives an amount of money less than the face value of the policy to use for his or her own purposes, such as medical expenses, travel, final wishes, etc. Investors receive the face value of the policy at the death of the insured.

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The questions below relate to viatical settlements.

1) Do you have the required viatical settlement license?

Under New York State Insurance Law, viatical settlement brokers must be licensed. Do not deal with unlicensed viatical settlement brokers. If you are unsure, contact the New York Insurance Department to verify that the broker is licensed.

2) May I see it?

Under New York State Insurance Law, a viatical settlement broker must show you his or her license. If the broker is unwilling to show you a license, do not complete any transactions.

3) May I see a copy of the viatical settlement agreement?

You should make sure you see a copy of the viatical settlement agreement before signing and make sure all the provisions you verbally agreed to are contained in the agreement.

4) How many days do I have to rescind the agreement?

Under New York State Insurance Law, you have a minimum of fifteen calendar days to rescind a viatical settlement agreement.

5) Where is my settlement money deposited once I sign the agreement?

The proceeds from your viatical settlement agreement must be deposited in a New York State bank or other institution approved by the Superintendent of Insurance for proper distribution.

6) How much money is paid as compared to the face amount of the policy?

The amount you are paid as a percentage of the face amount of the policy will vary based upon your life expectancy, current interest rates, etc. If you have certain estate needs, such as funeral expenses; the need to provide for a spouse; etc., you may want to explore other sources of funds, such as reverse mortgages, rather than selling your life insurance policy. You also should check with you insurer to determine if your policy contains an accelerated benefits provision which allows terminally ill insured individuals to collect a portion of their death benefit.

7) How much will be paid as compared to the policy’s cash surrender value?

"Cash surrender value" is the money you are entitled to when you surrender a life insurance policy. Cash values are typically smaller than the face value of the policy. Your payment under your viatical settlement agreement should exceed the cash value of your policy otherwise you would be better off surrendering your policy for its cash value.

8) Who will receive a fee, or other compensation concerning this agreement?

The viatical settlement broker usually receives a fee when completing the viatical settlement agreement. The fee is typically based on a percentage of the viatical settlement agreement in accordance with the contract between the two parties. Such contracts are approved by the New York Superintendent of Insurance.

9) May I review the information booklet before I sign the agreement?

Under New York State Law, viatical settlement brokers should have an information booklet available for your review. You should make sure you fully understand the information in that booklet.

10) Should I consult with any agency providing social, or similar services before I sign the agreement?

Your viatical settlement application should indicate that it is always a good idea before signing a viatical settlement agreement to contact the Department of Social Services (or similar agencies) to determine whether you would be eligible for any government-based financial assistance.

 

 

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