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A Viatical Settlement is a method by which terminally ill people sell their
life insurance policy to a third party at a discount. Investors purchase the
policy for 60-90% of its face value in exchange for being named the new
policy owner and beneficiary. When the insured dies, the new owner receives
100% of the face amount of the policy.
Viatical Settlements are not new. Every insurance agent can tell you the
procedure to change the beneficiary or ownership of your policy. This
concept has been around as long as the insurance industry itself. We all
know that under federal and state law any person may sell or assign their
personal property to whom they choose for reasonable value. Because of
these laws, insured may sell their life insurance policy, just as they may
sell other personal property.
Viatical transactions are a form of reverse insurance that allows the
insured to receive cash to meet immediate needs without dying first.
To be eligible, insured applicants must meet very precise "medical and
legal" underwriting criteria and have a life expectancy of approximately
6-36 months as determined by independent reviewing physicians.
While physicians review medical histories and order laboratory tests,
attorneys evaluate the legal aspects by obtaining certifications dealing
with mental competency, beneficiary releases and assignment clauses.
The transaction is closed in escrow with a bonded escrow agent or a
designated trust company, where a transfer agent presides over the closing.
The closing is very similar to a real-estate transaction. Disbursements are
made when all conditions of the escrow agreement are met.
ADVANTAGES TO THE INSURED:
Usually, terminally ill patients and their families are under severe
financial stress. Most are fully disabled and have not been able to work for
quite some time. They have significant trouble finding enough money to pay
for the bare necessities of life such as rent, food, medicine, clothing
and transportation. Many lose everything and die as part of the indigent
poor.
Given these realities, a growing number of terminally ill patients are
finding out they have the ability to spend a portion of their life insurance
proceeds before they die. This allows them to have dignity, and make
important decisions during the final months of their life.
Again, the Viatical Settlement enables the insured to receive a payment that
can be used in any way to ease the emotional and financial stress of
terminal illness.
ADVANTAGES TO THE INVESTOR:
The purchaser can expect a very high yield in relation to the minimal
exposure to risk. Just like a Treasury Bill, the return on investment
will depend on the "purchase discount" and "holding period".
Investors realize there is less risk to principal than owning instruments
like Common Stock and Bonds.
Even though the investment is not liquid and must be held to maturity,
there is no MARKET RISK concerning yield, because policies are held to
maturity just like a CD. No INTEREST RATE RISK, because yield is calculated
on the holding period and has nothing to do with the financial marketplace.
No CREDIT RISK, if the state in which the policy was issued has an insurance
fund to pay death benefits for each other should one of them become
insolvent. All insurance companies doing business in any state with such a
fund back the fund with their reserves. these reserves are regulated by
law.
There never has been. or ever will be, a death benefit that will not be paid
by the insurance industry.
Over the last 3 years it has been reported in many magazines and newspaper
articles that discounts have been between 10% and 40%, the average holding
period less than 9 months and the average yield to maturity over 15%.
I know of many situations where these contracts are used in qualified pension
plans, 403 (b), etc. You may invest in a whole policy, or portion of one,
provided the insurance policy has provisions for multiple beneficiaries.
This could be a great addition to your portfolio.
Please contact me if interested in complete package or if you want to be
put on a weekly mailing list of available policies for purchase.
Jim Tam
I saw this special on NBC last year around this time
about this type of investment involved with AIDS
sufferers. I was curious, but I didn't see enough of
the show to find out how to get involved. I am interested.
Please add me to your mailing list.
I would be interested if someone started a mutual fund
based on this type of investment...anyone feel pioneering?
Thanks,
Jim Tam
John
an AIDS carrier. When (s)he died, you would receive the insurance
money. One of the senators was/is actively involved in this, but I
do not remember the name.
Oh, you would pay the cash to the AIDS victim for them to use for bills,
debts, etc.