VIATICAL SETTLEMENT - Do You Need To Invest in One?

2007-03-08 10:33:40

( Financial )



Various insurances available can be bought as settlements. Viatical settlement is such. However, investing in a viatical settlement can prove to be risky for the investor. For ill people though, it could surely help in paying for medical bills.

A viatical settlement means the sale of a life insurance policy to another person or an institution before the policy matures. In return, the insured will get a lump sum for the insurance and the buyer will be named as the beneficiary.

This sale is lower than the face value of the policy. But then, viatical settlements will provide immediate cash settlements for the insured.

Generally, a viatical settlement can be agreed upon based on some criteria. First of which, the insured has life expectancy of two years or less. The policy must at least be two years in effect and assignable. The insured should get the releases from beneficiaries and must release all medical records to the buyer. Lastly, the insured and the policy buyer must sign an agreement.

Viatical settlements, if acquired from qualified companies, are exempted from federal taxation. States, however, have different laws regarding viatical settlements tax.

Life insurance settlements, on the other hand, mean the selling of a life insurance policy to another person should the insured deem it unnecessary to be tied to a policy. As in a viatical settlement, the insured immediately gets cash in opting for life settlements. The buyer will be the new policy beneficiary and will be obligated to pay for all premiums until the original owner passes away.

Viatical settlements and life settlements offer the policy holder the option to make use of their money for immediately.

Note that as an investment, a viatical settlement can be prone to fraud, if not dealt with the best of circumstances. Most of these viatical settlement frauds are due to misrepresentation of salespersons and brokers. Also, it is very risky. The longer the insured lives, the longer you will pay for the premiums.

Investors must also beware of buying senior life settlements. As in life settlements, you will purchase a policy, this time from a senior citizen. Usually, healthy senior citizens are persuaded to sell their insurances so that they can enjoy retirement with funds from having senior life settlements.

Still, for many ill people, a viatical settlement remains to be of value for personal finances.


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