D., 1993, Are Viatical Settlements
Securities Within the Regulatory Control of the Securities Act of 1933?
allow insured policy owners to sell their insurance death benefits to investors.
(157) Although viatical settlements
and other life settlements are distinguishable from SPIN-Life policies insofar as the underlying life insurance contracts for viatical and life settlements were originally entered into without the contemplation of a future sale of the policies, (158) they are similar to SPIN-Life in that they are both investments and not insurance, properly speaking.
The availability of a viatical settlement
is based on two major criteria: (1) the specifics of the life insurance policy, and (2) the health condition of the insured.
Accordingly, (Insurer), effective with applications dated March 7 and later will require that financial professionals certify on the life insurance application that they or their client has no intent to use this policy for any type of viatical settlement
, senior settlement or any other secondary market."
Accordingly, the type of individual who would most benefit from taking an accelerated benefit or a viatical settlement
is a financially independent person without a financially dependent spouse or children who is unable to work and who has no long-term care or disability insurance.
Currently, a majority of the states regulate viatical settlement
transactions, which are simply the sale of all ownership and beneficial rights to a life insurance policy in exchange for an immediate cash payment.
Trade Partners contributed viatical settlement
contracts valued at $8.3 million and gained a near 65 percent stake in TradeArk Properties, the joint venture with Capitol Communities.
One way to defraud the investor is to sell a viatical knowing that the insured lied about his or her health condition when applying for the policy, as did one Florida viatical settlement
company.(12) Sometimes, insureds acquire a policy by hiding evidence that they have a life-threatening condition.
From insurance programs and viatical settlements
to discounts on travel and merchandise, VFW has something for every member.
settlement.(3) Viatical settlements
are a specialized form of receivable financing under which viatical settlement
companies buy from the policyholder, at a discounted rate, the right to receive death benefits under life insurance policies.(4) The viatical settlement
company may then hold the policy, sell the policy to an individual investor, or pool the policy with others and sell fractions of the pool to investors.(5) The return to investors is the difference between the discounted value paid to the policyholder and the full value paid by the issuing insurance company upon the policyholder's death.(6)
Prior to the insurance industry entering into this market, private investors formed groups commonly known as Viatical settlement
companies for the purpose of purchasing, or taking assignments of, policies at a discount owned by the terminally ill.(2)