Viatical Settlement For Life Insurance Policy

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Lon
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Viatical Settlement For Life Insurance Policy

Post by Lon » Wed May 06, 2015 1:58 pm

Interesting concept. Do you know anyone that has done this and must you have cancer or be terminally ill?

Gill
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Re: Viatical Settlement For Life Insurance Policy

Post by Gill » Wed May 06, 2015 2:13 pm

I don't know anyone personally, but viatical settlements have been around as long as life insurance. An investor simply buys an existing insurance policy on someone insured and then collects on the death of the insured. There is no requirement that the personal have any illness. Many investors were burned on these when medicine was able to extend the lives of patients once thought to be terminally ill.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

dhodson
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Re: Viatical Settlement For Life Insurance Policy

Post by dhodson » Wed May 06, 2015 2:32 pm

I don't have any personal experience doing this but did look into it very briefly for a policy I unfortunately purchased and I find it questionable.
Its typically for cash value life insurance and what they do is offer the person slightly more than the cash surrender value. They typically are only interested in polices that have been in force a long time without loans/etc against the CSV and as you mentioned seem to prefer folks who are pretty sick since they will sooner collect/get a higher return.
While one might argue that maybe these people need the money now so it isn't preying on them, frankly I imagine most of the time if the person is that sick that they would be much better off taking a loan from the insurance company against the CSV and then their heirs would get the death benefit minus loans. I doubt people trying to buy the policy informs the customer of this. Now I believe they will still purchase polices from very healthy folks so long as its been in force a long time and doesn't have any loans against it but don't offer as much to the customer over the CSV. Now IF the owner of the permanent policy is set on surrendering it and understands their options then I don't see a problem. Permanent insurance in my view should rarely be purchased but once in place a long time, it can make sense to keep it assuming one wants/needs a permanent death benefit. Its "easiest" to keep in force an old whole life policy until death or some form of Universal IF the universal was well funded in the earlier years.

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HardKnocker
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Re: Viatical Settlement For Life Insurance Policy

Post by HardKnocker » Thu May 07, 2015 2:42 pm

Generally, they are a bad idea. Similar to a reverse mortgage.

You take a big hit on the discounted proceeds.
“Gold gets dug out of the ground, then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility.”--Warren Buffett

Gill
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Re: Viatical Settlement For Life Insurance Policy

Post by Gill » Thu May 07, 2015 2:55 pm

I think the OP is talking about buying, not selling.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal

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