VIATICALS CAN BE DEADLY TO YOUR PORFOLIO

It sounds simple and logical.  Patients who are terminally ill sell the death benefits in their life insurance policies at a discount so they can get cash to use during the remainder of their lives.  The viatical settlement investor puts up that portion, say 50% of the death benefit, and receives a larger portion of the death benefits (85%) when the insured dies.  

While there are sound, reputable companies that offer viatical settlement investments, these are highly risky investments; and there is a great risk of fraud.

What kinds of problems can occur with viatical settlement investments?

• The insured lives longer than estimated, reducing the investor’s rate of return and tying up the investor’s money longer too.
• If the policy is a term life policy, and the insured outlives the term, the investor will get nothing.
• The policy is still "contestable" (usually a two-year period), meaning the insurance company can refuse to pay the death benefits for a variety of reasons unknown to the investor.
• The investor may be required to pay the premiums on the policy to keep it in force, or the policy actually lapses before the insured dies, and the investor gets nothing.
• The insurance company becomes insolvent and is not able to pay the death benefits.
• The viatical settlement company goes bankrupt and the investor’s money is lost or tied up indefinitely.

What are the possible risks of fraud in viatical settlement investments?

• The policy is fraudulently obtained by the insured (for example, by concealing or misrepresenting his or her health condition) so the insurance company refuses to pay the death benefits.
• The viatical settlement company misappropriates the investor’s money and never purchases the insurance policies.
• The investor is not the named beneficiary on the policy, and the viatical settlement company never pays the investor the proceeds.

What about the guaranteed return on my investment?

With advancing medical developments, predictions about life expectancy are nothing more than guesses. And, since the return on an investor’s investment depends on how long the insured lives, an annual rate of return cannot be guaranteed. Finally, the "guarantee" assumes that nothing goes wrong with the investment.

Do you know all the facts?

• Who pays the premiums on the insured’s policy?
• Who monitors the insured’s whereabouts and health?
• Did the doctor who estimated the insured’s life expectancy actually examine the insured?
• Who is responsible for obtaining the insured’s death certificate?
• Who is responsible for making a death benefit claim?
• What percentage of the investor’s "humanitarian" investment does the insured get?
• Does your sales agent receive a commission on the investment – how much?
• Are there any fees or costs the investor may have to pay – what are they and how much?

Isn't a viatical settlement contract simply another form of insurance investment?

No, in many states, including California, viaticals contract are securities.
The biggest problem that you may have if you are dealing with a fraudulent viatical transaction, is that, in the end, your money may simply be gone, and there may not be a company  or assts from which you will be able to recover.