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Frequently
Asked Questions
About Life Settlements
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are answers to commonly asked questions about life settlements to help
you better understand this important new financial resource. |
- What Is A Life Settlement?
Life Settlement is the term used to describe the financial service
of selling an existing life insurance policy for less than the
policy's face value. Life Settlements are generally divided
into three categories: Viatical Settlements, Senior Settlements,
and High Net Worth Transactions. A viatical settlement
allows an individual with a life-threatening illness--such as
AIDS, heart disease, cancer or Alzheimer's disease--to sell their
life insurance policy for cash. A Senior Settlement provides
an opportunity for individuals age 65 or older to sell their life
insurance policy for cash. A High Net Worth Transaction
provides an opportunity for wealthy individuals, businesses and
trusts to sell their life insurance policies for cash.
- How Can The Funds Be Used?
There are no restrictions on how funds from a life settlement can
be used. The money helps people to restore a sense of control over
their lives--to make choices they might not otherwise have, such
as paying for medical treatment or nursing home care, keeping
their home, or sharing funds with family, friends or favorite
charities. They might even need the funds to meet day-to-day
living expenses. In cases where the policy is simply no
longer needed, clients have used the money to buy new cars and go
on exotic vacations. There are no restrictions.
- What Specific Types And Sizes Of
Life Insurance Policies can be Bought?
VSPI can handle the purchase of almost any kind of life insurance
policy--including term, whole life, universal life or group
(employer paid) policies--from most any company. VSPI routinely
handles policies with face values of $50,000 to well in the
millions.
- Are There Any Application Fees?
You will never pay VSPI any fees, application charges,
underwriting or medical review costs at any time in the process.
- How Do I Apply?
The process of selling a life insurance policy is easy and
non-threatening. There are no invasive interviews or lengthy
questionnaires to complete--just one simple form. With the
applicant's permission, our professional staff then gathers
medical records and insurance information for review.
- How Long Does The Process Take?
A determination on each case is made within a few days of the
application's completion, with the entire process taking
approximately 3 to 6 weeks. All funds are transferred directly to
the policyholder by wire transfer or overnight delivery of a
check. The policyholder decides.
- How Is A Policy's Value
Determined?
The amount paid for a policy is determined by several factors
including prevailing interest rates, premium obligations, and
projected life expectancy.
- Are The Proceeds Subject To
Taxation?
With the recent passage of the Health Insurance Portability and
Accountability Act of 1996, individuals with chronic or
life-threatening illnesses may be able to receive viatical
settlement proceeds free of any Federal income tax. Also
noteworthy, some life settlement transactions may reduce estate
taxes. We encourage policyholders to consult a financial planner
and estate planner on such tax issues. VSPI will work with
policyholders and their financial advisors to help structure life
settlements to best meet their financial and estate planning
needs.
- Will A Life Settlement Affect My
Ability To Receive Federal and State Aid Programs?
The proceeds from a life settlement may impact certain means-based
entitlement programs, such as Medicaid. Other programs may not be
affected. VSPI urges potential viators to consult their legal
advisors or financial planners as well as their state's Department
of Health and Human Services for specific guidance in this area.
- Is The Life Settlement Industry
Regulated?
The short answer is yes. The question is hard to answer
because regulation of life settlements is on a state-by-state
basis. For instance, some states regulate viatical
settlements, but do not regulate senior settlements. Other
states may define both viatical and senior settlements as life
settlements, and have one body of law to cover both categories.
Still other states will have separate bodies of law for viatical
and senior settlements. Currently, regulation, or proposed
regulation, exists in over half the states. Also, the National
Association of Insurance Commissioners (NAIC) has written a model
act. The purpose of this model act is to encourage states to adopt
uniform standards to regulate the life settlement industry. VSPI
encourages uniform regulation of the life settlement industry, and
therefore VSPI is licensed for life settlement (viatical
settlements and senior settlements) in most states.
- What Should I Look For In A Life
Settlement Company?
Stability, experience and professionalism are the keys. With VSPI,
you have an attorney on your side. Stephen M. Watson, Esq., brings
a unique blend of previous legal background and client compassion
to the industry. Go with a company you can trust, and one
that will act with discretion and integrity.
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