"Bringing Benefits to Life..."

We Are in the Business of Buying Life Insurance Policies

SENIOR CITIZENS HAVE NEW SOURCE OF FUNDS

By: Stephen M. Watson, Esq.

There is a little known fact that a life insurance policy, just like most any other valuable asset, can be sold. This comes as good news for senior citizens, because often life insurance policies become more of a burden than a blessing--premium payments may escalate to uneconomical amounts; the original need for the policy may no longer be pertinent; or perhaps the original beneficiary of the policy has predeceased the policy owner. In each of these cases, the policy may have lost its utility, or simply may not be needed anymore. 

The sale of a life insurance policy is called a "viatical settlement." The term "viatical" has its roots in the Latin word viaticum, which in ancient Rome stood for the provisions that a family would provide for a soldier heading off to war. Today, viatical settlements are used by those who have contracted a terminal illness to provide a source of funds while they are still living. But the viatical settlement industry has expanded well beyond buying policies from only the terminally ill.

For those who have reached retirement age, viatical settlement companies will purchase policies regardless of health condition. In general, policies for those age 70 or more can be sold. If there are any health complications, the age becomes less relevant, and those policies with insureds of a much younger age will be considered. This is great news for those who find that they need cash more than they need the policy.

Viatical settlement companies will purchase most any kind of life insurance policy (whole life, term, universal, split-dollar, etc.) from most any insurance underwriter. Thus, value can be captured from a term policy, which otherwise has no cash value on its own. Also, with insurance policies that do build up cash, viatical settlement companies will often pay more than the cash value. 

Why would a senior citizen wish to sell a life insurance policy? Consider the following scenarios:

• The husband holds a policy with his wife as beneficiary. His wife predeceases him and he has no children. He would rather sell the policy and use the funds now than leave the policies death benefit to someone else.
   
• Retiree is offered his employer's key person policy upon retirement. Retiree doesn't need the policy, but recognizes that he can accept the policy and then immediately sell it for cash, perhaps before he's even made the first premium payment!
   
• Senior citizen's policy has a policy on which the premiums have simply gotten too expensive. Before, the choice was to let a term policy lapse, or cash in a permanent policy. But now, the policy can be sold, realizing more value for the policyholder.

Stephen M. Watson, President of Viatical Settlement Professionals, Inc., is an attorney and licensed Viatical Settlement Broker. He is a graduate of The University of Virginia, and Washington & Lee University School of Law.

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