Often after the fact, an attorney or accountant learns that their client has surrendered or cashed in a life insurance policy. The client may not be in the best of health, may be somewhat older, and determined that they needed the cash that was in the policy. In the alternative, a person may have a term insurance policy, which basically has no cash value, and the client merely stops making the payments.
In these cases, prior to the cash being withdrawn or the lapsing of a policy, it would have been better for you to have consulted an advisor, who could have secured a viatical settlement for you. In fact, it is specifically these situations where you could have received funds for the policy in an amount greater than the cash value.
With a viatical settlement, you contact your advisor or consultant, who researches several different companies to determine which will offer the most money for your life insurance policy. You must submit to a physical to determine your health status, and the less healthy you are, the more money will be available from the proposed purchaser, since your life expectancy is not nearly as great as it was when the policy was issued.
However, some purchasers of these policies are not as honorable as others, so it is wise to obtain several quotes to determine the largest amount offered. Naturally, a small policy, such as $100,000 or less, may not be economic, and so in many cases, the viatical settlement company will only buy policies of larger sums.
It is important to contact an accountant and lawyer to review the tax and other legal issues prior to contracting with a viatical settlement company. In addition, there may be rules and regulations in your state that may require the agent to have a special license to conduct the settlement. You should also be careful about maintaining your privacy, what documents are being signed, and who will be reviewing them.
Finally, with a viatical settlement you should insist on receiving a lump sum as opposed to payments over time. Even if the offer is such that a larger amount may be payable over time, when you die or if the company defaults, you no longer own the policy and you have no further rights to it, for example, to change the beneficiary or to any aspects of the policy.
by: Hyman G. Darling, Esq.
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