Question

Take a position on whether you support or oppose viatical insurance. What is the role of courts in being a referee for activities related to viatical insurance?

Answer 1

A viatical settlement occurs when a person facing a terminal illness or chronic medical condition sells their life insurance policy to a viatical settlement broker for an amount larger than the cash surrender value but less than the policy’s death benefit, or face value of the policy. In exchange for the cash settlement amount paid to the policyholder, the buyer continues to pay the future premiums and associated interest rates on the policy, as well as commissions if applicable, and becomes the beneficiary of the policy, receiving the death benefit from the insurance company when the policyholder passes away.

I strongly support viatical insurance because of these reasons.

• You’ll receive funds you can use within a matter of weeks. Once you’ve reached out to a third party viatical broker with your intent to sell your policy, you’ll go through a verification process, review your offer, and complete the necessary application forms. When you receive your settlement from the viatical settlement company, you can quickly access the proceeds instead of having them cashed out as a death benefit.
• You’ll no longer have to pay monthly insurance premiums. With mounting medical bills, outstanding debts, and funeral expenses looming, every dollar counts. Instead, the viatical settlement company will continue to make these payments on your behalf. Eliminating an additional premium payment aids patients and could make a big difference to your financial plan.
• Your viatical settlement contract states that your viatical settlement funds are yours to use however you choose. Your viatical settlement broker, buyer, and life insurance company do not place any restrictions on how you spend your settlement. Pay off your mortgage and credit card debt, take a vacation, or prepay monthly household bills so you won’t have to worry about making ends meet. You could also create a financial safety net for your spouse to use after you’re gone, utilizing some of the funds as a present-day death benefit. Instead of waiting for your death benefit after your passing, your family can share the proceeds of your life insurance settlement with you during your final days.
• Viatical settlement proceeds are not taxable. Thanks to insurance laws and the 1996 Health Insurance Portability and Accountability Act (HIPAA) exempted viatical settlement proceeds from income taxes. However, it’s still a good idea to consult your tax advisor when considering any sort of insurance settlement.
• Your settlement amount will be more than you would receive if you surrender your insurance policy for its cash value. Typical offers range from 50 percent to 70 percent of the face value of a policy. Although your lump sum payment will be less than what your family would have received as a death benefit, you get to enjoy the proceeds with them while you’re still living.

Courts play a vital role in solving disputes between the parties.Court's decision set forth the fundamental principle upon which the viatical settlement and later, the life settlement industry were based: a life insurance policy is private property, which can be assigned at the will of the owner. Viatical settlements were rare for almost eight decades until the onset of the AIDS epidemic