If you weigh all of your options and decide that a viatical settlement is best, be aware that the process takes time and can be quite complex, both legally and financially. There are a range of people you will want to consult: your physician, your life insurance agent or company, a lawyer, and a financial planner, accountant, and/or tax advisor. Ask a family member or other trusted advisor to help you through the process.
Research the viaticals industry and the process itself as much as you can before getting started. You may want to start with the list of potential resources at the end of this article. As you use the Internet to look for viatical settlement companies and possibly a broker who could represent you, keep in mind that what looks good on the Web may not always be legitimate. Entering the term "viatical" into any search engine returns dozens of hits -- but don?t count on the site alone for information about a company. Do additional research as well. The Federal Trade Commission offers the following tips for consumers getting started in the viatical settlement process (we?ve added some advice where appropriate):
- Contact two or three viatical settlement companies to make sure offers are competitive, and be aware of prevailing discount rates. A viatical settlement company may pay 80% of the face value of a policy to a person whose life expectancy is six months or less.
- Check with your state insurance department to see if viatical settlement companies or brokers must be licensed. If so, check the status of the companies with whom you are considering doing business. If not, check to see whether any complaints about them have been filed with the Better Business Bureau, the state Attorney General's office, or the department of insurance. Also, verify whether they are members of industry organizations like the National Viatical Association or the Viatical Association of America.
- Don't fall for high-pressure tactics. You don't have to accept an offer, and you can change your mind. Some states require a 15-day cooling off period before any viatical settlement transaction is complete.
- Once you accept an offer, verify that the investor or the company has the money for your payout readily available. Large companies may have cash on hand; smaller ones may have uneven cash flows or may be "shopping" the policy to third parties. Insist that the company set up an escrow account with a reputable, independent financial institution before the company sends the offer papers for your signature. An escrow account will let you be sure that the funds are available to cover the offer.
- Insist on a timely payment. Once the insurance company has made the necessary changes, you should get your money within two to three business days from the escrow agent. No more than a few months should go by from the initial contact with the company to the closing.
- Ask the company about possible tax consequences and implications for public assistance benefits. Some states require viatical settlement companies to make these disclosures and tell you about other options that may be available from your life insurance company.
- Ask about privacy. Some companies may not protect a policyholder?s privacy when they are marketing the policy to another potential investor.
- Remember: If you make a viatical settlement, there will be no life insurance benefits for the person you originally designated as beneficiary, whether that be your spouse, children, or another relative. For some people, this is perfectly acceptable; maybe the beneficiary has passed away, or simply doesn't need the money from the policy. It all depends on the individual situation.