The two year prohibition on a life settlement proposed by the Life Settlements Act is more flexible for life settlements than the five year prohibition proposed by the National Association of Insurance Commissioners' ("NAIC") Model Viatical Settlements Act (the "Model Act").
Whereas the Insurance Department does not currently regulate life settlement advertisements, it regulates advertisements that relate to viatical settlements as those are within its authority.
Since someone "living with an illness" could qualify, the Department opined that the laws and regulations applying to viatical settlements applied and the proposed advertisement was not permissible.
New York's Life Settlements Act, overall, is consistent with the regulations applicable to viatical settlement companies and viatical settlement brokers.
992 Use of licensed viatical settlement providers, viatical settlement brokers, and registered life expectancy providers required.
1) "Financing entity" means an underwriter, placement agent, lender, purchaser of securities, or purchaser of a policy or certificate from a viatical settlement provider, credit enhancer, or any entity that has direct ownership in a policy or certificate that is the subject of a viatical settlement contract, but whose principal activity related to the transaction is providing funds or credit enhancement to effect the viatical settlement or the purchase of one or more viaticated policies and who has an agreement in writing with one or more licensed viatical settlement providers to finance the acquisition of viatical settlement contracts.
The term does not include any person associated, affiliated, or under common control with a viatical settlement provider or viatical settlement broker.
a) On behalf of a viatical settlement provider, viatical settlement broker, life agent, or person engaged in the business of viatical settlements;
Accordingly, the type of individual who would most benefit from taking an accelerated benefit or a viatical settlement is a financially independent person without a financially dependent spouse or children who is unable to work and who has no long-term care or disability insurance.
Once these proceeds are paid to a living insured, however, the insured's creditors may be able to reach them, unless state law has extended creditor protection to accelerated benefits and viatical settlements.
5) If the insured actually lives months, years, or decades longer than expected, the accelerated benefits or viatical settlement continue to be excluded from income.
In other words, unlike terminally ill insureds, chronically ill individuals do not have the discretion to use accelerated benefits or viatical settlements in whatever manner they desire.