We describe the welfare effects of price regulations in an important segment of the secondary life insurance market--the viatical settlements
While most viatical settlement
companies are legitimate, others mislead, deceive, or even defraud viatical investors.
Since most residents and their families are probably unfamiliar with viatical settlements
, it is in their best interests - and those of management, social workers and others in direct contact with residents - to make them aware of this financial resource.
The mechanics of viatical settlements
are fairly straightforward.
Since the Salazars wanted a big percentage return but were too small for the risky real estate deals, and had too little tolerance for stock funds given the bubbles and serious market reverses of the last few years, Tom recommended they invest in a privately syndicated pool of life insurance policies in a transaction called a viatical settlement
A "viator" is the owner of a life insurance policy who enters into a contract to sell the policy to a third party, usually a viatical settlement
The state income tax treatment of viatical settlements
will vary from state to state.
became popular because the immediate liquidity available from life insurance policies often provided materially greater cash to the victims and their families than the future value of the death benefits.
Virginia enacted its Viatical Settlements
Act in 1997 to address the state's concern with the "potential for exploitation of vulnerable and seriously ill individuals.
with independent third parties; and
Life settlements are not viatical settlements
, which terminally ill policyholders often use to raise quick cash.
Contrary to the early days when viatical settlements
were primarily utilized by the terminally ill, today many affluent seniors may be eligible to sell their life insurance benefits pursuant to what is now known as a senior or a life settlement.