Life insurance offers a relatively new benefit called viatical settlements, which may affect your estate planning. With this program, terminally ill patients can, in effect, “sell” the proceeds of their life insurance death benefit to a third party and receive the cash they need while they’re alive. To qualify for this benefit, your doctor must certify that your life expectancy is no more than two years based on the fact that you have a terminal disease. The company then purchases your life insurance policy (including any cash value) for 60 percent of the face value. If your disease has progressed even further, and your doctors certify that you have less than six months, the viatical company will purchase your life insurance policy for up to 80 percent of the face value. The purpose of the settlement is to ensure that terminally ill patients have the bulk of their life insurance benefit available to pay for their medical and living costs. On the other hand, terminally ill people must decide whether the life insurance benefits are for them or for their survivors.
As you would expect, this issue is fairly controversial. You can learn more about this kind of policy by checking with an insurance company that offers viatical settlements. You should also check out the information made available by the Federal Trade Commission (FTC), which you can reach by writing Federal Trade Commission, P.O. Box P, Room 403,
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