A new industry has formed in the past two decades: Viatical settlement involves the selling of a life insurance policy by a terminally ill person to unrelated investors who can be banks, private companies, or brokers. The seller gets a lump sum amount as cash payment while the investor gets the death benefits upon the person's demise.



Grim as they may sound, viatical settlement can provide financial relief to the terminally ill people, provided they do not fall prey to unscrupulous elements who may take advantage of the vulnerability of the person.

A terminally ill person can sell his policy to a private funding company or to a broker, who will then sell to other viatical settlement companies. The physical and emotional demands of the terminally ill person are traumatic enough by themselves; much care needs to be taken to ensure that the policy is not sold to any fraudulent broker, causing even more financial and emotional trauma. To ensure this, be certain that the broker has a license to purchase viatical settlements. The New York State law has made it mandatory for all brokers to be properly licensed. Therefore, you must make it a point to check the license of the concerned broker. If you find that the broker is unwilling to prove his license, do not continue with the transaction at any cost.

Besides a proper and valid license, another element to keep in mind is that you should go through the copy of the agreement very carefully before signing it. Your CPA or attorney would be excellent resources should you have any questions relating to the purchase and sale agreement. The broker will purchase your policy for a reduced amount of the actual face value. As with every other type of broker, there are ones who enjoy their job and sincerely want to help people in this capacity, and there are unscrupulous ones who are merely trying to make the most money possible, often at other peoples' expense. Never give in to pressure tactics, as this is a warning sign the the broker may be one of the latter rather than the former.

In order to get the best possible offer, it is important to shop around. The broker may claim to do this for you. If so, be sure to verify the results the broker has obtained. It would only benefit you to have at least two offers you've obtained without the broker's assistance in order to verify that the broker's offers are reasonable. Additionally, you should contact your insurer and check if your policy contains any accelerated benefits, as these benefits allow a person to collect a part of their death benefits. If your policy contains these benefits, compare them to the offers you've received as well. In all cases, the offer for a viatical settlement should be higher than what can be obtained directly from the insurance company by means of accelerated benefits.

The viatical settlement broker will charge a fee for completing the life settlement agreement. This fee is based on the contract between both the parties and is approved by the New York Superintendent of Insurance.