Individual Opportunities- for People with Life Insurance

Cancer patients who have been given a poor prognosis and who have life insurance can often liquidate their life insurance (for up to 80% of face value) and use the money for any purpose including paying for treatments not covered by insurance. The information below provides further details.

What is this about?

If you have advanced or metastatic cancer (or are chronically or "terminally" ill with another disease) and have life insurance you can sell your policy now and use the money for any reasons such as a better quality of life or to pay for medical treatments not covered by insurance. In addition, if you do not have a terminal diagnosis, but are over 65 years of age, you may also have the option to liquidate your life insurance policy.

How much money can I receive?

If you are living with cancer and have a terminal diagnosis you might expect to receive up to 80% of the face value of the policy. Qualifications, regulations and payments can vary from state to state depending on the current market at any given time. If you are over 65 and relatively healthy you might expect to receive up to 20% or possibly more, of the net death benefit of their policy. The precise value is determined by a number of factors, including the age and medical condition of the insured, type of insurance policy, rating of the issuing insurance company and amount of premium payments to keep the life insurance policy in force for duration of the life of the insured. In general, the longer the life expectancy of the insured, the less the cash settlement will be. Conversely, the shorter the life expectancy of the insured, the higher the settlement.

Is there a name for this?

Although terminology can vary from state to state, typically the sale of a life insurance policy by someone who has a life-threatening illness is called a "viatical settlement." The word viatical comes from the Latin word viaticum, which were the supplies given to Roman officials as provisions to trade with as they embarked on a long journey. When a person over 65 who is relatively healthy liquidates a life insurance policy it is commonly called a "Life Settlement."

What types of life insurance policies can be sold?

Most types of life insurance policies qualify. The most common are Universal Life, Whole Life, and Term Life if it is convertible. It is wise to speak to someone who specializes in these types of settlements to see if yours qualifies.

Currently, the majority of settlement companies require a minimum Death Benefit of
Two Hundred Fifty Thousand Dollars ($250,000) for life settlements and One Hundred Thousand Dollars ($100,000) for viatical settlements. Because this can vary, one should speak with a settlement professional.

After I sell my policy, are there any restrictions on how I can use the money?

No. You will get your money in one lump sum payment so that you have the option of spending or investing it.

Are the proceeds of a Viatical/Life Settlement taxable?

That depends on a number of variables including the age of the insured or owner, state of residency, the life expectancy of the insured, and the payments made to the policy since its inception. This makes each situation unique. In addition, proceeds from a life settlement are treated differently from those from a viatical settlement. You should consult your tax advisor, accountant or other financial advisor for additional information.

What are some of the reasons why I might consider the sale of my policy?

There are many reasons why people sell their policies. For example:

• To pay off debt and regain financial control;
• To pay for healthcare costs not covered by insurance;
• To enjoy a better quality of life;
• To fulfill a dream;
• To alleviate unaffordable premium payments;
• The policy is no longer needed or wanted.

What happens to the policy after I sell it?

All rights and obligations of the policy are transferred to the new owner. You are no longer responsible for making premium payments on the policy. The new owner will name a new beneficiary of the policy who will collect the proceeds upon the insured's passing. The company which purchases your policy will "track" the insured. The tracking process may vary by company.

Does my state regulate Viatical or Life Settlements?

Viatical/Life Settlements are regulated by state insurance departments. Some states have enacted statutes addressing the sale of life insurance policies insuring non-terminally ill individuals. Some states only have laws that regulate the sale of life insurance policies insuring terminally or chronically ill individuals. Other states do not regulate the transaction at all. Of those states that regulate the transaction, most require both the Viatical/Life Settlement Broker (facilitator of the transaction) and Viatical/Life Settlement Provider (purchaser of the policy) to be licensed. The National Association of Insurance Commissioners (NAIC) website <www.naic.org> provides a link on its homepage to each state's Department of Insurance (DOI) website. You should check with the DOI in your state for the most up to date information on licensing requirements.

What should I do if I'm interested in learning more?

There are companies that specialize in these types of transactions. These are brokers who facilitate the sale, and providers who actually purchase the policy. A simple internet search will provide you with a variety of companies. You should also consider the following:

• Since licensing varies by state, you should check with your state's Department of Insurance to obtain a list of licensed companies.
• Research any company before you give them any personal information.
• Ask questions.
• Get professional advice regarding types of living benefits available and the positives and negatives of each.
• Talk to a lawyer or a financial planner to help you decide what is best in your own case. (Find out if Medicaid or other benefits will be affected.)
• Remember - you are the one making the choice and this is an important decision.