Is Viatical Settlement subject to any sort of government regulation?
About eight states have adopted insurance legislation dealing in one or the other form with the activities of Viatical Settlement providers dealing with investors. In most of the states, sales of the policies of people who are not considered as terminally ill are not regulated.
What are the legal risks of engaging in a Viatical Settlement?
There are no national standards which guide or regulate the information which is being provided to the investors during the purchase of a viatical. However there can be misleading advertisements claiming guaranteed returns or no risk, which probably constitute fraud. The buyer as with any other investment must pay attention to details such as age, liquidity, objective of the investment, financial situation, etc.
Can I sell my newly issued policy?
A newly issued policy is in the “Contestable Period” till 2 years from the date of issue. This period is usually kept for the insurance company to make sure that your information provided is correct. In case the information provides does not match, the insurance company stands a chance to cancel your policy. Investors are advised not to buy any policies which are still in their “Contestable Period”, thus any broker who encourages you to sell of your policy is likely fraudulent.
What is “Clean Sheeting”?
“Clean-sheeting” is the practice where in false information regarding your health or otherwise, is being provided to the insurance company. Making misleading statements in the form which is the sole identification available with the insurance company is a serious case of fraud and can be charged in a court of law.
Does a Viatical make any difference to my IRA?
Internal Revenue Code section 408(a)(3) requires that “No part of trust (IRA) funds will be invested in life insurance contracts.” This clearly means that in case you utilize the funds of IRA to invest in Viatical Settlements, you will not be provided with any sorts of benefits from IRA (Individual Retirement Account). Since annual distributions are mandatory beginning the age of 70, and in case he funds are not available, you can be penalized.
Can I sell my Group Policy as Viatical?
Group policies are not the favorite amongst the buyers of Viaticals. Since all group policies are different, many of these policies have restrictions on them regarding change of beneficiary. Some others do not provide a good amount of face value and are subject to lower priorities amongst the investors. Thus most of them have strings attached to them in one or the other way which makes them cumbersome to deal with. Serviceman’s Group Life Insurance (SGLI) and Veteran’s Group Life Insurance (VGLI) are not eligible for a viatical settlement unless they are first converted to individual policies which can be viaticated. Federal Employees’ Group Life Insurance (FEGLI) can be the subject of a Viatical Investment but even these can get complicated.