A Closer Look at Viaticals
Do your homework first
If you're considering viaticals there are a number of options you should look into before you sell your life insurance policy. Viaticals can be risky and you might find there are alternatives that are more appropriate to your situation. Think about selling the life insurance policy to the benefactor, for example, then making arrangements for payment. Or you could take out a bank loan or get a reverse mortgage.
You can also find out from your life insurance company whether you have accelerated death benefits (ADB). This allows you to pre-collect anywhere from 25 percent to the entire amount of the death benefit, depending on the circumstances. ADBs usually pay out between 60 and 80 percent of full benefits, which is hard for any viatical broker to beat.
Some sensible insurance companies pay benefits as a loan if you're close to death.
Licensed Viatical Brokers
If you do decide to go the viaticals route, there are several states that have a list of licensed viatical brokers. These are as follows:
- California Department of Insurance (www.insurance.ca.gov) supplies an online list of viatical providers. They also have a consumer hotline you can contact at 800-927-HELP
- New York State Insurance Department (www.ins.state.ny.us) also provides an online list of providers. Their consumer hotline number is 212-480-6400
- The Washington State Insurance Commissioner (www.insurance.wa.gov)
Thinking About Viaticals
If you're considering viaticals there are a few precautions you should take. AIDS patients should never get a medical checkup supplied by the viatical brokerage company. These are likely to be skewed in favor of the broker, telling you what you might want to hear - that you will live longer than expected, thus justifying a low payout by the viatical broker.
Also be aware that unscrupulous viatical brokers are known to renege on payout contracts. If the broker is licensed (and posted on the websites listed above), they're safe, but many states don't have this service. To avoid being duped, viators should never accept an installment payment plan. Have the money deposited in an escrow account.
You should also know that some states require you to pay taxes on the amount of the agreement, and these taxes can vary depending on your expected life term. The life insurance payout may also affect your Medicaid benefits and other social assistance.