Viatical Investment Contracts
What is a Viatical Settlement Contract?
In a viatical settlement contract, a terminally ill person ("Viator"), such as one with AIDS or cancer, sells the death benefit in his or her life insurance policy at a discounted price in return for cash that can be used for current expenses. The purchaser of the death benefit then sells interests in the insurance policy to investors, or raises funds from investors, to purchase the death benefit. Upon the death of the Viator, the investors receive the proceeds of the Viator’s life insurance policy in an amount proportional to their investment.
Under California Insurance Code § 10113.1, a ”Viatical Settlement” is an agreement by which a person owning a life insurance policy upon the life of a person with a catastrophic or life-endangering illness or condition' sells the policy or the right to death benefits for an amount less than the policy's death benefits. Viatical settlements are deemed securities under the California Corporations Code §§ 25019.
Why are Viatical Settlement Investments Risky?
The problem with Viatical Settlement investments is that they are unregulated. There is no governmental agency that monitors the process by which sick people with life insurance are medically evaluated and determined terminal, settlement investments are organized into investments, and contracts are sold to consumers. Because of this, there has been a very large amount of fraud and abuse involved in the sale of Viatical Settlement Contracts. Huge sums of money have been raised by dishonest Viatical Investment promoters and billions of dollars have been lost due to fraud by promoters. Often times the promoter ends up in bankruptcy, with the investors suffering a total loss.
The essential flaw in this investment is that the investor has no way to ascertain whether or not the Viator is truly likely to live or die. Many times, the medical evaluation which forms the basis of the finding that the Viator is terminal is bogus. If the Viator does not die, but continues to live, then the investor may be forced to keep paying life insurance policy premiums or risk the total loss of the investment. Because of medical privacy laws, the investor may never be able to really learn any information about the Viator, who remains merely a statistic or number on a piece of paper. Moreover, because of advances in medical science, the life of someone who is actually terminally ill may be prolonged for a very long time, so long, that by the time the insured person dies, the investor has paid so much in policy premiums that the investment is a loss, even if it pays off in full.
Viatical Investment Contracts may be presented as low risk or even guaranteed, suitable for the elderly or for retirement purposes. However, this is rarely the case. More often, Viatical Investment Contract are really just a scam which are marketed because a large fee is paid to the sales person.
If you need assistance with regard to a Viatical Investment Contract, please feel free to contact our firm.
In a viatical settlement contract, a terminally ill person ("Viator"), such as one with AIDS or cancer, sells the death benefit in his or her life insurance policy at a discounted price in return for cash that can be used for current expenses. The purchaser of the death benefit then sells interests in the insurance policy to investors, or raises funds from investors, to purchase the death benefit. Upon the death of the Viator, the investors receive the proceeds of the Viator’s life insurance policy in an amount proportional to their investment.
Under California Insurance Code § 10113.1, a ”Viatical Settlement” is an agreement by which a person owning a life insurance policy upon the life of a person with a catastrophic or life-endangering illness or condition' sells the policy or the right to death benefits for an amount less than the policy's death benefits. Viatical settlements are deemed securities under the California Corporations Code §§ 25019.
Why are Viatical Settlement Investments Risky?
The problem with Viatical Settlement investments is that they are unregulated. There is no governmental agency that monitors the process by which sick people with life insurance are medically evaluated and determined terminal, settlement investments are organized into investments, and contracts are sold to consumers. Because of this, there has been a very large amount of fraud and abuse involved in the sale of Viatical Settlement Contracts. Huge sums of money have been raised by dishonest Viatical Investment promoters and billions of dollars have been lost due to fraud by promoters. Often times the promoter ends up in bankruptcy, with the investors suffering a total loss.
The essential flaw in this investment is that the investor has no way to ascertain whether or not the Viator is truly likely to live or die. Many times, the medical evaluation which forms the basis of the finding that the Viator is terminal is bogus. If the Viator does not die, but continues to live, then the investor may be forced to keep paying life insurance policy premiums or risk the total loss of the investment. Because of medical privacy laws, the investor may never be able to really learn any information about the Viator, who remains merely a statistic or number on a piece of paper. Moreover, because of advances in medical science, the life of someone who is actually terminally ill may be prolonged for a very long time, so long, that by the time the insured person dies, the investor has paid so much in policy premiums that the investment is a loss, even if it pays off in full.
Viatical Investment Contracts may be presented as low risk or even guaranteed, suitable for the elderly or for retirement purposes. However, this is rarely the case. More often, Viatical Investment Contract are really just a scam which are marketed because a large fee is paid to the sales person.
If you need assistance with regard to a Viatical Investment Contract, please feel free to contact our firm.
