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Viatical Life Settlements

Sep 8, 2008
If you choose to sell your life insurance policy, you should be conscious of the fact many states, including Maryland, require your viatical settlement broker to take particular steps in every matter. The broker must:

1. Give you a printed explanation of the services that are requisite on your part by state law

2. Divulge all offers, counter-offers, acceptances and rejections involving the sale of your life insurance policy within 72 hours of their delivery

3. Clarify in writing within 72 hours prior to a viatical settlement contract signing (by all parties), the sum of the broker's payment, and how it is calculated

4. Make any other revelations regarding your legal privileges in a viatical settlement.
If you deem that your viatical settlement broker did not make an obligatory disclosure or did not execute a legally required service, you can file a complaint with your state's Insurance Administration against the broker. For details on filing a complaint, you may call or write the Insurance Administration or visit their website.

Your state Insurance Administration and the National Association of Insurance Commissioners want you to be in possession of all the facts prior to selling your policy. This article provides some of these details, but selling a life insurance policy is much more involved than what is contained in this article.

Seek advice from your personal qualified financial advisor, attorney, or accountant to aid in comprehension of your rights in this kind of transaction, what the potential consequences are, and what alternate solutions exist that could more appropriately serve your personal financial situation.

A viatical settlement is a written concurrence for the sale of a life insurance policy to an outside third party. The proprietor or certificate holder of the life insurance policy (the "viator") sells the policy for an instantaneous cash profit. This is true for all different types of life insurance (http://www.equote.com/li/nomedicallifeinsurance.html).

In the past, most viatical settlements were for individuals with an incurable disease or illness. In current times, people who are not dealing with a health emergency may now sell their life insurance policies to acquire monetary funds.

A "viatical settlement broker" is the individual or organization that, for a charge, commissions or arranges the sale of your life insurance policy for you.

In states like Maryland, a viatical settlement broker represents solely the viator and has a responsibility to behave in the viator's best interest. Viatical settlement brokers have to be licensed to sell life insurance in that state as well as specifically indexed with the state's Insurance Commissioner to perform viatical settlements.

The "viatical settlement provider" is the purchaser and becomes the new title-holder of the life insurance policy, is responsible for paying future premiums, and gathers the death benefit when the insured individual passes away. Viatical settlement providers must be registered with the State Insurance Commissioner.

If you are considering selling your policy to acquire cash to pay expenses, research all of your options primarily. You may discover that there is a means to receive more funds from your life insurance policy than you thought was possible.

Inquire with your insurance agent or company to determine whether you have any cash value in your life insurance policy (http://www.equote.com/li/life-insurance.html). It may be possible to use some of the funds to address your immediate needs and keep your policy in effect for your beneficiaries. You might be able to utilize the cash value as security for a loan from an outside financial institution as well.

Find out whether or not your policy has an "accelerated death benefit." An accelerated death benefit characteristically disburses a portion of the policy's death benefit prior to the date that the insured dies. It could be a way for you to obtain funds from a policy without resorting to selling to a third party.

* Do not hesitate to comparison shop and get quotes from several prospective buyers to ensure you have the best possible offer.

* Find out what if any, the tax implications are. Not all earnings from the sale of your policy are likely to be without tax consequences.

* It's imperative to understand that any of your creditors can file a claim against your cash settlement.

* Find out if you will lose eligibility for public aid benefits like food stamps or Medicaid if you obtain a monetary settlement.

* The buyer of your policy may occasionally inquire about your health condition, regardless of whether your policy was a no medical exam term life insurance (http://www.equote.com/li/termlifeinsurance-quote.html) policy. The buyer is obligated to give you a privacy notice listing who will receive this personal information.

* Verify all application forms for accurateness, particularly your medical history. All questions must be answered honestly and entirely.

* Ensure that the viatical settlement provider agrees to place your settlement proceeds into a free escrow account to shield your finances during the transfer.

* Keep in mind that by law, you have the right to change your mind and cancel the transaction within 15 days of acquiring the cash payment.
About the Author
Sarah Martin is a freelance marketing writer based out of San Diego, CA. She specializes in life insurance and financial planning. For more information on different types of life insurance, please visit http://www.equote.com.
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