The Policy Owner policy receives a single lump-sum payment.
Frequently Asked Questions
If the Insured does not qualify for a Viatical Settlement, what other Programs might be available?
To qualify for a tax-exempt Viatical Settlement, the Insured must obtain a physician’s HIPAA-compliant letter that death is probable within 24 months or less. If that letter cannot be obtained at this time, the availability of other Programs would depend on the specifics of the case, notably health, age, type of policy and policy size, and gender. Here is a recap of possibilities:
- If the terminally ill Insured is already receiving licensed Long-Term Care or may need some within 90 days, the Long-Term Care Life Settlement might be considered. There are no age limits and $10,000 is the smallest policy size.
- The tax-exempt Accelerated Death Benefit feature in some policies requires physician certification of probable death either within 6 months or less or with some policies 12 months or less. There are no age limits or minimum policy size. American Life Settlements may be able to sell the balance of the policy after the Accelerated Death Benefit loan has been approved and sent to the Policy Owner. The Accelerated Death Benefit page has more information.
- The tax-exempt Private Policy Loan requires a 24-month lifespan estimate through traditional medical underwriting and no physician’s letter is required. Its minimum age is 60 and smallest policy is $100,000. More information is at Private Policy Loan.
- If the terminally ill Insured has a probable lifespan of 5 years or less but cannot qualify for or does not want any of the above, then American Life Settlements can ask Funders to make Life Settlement and Retained Benefit Life Settlement offers on an exception basis. Normally, those Programs are for Insureds age 60 and above with lifespans up to 23 years.
Should the policy be sold for a Viatical Settlement if it has an Accelerated Death Benefit feature?
Our Accelerated Death Benefits section goes into much more detail because this is a complicated, confusing issue with many variables. As always, it will be easier to call (888) 247-3659. What follows is an overview.
The Viatical Settlement requires a physician’s HIPAA-compliant letter stating that death is probable within 24 months or less. If the physician cannot sign the letter because the Insured appears likely to live longer than 24 months, this logically means the Accelerated Death Benefit (ADB) would not be available because it requires certification of likely death within 6 months, though some carriers will accept ADB Claims up to 12 months. The policy could still be sold, just not as a Viatical Settlement.
For purposes of this FAQ let us assume that the Insured’s physician agrees to sign the HIPAA 24 Month letter, and to certify likely death within the carrier’s ADB shorter timeline. The Policy Owner’s best strategy is to file an ADB Claim while simultaneously submitting the policy to us for quotes from every possible Program. This saves time whether the ADB Claim is approved or declined.
Further assuming the ADB is paid, the next question is whether to keep the reduced policy and continue paying premiums, or transact it and quit paying premiums. Depending on case specifics, the balance of the policy might receive bids for a Viatical Settlement, Private Policy Loan, Retained Benefit Life Settlement, or even a Long-Term Care Life Settlement.
Check out our Program Comparison page to review these options side-by-side.
Does the Viatical Settlement require a Federal form for the physician’s statement that the Insured might live no more than 24 months?
There is no Federal form letter, but our team can provide clients with a generic template that works.
If the Insured lives more than 24 months after the physician writes the letter, is the policy sale still tax-exempt?
There is no time-limit to this letter. No matter how long the Insured might live, a Viatical Settlement policy sale remains tax-exempt.
Can Survivorship (Joint Life) policies be sold as a tax-exempt Viatical Settlement?
Survivorship policies are underwritten on the healthier of the two Insureds. Very few Survivorship sales involve two terminally ill Insureds, especially as female Insureds of such policies are historically younger than the male. For the sale to be HIPAA-qualified as a tax-exempt Viatical Settlement, both Insureds would have to obtain a physician’s letter stating that death may reasonably be expected within 24 months or less. If either could not secure this letter, the sale would be classified as a Life Settlement and potentially subject to taxation.
I want to look at the actual text regarding the tax-exempt Viatical Settlement and the Accelerated Death Benefit, and the text regarding their tax-exemption.
- Health Insurance Portability and Accountability Act of 1996 – Public Law 104-191 (HIPAA). This link provides a choice of Text or PDF. See pages 133-135.
- Title 26 of the U.S. Internal Revenue Code 101(g), pages 427-428