What is a third party who purchases a life insurance policy death benefit from a terminally ill insured?
If you are diagnosed with a terminal illness, such as AIDS or cancer, or a chronic illness that prevents you from performing daily functions, you face many hurdles. You are likely to have medical expenses that insurance won't pay, as well as other bills. Traditionally, life insurance helps surviving beneficiaries meet expenses. There are, however, two other options available that let an insured tap into their life insurance benefits while they are still living. These options are Viatical Settlements and Accelerated Death Benefits. Show
As of July 1, 2010, Illinois law places strict and specific guidelines on viatical settlements for persons who are not terminally or chronically ill. If someone offers you “free” or “no cost” or “zero premium” life insurance you may the subject of an illegal scam. Please see the section below on “Stranger-Originated Life Insurance” or call the Department toll-free at (866) 445-5364 for more information. What is a Viatical Settlement? A viatical settlement is a contractual agreement to provide a life insurance policyholder immediate cash in exchange for the sale and transfer of life insurance policy ownership rights. The person selling the life insurance policy, who is known as theviator, gives up ownership of the policy in return for a cash payment that is less than the full amount of the death benefit in the life insurance policy. If you are terminally or chronically ill, a viatical settlement lets you sell a life insurance policy you already have to a viatical settlement provider. The term viatical comes from the Latin term viaticum, which means "provisions for a long journey." Who are the parties involved in a Viatical Settlement? A viatical settlement provider is the person or company that buys the life insurance policy. The viatical settlement provider becomes the policy owner, must pay any premiums that are due, and eventually collects the full amount of the death benefit from the insurance company. The person or company who represents the seller (viator) and who can "comparison shop" for viatical offers is a viatical settlement broker. What is a terminal or chronic illness for purposes of a Viatical Settlement? A terminal illness is an illness or physical condition a physician has certified as reasonably expected to result in death in 24 months or less. A chronic illness requires certification within the preceding 12 months by a licensed health professional of: (1) an inability to perform, without substantial assistance and for at least 90 days due to a loss of functional capacity, at least 2 activities of daily living, including, but not limited to, eating, toileting, transferring, bathing, dressing, or continence; (2) requiring substantial supervision to protect the individual from threats to health and safety due to severe cognitive impairment; or (3) having a level of disability similar to that described in paragraph (1) as determined by the Secretary of Health and Human Services. What are Accelerated Death Benefits? Accelerated Death Benefits are paid by an insurance company on an existing policy as a percentage of the policy's face value, minus any outstanding policy loans. While some older policies may not grant an accelerated death benefit in the terms of the life insurance contract, many insurance companies are making this option available to their policyholders. You should check with your insurance agent or company to find out if this option is available. If you accept an accelerated death benefit payment, you may become ineligible for Medicaid or other governmental benefits and the benefits may be taxable. You should consult with your tax and/or legal advisor to determine whether or not this may be the case in your individual situation prior to entering into any financial agreement. What Should I Consider in Evaluating a Viatical Settlement or Accelerated Death Benefits? A viatical settlement or accelerated death benefit option may be a good source of funds, but you should fully understand how your choice will affect you and your survivors. Before you decide to apply for a viatical settlement or accelerated death benefits, you should:
NOTE: Effective July 1, 2010, it is a violation of Illinois law for any person to enter into a viatical settlement contract within 2 years after the insurance policy is issued unless one or more specific conditions has been met, including
the viator being diagnosed as terminally or chronically ill. You should contact the Department before entering into a viatical settlement contract less than two years after your life insurance policy has been issued. Is there anything that has to be disclosed to me before I sign a Viatical Settlement Contract? Yes. Effective July 1, 2010, the Viatical Settlement Act of 2009 (P.A. 96-739) (the Act), provides new consumer protections for individuals seeking to enter into a viatical settlement. The Act requires that certain disclosures are made to the viator no later than the time the viatical settlement application is signed. Both the viator and the provider or broker must sign the disclosures. The following information must be disclosed before you sign a viatical settlement contract:
What are the Differences Between Viatical Settlements and Accelerated Death Benefits?
What is the term attributed to the third party that buys the death benefit from a life insurance policy?What is a Viatical Settlement? A viatical settlement is the sale of a life insurance policy to a third party. The owner (viator) of the life insurance policy sells the policy for an immediate cash benefit.
When a terminally ill insured sells their life insurance policy to a third party?A viatical settlement is an arrangement in which someone who is terminally or chronically ill sells their life insurance policy at a discount from its face value for ready cash.
Who is the third party in life insurance?In a third-party insurance claim, there are three parties. The first party is the insured individual. The second party is the insurance company. The third party is another individual.
What happens to the death benefit of a life insurance policy if the insured?The insurer must pay the death benefit when the insured dies if the policyholder pays the premiums as required, and premiums are determined in part by how likely it is that the insurer will have to pay the policy's death benefit based on the insured's life expectancy.
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