You can sell your life insurance policy if you are critically ill and need cash urgently. The amount you get will be from 50 per cent to 80% of the face value of the policy, depending on the condition of your health. But before selling, you should think why you bought the policy in the first place.
A company that intends to buy your life insurance policy will ask for all your medical records since you are not healthy. The company’s profit on buying your policy depends on how long you live after selling the policy.
You might be surprised to see people who are total strangers showing more interest in your deteriorating health. The viatical company will keep an eye on your progress through phone calls, post cards and any other means of communication. This is not always done confidentially and almost everyone around you will be aware of what’s happening.
It is therefore important that you choose the viatical company carefully. Some of the points that you must keep in mind are:
1. Is the viatical company licenced? This is important because some states have such requirements.
2. Consult your lawyer, accountant or financial planner. Check for the tax that is involved in the procedure. Some states allow tax-free transactions. Find out the impact on probate and estate settlements. As per the Health Insurance Portability and Accountability Act, the viatical settlements in case of a terminally ill recipient are exempt from federal income taxes. But those involving people with mild illness or total good health are taxed as capital gains.
3. Approach several viatical companies to get a competitive rate. A person with a life expectancy of 2 years or less may get 60% of the face value, while one with a life expectancy of less than 6 months may get 80% of the face value.
4. Ask the company to open an escrow account in your name to ensure that the funds are there to cover the offer. A reputed viatical firm will do this straight away. If a company hesitates to do so, better look for someone else.
5. Discuss the transaction with your initial beneficiary. It is his/her life that will also be affected due to the sale of your policy and be sure they are not bothered by your medical bills once you are no more.
6. Remember that once you receive a viatical settlement, it will affect any other financial help you may receive for your medical expenditure. Your creditors may also cry for settlement.
7. Look out for any other available alternative for getting fast cash. Check if your policy has an accelerated death benefit.