Wednesday, Aug. 10, 2005 | ||
Bad Links? | Insurance questions and answers from John OxendineLife insurance can provide vital financial support when a family loses an individual who was the primary wage earner. The many types of life insurance products all do primarily that: pay named benefactors a predetermined sum in the event of the death of the policyholder. A variation on the usual life insurance payout became available a few years ago: the viatical settlement. Under certain conditions, a life policy can pay a portion of the death benefit before the policyholder dies. This early payment is for terminally ill patients who may need the money for medicine, hospital bills, or other necessities. A viatical company offers to pay the policyholder to have the company named as policy owner and beneficiary of the life policy. Viatical companies dont assume any risk and so arent considered insurance companies. In Georgia, viaticals arent required to be licensed by the Insurance Commissioners Office, though they still must obtain a business license through the Secretary of State. In another variation of early settlement, a life insurance company may offer, as part of a life insurance policy, accelerated death benefits in the event of a terminal illness. Thus, a terminally ill policyholder has the option of getting most of the life settlement early, without having to go through a separate company. While viaticals may be legitimate businesses, recently some companies have come under investigation for fraud. Viatical transactions can provide a service to the terminally ill, as well as return a benefit to the investor. But a potential investor should realize that viatical transactions are potential targets for fraud and abuse. In many instances the investor never collects because the insurance company voids or rescinds a life policy that was fraudulently issued. Investors stand to lose their entire investment when viaticals turn out to be fraudulent. Q: If a terminally ill patient gets a pre-payment on a life policy, what percentage of the death benefit originally listed in the policy will he or she get? A: Typically, viatical companies pay out 60-80 percent. If an insurance company has an early payment option in their policy, it will usually pay 90-95 percent of the death benefit. Please send your insurance questions to Insurance Commissioner John Oxendine, 716 West Tower, 2 Martin Luther King Jr. Drive, Atlanta, GA 30334. Or call 404-656-2070 (toll free at 1-800-656-2298), from 8 a.m. to 7 p.m.weekdays, for assistance with an insurance question. Web address is www.gainsurance.org. |
|
Copyright 2005-Fayette Publishing, Inc. |