Because the disease progresses slowly, caregivers need to find funding sources such as life insurance that contain a long-term care rider or a viatical settlement
, which allows people to sell their life insurance policy, Bress said.
One of the most widely held misconceptions is that life settlements are viatical settlements
. The viatical settlement
market became popular in the late 1980s due to the AIDS epidemic.
In contrast to an accelerated death benefit received under a life insurance policy, when a chronically or terminally ill insured sells his death benefit at a discount to a third party it is known as a life settlement or viatical settlement
(see discussion, pages 461-462).
Originating out of the viatical settlement
business that took hold in the early days of AIDS, this business has always had both financial hurdles and public relations hurdles to overcome.
(91) The selling of a life insurance policy by a terminally ill policyholder on the secondary market became known as a "viatical settlement
." (92) Viatical settlement
transactions, however, are not insurance contracts, and as such, are not part of the "business of insurance." (93) For the purposes of the Securities Act, the Securities and Exchange Act, and federal securities regulation, viatical settlements
in certain instances qualify as investment contracts, and therefore as securities.
Such a sale is called a life or viatical settlement
, which goes back to a Latin term that refers to providing a stipend or living expense.
A viatical settlement
enables someone facing a terminal illness to use the value of the life insurance policy prior to death to assist with the financial burdens of medical care, particularly if there is a loss of income during the final period.
Another option is a viatical settlement
: If you are terminally ill or chronically ill, you might be able to sell your life insurance policy to another person (a third party).
According to an article in the July 31, 1992 issue of The Wall Street Journal, "the first viatical settlement
company was started in 1989 by Robert Worley, Jr., an Albuquerque, NM financial planner." (14) He reportedly got the idea from "a radio talk show when a caller was complaining that his life insurance company would not buy back his policy--even at a 50% discount.
Before life insurance companies offered accelerated benefits, entrepreneurs formed viatical settlement
companies to provide accelerated payments to insureds.