The Asset Conversion Process for a Viatical Settlement

The Asset Conversion Process for a Viatical Settlement

Individuals who are chronically or terminally ill can use life settlement companies to receive a source of funds. This is also an option for anyone nearing retirement in the upcoming new year that needs additional cash. Another term for this type of asset conversion is a viatical settlement. A series of steps are required to sell a life insurance policy to a life settlement company.

The first step in the process of settling a life insurance policy is to complete an application. This step is done once a financial representative has been chosen to settle the policy. Applicants will also need their policy documentation and other required paperwork.

The documentation provided by an applicant needs to include medical records and insurance information. Once the documentation is received it will be reviewed by a provider or a settlement broker. A life settlement company may work directly with the policyholder or their representative.

The documentation of the applicant is then submitted to an independent life expectancy company. This company will review the documentation and calculate an applicant’s estimated life expectancy. The life expectancy of an applicant is estimated using actuarial analysis and other methods. Information is then sent back to the settlement firm.

A calculation is then performed by the settlement firm to determine the suitability for a policy sale and the probable market value. The application will be denied if the policy has no market value. If an applicant’s policy has sufficient market value, then an offer is made.

The offer made to the applicant is relayed to the applicant directly or to their representative. This offer can then be accepted or rejected by the applicant. If the offer is declined, then the applicant is free to find a different settlement company.

A settlement package is sent to the applicant or their representative if the offer is accepted. The offer can then be reviewed and signed by before sending it back to the settlement company. Funds that are due will be deposited into an escrow account for the applicant. The insurance carrier of the applicant is notified of the transfer of ownership of the policy.

The insurance carrier will then send a written confirmation of the ownership change. Funds that are in the escrow account will then be transferred to the applicant or other interested parties. The recipient of the funds may also be responsible for paying taxes and should seek advice from a CPA or another tax professional.