The Big Business of Selling Your Life Insurance Policy
It is common thought that your life insurance policy is something that will benefit your family, and if all goes well you will never receive any money from it. This is because a plan only matures when you die, leaving you paying years of premiums without ever seeing any money in return. This has changed, however, with the rise of the viatical industry.
Viatical Industry
The buying and selling of policies is called the viatical industry. The industry started in the late 1980s when investors started to buy the insurance policies of HIV (or then known as AIDS) patients. The entire process is simple in theory. You are in your later years, or have contracted a fatal disease, and will soon be collecting on your policy. You could sell your plan to an investor, therefore enjoying the benefits of a large sum of money in your final years.
For example, if your life was insured for $1 million and you were coming up on your 80th birthday, you could sell your policy to an investor for $300,000. The investor keeps paying premiums on your policy and collects the $1 million when you pass on. You get to enjoy the $300,000 in the final years of your life. As harsh as it sounds, the investor is hoping you die sooner so they pay less premiums, Hey, no one said it wasn’t a cutthroat business.
Is selling off your plan even legal? Well it is now, but people are trying to change this. There have been laws proposed to outlaw spin-life investments and make it harder for investors to get their payouts. Some insurance companies have sued in attempt to cancel policies. They state that payouts that benefit outside investors violate the legal requirements that the beneficiaries of the policy have an insurable interest in the life of the policyholder.
Many people say that it is necessary for older people to shop their policies. With the rising cost of medication and the uncertainty of the Nation’s health care policies, the only asset the elderly have to combat these costs are their plans. Can one really deny the right of a person to shop their policy? Once they are past the point where they need to support a family, it should be their right to profit off something they have paid premiums all their lives for.
This is obviously a big issue with permanent products, and not as big of one with term insurance options. There have been cases, however, where elderly people have been encouraged, by investors looking to buy, to sign up for another plan, just so they can sell it right back to the investors. It is quite obvious that something legally will probably be done in the near future to regulate this market.
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