What is the distinction between a “lifetime settlement” of a life insurance policy and a viatical settlement?
A. A “lifetime settlement” is a means of “selling” a life insurance policy to a third party investor in lieu of cancelling the policy in return for its cash surrender value. Although this arrangement must be entered into cautiously, and it certainly is not for everyone, it may provide a significant increase in available funds from life insurance policies that a person may own but no longer needs or wishes to maintain. Subject to certain underwriting criteria, virtually any type of policy, even a term policy with no cash value, may qualify for a lifetime settlement. The transaction involves the payment of a lump sum amount and relief from future premium payments in return for an assignment of ownership of the policy to the third party investor. Subject to certain minimum amounts, policies of almost any size can be sold or a group of smaller policies may be sold in the aggregate for an amount which will justify the transaction. It should be noted that a lifetime settlement differs from a
