What kinds of problems can occur with viatical settlement investments?
• The insured lives longer than estimated, reducing the investor s rate of return and tying up the investor s money longer too. • If the policy is a term life policy, and the insured outlives the term, the investor will get nothing. • The policy is still “contestable” (usually a two-year period), meaning the insurance company can refuse to pay the death benefits for a variety of reasons unknown to the investor. • The investor may be required to pay the premiums on the policy to keep it in force, or the policy actually lapses before the insured dies, and the investor gets nothing. • The insurance company becomes insolvent and is not able to pay the death benefits. • The viatical settlement company goes bankrupt and the investor s money is lost or tied up indefinitely.
