Protecting Life Insurance Policy Holders
There are times when people who own life insurance policies may need quick cash more than they will need benefits from the policy. If their health is quickly declining with a terminal or chronic illness, cashing out a policy with a Viatical Settlement Provider, also known as a Life Settlement Provider, can provide them with the resources to pay for medical expenses, move to a more comfortable housing situation, gift money to family or friends, and even travel. The money can be used for whatever they like.
If they choose, a policy holder may sell the entire policy, or keep the death benefit and sell the rest of the policy.
There are downsides to cashing out a policy. Beneficiaries are no longer eligible to receive benefits, the policy holder may be excluded from Medicaid coverage, and the policy holder may have to pay taxes on the money received. Policy holders should weigh the pros and cons of selling before making this important decision.
While the laws vary from state to state, most policy holders must meet the following restrictions in order to sell their policy:
- Be 65 years old or older
- Experience a decline in health
- Own a policy of $100,000 or more (can be less depending on the state)
- Is terminally or chronically ill
A Viatical Settlement Provider buys life insurance policies in a “life settlement.” They pay more than the cash surrender value but less than the net death benefit. Becoming the new owner of the policy, a settlement provider takes on the monthly premium payments until the original policy holder dies. Then they receive the full benefit of the policy, making a profit.
Settlement Provider Licensing Requirements
A Viatical Settlement Provider must be licensed. While licensing requirements vary by state, typical licensing requirements include:
- Application for license
- Provide a detailed plan of operation – include target markets, geographic locations, marketing and advertising strategies, training procedures
- Certificate of good standing for non-resident providers
- Anti-fraud plan
- File contracts and disclosures
- Continuing education
- Surety bond, errors and omissions insurance policy, or letter of credit
Surety Bond Requirement
Not all states have a surety bond requirement. A surety bond protects the state and any persons harmed by breaches of law by the Settlement Provider. Settlement Providers must act in good faith, not participate in fraudulent activity or dishonest practices, and honor all contractual obligations.
Examples of states with surety bond requirements are:
Colorado $100,000 bond
Delaware $250,000 bond
Illinois $125,000 bond
Kentucky $100,000 bond
New Hampshire $250,000 bond
North Dakota $150,000 bond
Ohio $250,000 bond
Oklahoma $100,000 bond
Oregon $100,000 bond
Pennsylvania $100,000 bond
Tennessee $250,000 bond
Vermont $50,000 bond
Virginia $100,000 bond
West Virginia $250,000 bond
How Do I Get a Viatical Settlement Provider Surety Bond?
No matter what state you are in, SuretyGroup.com can help you get bonded quickly at the best rates possible. Our rates start at .75% of the bond amount with good credit. Contact our Surety Bond Specialists to get started by calling 844-432-6637 or email info@SuretyGroup.com. We offer free quotes based on your personal situation.
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