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What is a viatical settlement broker?
A Viatical settlement broker is someone who negotiates a viatical settlement on behalf of a life insurance policy owner. Viatical brokers work with a number of viatical providers, which is another term for the financial institutions that buy these policies, to find the best price for their client’s insurance policy. Viatical brokers essentially facilitate the sale of an existing life insurance policy which is insuring someone who is terminally ill. Some states provide the following definition of a viatical broker: A viatical broker is defined as person who is not a viatical or life settlement provider representative, and who for a commission or other form of compensation, or with the intent of obtaining such compensation.
Viatical Settlement Broker and Life Settlement Broker – What’s the Difference?
Viatical settlement brokers and life settlement brokers are terms that are often used interchangeably. In fact, some people use the term viatical life settlement broker to describe an individual that facilitates the sale of an existing life insurance policy. However, there is a distinct difference between a viatical settlement and a life settlement and thus a distinction between a viatical settlement broker and a life settlement broker. Viatical brokers are brokers that deal with viatical policies. In other words, the sale of an existing life insurance policy for an insured that is terminally ill. However, often a viatical settlement broker will also act as a life settlement broker. They are different, but not mutually exclusive.
Viatical Settlement Broker – Licensing?
Viatical brokers are regulated by almost every state in the USA. In order to participate in the sale of these a terminally ill insured’s policy, viatical settlement brokers licensing is required. The licensing is quite stringent as the sale of a viatical policy is a sensitive matter requiring expertise, sense of urgency and compassion. Some states such as New York and California do not regulate life settlements, but do regulate individuals acting as a viatical broker. Since the viatical settlement broker field is so specialized and requires a great deal of expertise, the viatical broker license can be quote costly. For example, the application fee to obtain a viatical settlement brokers license is $3000. The requirements are so strict and the cost so prohibitive that there are less than 20 issued licenses for a viatical settlement broker in the state of California. The amount of viatical settlement providers number less than 10 in California.
Viatical Settlement Broker - What are the alternatives?
Viatical brokers are not the only option for someone who is terminally ill seeking money for medical and living expenses. Those with serious health conditions or who are terminally ill should also consider accelerated death benefits. Some life insurance policies allow for a portion of the death benefit to be advanced prior to an insured’s death. This may or may not be advantageous over selling a policy through a viatical life settlement broker.
History of Viatical Settlement Broker Industry
Viatical brokers arose from a need to help terminally ill patients sell their existing life insurance policy in order to fund medical and living expenses. This really emerged during the 1980’s when the AIDS epidemic came to the forefront of our nation. AIDS patients faced costly medical expenses as doctors tried a wide variety of treatments. A large number of medicines while unproven were expensive and sometimes not covered by insurance. In addition, AIDS patients became very ill and were often unable to work. Therefore they needed money for living expenses in addition to medical bills. Selling their policies through viatical brokers proved to be an ideal opportunity to access large amounts of cash while theoretically not giving up anything they needed at the time. Viatical settlement brokers entered the market to facilitate the transaction and provide access to a number of buyers who would compete for the policy. As the treatment of AIDS improved and the viatical industry reached its maturity point, viatical brokers looked to healthy seniors for additional sources of life insurance policies to sell. Hence, many viatical settlement brokers are now also life settlement brokers. Which is why some states don’t differentiate between a viatical settlement broker and a life settlement broker in their legislation or regulatory treatment.