In 1911 a sick patient was having trouble paying his hospital bills. He was terminally ill and had but a few more months to live. Fortunately, he had a life insurance policy which he wished to cash in for spare liquidity. The patient asked his doctor, who was taking care of him at the time, if the doctor could purchase his life insurance policy early, and receive the benefits after he had died.
The doctor, named Grigsby, agreed. Grigsby would pay the premiums on his patient’s life insurance and receive the death benefit after his passing. In exchange the patient was able to get immediate financial help, and turn this unused asset into cash.
This was the background for the 1911 case of Grigsby vs. Russell, which it made it all the way up to the United States Supreme Court. After the trial, long after the sick patient’s passing, the Supreme Court established that life insurance policies possess all the ordinary characteristics of property.
Viatical settlements, or life settlements then became cash for private property (the life insurance policy). similar to selling a home. A person with a life insurance policy can take advantage of their asset and be financially rewarded before the maturity date.
The 1911 case made it available for a policy holder to transfer their life settlement to a third party in order to benefit from the proceeds while alive.
In the 1980’s the viatical settlements market emerged. Brokers would purchase the life insurance of AIDS patients who didn’t have long to live, and wanted immediate liquidity. The patients would get a better quality of life due to their increased finances as the brokers liberated them from having to pay monthly premiums. In exchange, the brokers and policy buyers received the face value of the policy.
Many people do not know the benefits that a life settlement organization like Life Insurance Settlements can offer. In fact, most seniors don’t know that they have this option but there and there are many reasons for selling your life insurance policy. Viatical settlements can be a valuable source of liquidity for people who would otherwise surrender their policies or allow them to lapse.
When you surrender your policy to your insurance company you will only get back your policy’s cash surrender value: pennies on the dollar. Similarly, when you allow your life insurance policy to lapse you are telling your life insurance company that you cannot pay your monthly dues anymore. The policy freezes (you are not covered) and your survivors will not be able to receive the death benefits after your passing.
The beauty of a life settlement is that you receive a lump sum cash payment GREATER than the surrender value your insurance company can give you. The amount you receive depends on three factors: your age, health and the terms/conditions of your policy.
A life settlement can make sense for you if you no longer want or need your current policy, or if you can no longer afford the expense of paying insurance premiums.