When a client comes to a lawyer for help in viaticating a policy, Adney suggests checking to see if it has an accelerated death benefit clause that lets the insurer essentially provide the same services a viatical settlement does. If the clause isn't there, most carriers are willing to add the benefit upon request. A lawyer is well advised to spend a lot of time learning to understand policy transfer and assignments, warns David Binter, president of Neuma Inc., a Skokie-based viatical settlement firm. Since viatical settlements are relatively new and untested, the body of law, administrative rules and judicial precedents is still developing. One uncertainty is the issue of insurers who contest viatification of policies that have existed for two years or less.
Insurers can try to escape paying out by trying to have such policies declared void.
The insurer can make an attractive bid for several reasons, according to Wolf, who served on the board of the Conference of Consulting Actuaries and headed the American Association of Actuaries. For one, it eliminates a middle man's expenses and profits. Second, it eliminates administrative expenses and other costs the insurance company would have to bear while the policy is in force in the hands of the viatical settlement company. Shopping for the best deal among viatical settlements can be vital. They had been slated to divide the proceeds of the life insurance policy equally.