Mississippi Administrative Code › Title 19 - Department of Insurance › Part 2 - Life Insurance › Chapter 15 - (2000-1) Viatical Settlements Regulations › Rule 19-2-15.12 - Appendix A- Disclosure Form

Current through June 25, 2024
APPENDIX A
Selling Your Life Insurance Policy
Today it is possible for you to sell your life insurance
				  policy to someone else (a viatical settlement provider) for an immediate cash
				  payment. This financial arrangement, known as a viatical settlement, is best
				  suited for people who are living with an immediate life-threatening illness and
				  facing tough financial choices. A viatical settlement may also be beneficial
				  for individuals who do not have a terminal or chronic illness, but wish to sell
				  the policy for other reasons including, changed needs of dependents, wanting to
				  reduce premiums, and cash for meeting expenses.
It may not always be in your best interest to sell you life
				  insurance policy. Before you take action, you want to be sure you
				  understand:
What future benefits you may lose What other options may be
				  available
Selling you life insurance policy is a complex financial
				  arrangement. This guide will help you make an informed decision.
We recommend that you:
A. Evaluate your needs
B. Check all your options
C. Understand how the process works
D. Know your rights
E. Check with the Mississippi Insurance
				Department
Step 1. Evaluate your needs
Before you sell your policy and give up valuable insurance
				  protection, think about whether your need for life insurance has changed since
				  you bought the policy. If it hasn't, selling you policy may not be the right
				  choice. If you sell your policy now, your beneficiaries
will not
be paid a benefit at your death.
If you sell your policy now, remember premiums go up a lot as
				  you grow older. You may not want to pay the higher cost to replace your
				  coverage later.
Step 2. Check all of your options
Your may be able to get the cash you need now without selling
				  your policy:
A. Policy Cash Values
Contact your current life insurance agent or company to see
				  if you have any cash value in your policy. Ask if you can:
borrow from the cash value and still keep the insurance in
				  force, cancel the policy for its current cash value, use the cash value as
				  collateral to get a loan from a financial institution.
Your insurance company must tell you about your options if
				  you ask.
B. Accelerated
				Death Benefits
Find out if your policy has an "accelerated death benefit."
				  It may be your best option.
Many life insurance policies do have an accelerated death
				  benefit. With that benefit, policy holders who are terminally ill, affected
				  with certain diseases or permanently confined in a nursing home can access 50%
				  or more of a policy's death benefit while still living. An accelerated death
				  benefit could pay you a large part of your policy's death benefit and you could
				  keep your policy.
A very important feature of the accelerated benefit is that
				  when the policy holder dies, the beneficiaries get the remaining death benefit.
				  This means that eventually 100% of the policy benefits will be paid out either
				  to the insured or the beneficiary.
C. Other Considerations
Think about what it will mean if you do sell your policy.
				  Check out the tax implications. Not all proceeds from a viatical settlement are
				  tax-free.
Find out if creditors could claim any of the money you would
				  get from a viatical settlement.
Find out if you will lose any public assistance benefits such
				  as Medicaid or other government benefits if you accept a cash settlement for
				  your life insurance.
D.
				Comparison Shop
To learn the market value of your policy, it's a good idea to
				  contact three to five viatical settlement providers. Or you could use a
				  viatical settlement broker who would contact several viatical settlement
				  providers for you. Your financial advisor can help you decide whether to work
				  with a viatical settlement provider or through a viatical settlement
				  broker.
E. Summary
Everyone's financial situation is different. A viatical
				  settlement may or may not be the best approach for you. Check it out for
				  yourself. We recommend that you ask an advisor who is qualified to review your
				  finances to help you review your options.
Step 3. How the process works
If you decide to sell your life insurance policy to a
				  viatical settlement provider, you will enter into a viatical settlement
				  agreement with the provider. You, the seller, agree to accept a cash payment
				  for your policy. The amount will be less than the face amount the policy would
				  pay upon your death. (For example, you might agree to accept a $75,000 cash
				  payment for a $100,000 policy)
The viatical settlement provider buying your policy:
A. becomes the new owner of your
				policy,
B. names the
				beneficiary,
C. collects the full
				death benefit when you die,
D.
				begins paying premiums on the policy, and
E. may sell your policy again.
There are four basic phases required to complete a viatical
				  transaction:
A. Phase 1-Qualifying to
				sell your policy (underwriting)
The viatical settlement provider will need information about
				  you before making an offer. Usually it will take some preliminary information
				  from you over the phone and send you this paperwork to sign:
A medical release form so the viatical settlement provider
				  can get and review your medical records an authorization form to contact your
				  insurance company to confirm benefit, premium, and ownership of your
				  policy.
To avoid delays, it's important that you give complete and
				  accurate information about your medical history.
If you apply with more than one viatical settlement provider,
				  each will contact your doctor for medical records and your insurance company
				  for policy information.
B.
				Phase 2-Calculating the offer
The viatical settlement provider uses the information it gets
				  in the underwriting phase to make an offer. To develop an offer, a viatical
				  settlement provider takes into account various factors including:
1. Estimated life expectancy and medical
				condition of the insured. Generally, the shorter the life expectancy of the
				insured, the more the viatical settlement provider will offer for the
				policy.
2. The amount of life
				insurance coverage.
3. Loans or
				advances, if any, previously taken against the policy.
4. Amount of premiums necessary to keep the
				life insurance policy in force.
5.
				The rating of the issuing insurance company.
6. Prevailing interest rates.
7. The minimum payment required by
				Mississippi Insurance Regulation.
C. Phase 3-Closing the agreement
If you accept an offer, a closing package is forwarded to
				  you, the seller, for approval and signature. Closing documents typically
				  include an offer letter, a viatical settlement contract, and the forms the
				  insurance company needs to transfer ownership of the policy to the viatical
				  settlement provider.
The closing documents are then returned to the viatical
				  settlement provider for its signature.
The viatical settlement provider will put the cash payment
				  owed to you in escrow, if required, and send the signed insurance change forms
				  to the insurance company to record the change.
Phase 4.Know your rights
A. State laws
Mississippi provides you with important consumer protections.
				  You'll want to contact the Mississippi Insurance Department if you have any
				  questions about the following consumer protections Mississippi requires:
1. A viatical settlement broker or viatical
				settlement provider arranging viatical settlements must be licensed with the
				Mississippi Insurance Department.
2. The viatical settlement provider buying
				your policy must keep your identity and medical history confidential unless you
				give written consent to tell others.
3. To protect your proceeds, the viatical
				settlement provider buying your policy must put your money into an escrow
				account with an independent party during the transfer process.
4. You have the right to change your mind
				about the settlement AFTER you receive the money, provided you return all the
				money. You have 15 days to review your settlement arrangement.
5. The new owners of your policy are limited
				in how often they may contact you about your health status.
B. Federal tax laws
Two groups of people may receive benefits from a viatical
				  settlement without owing federal income tax:
1. persons who have been diagnosed with a
				terminal illness and with a life expectancy of 24 months or less; and certain
				chronically ill individuals.
2. If
				you qualify for this federal tax-free treatment, you also must use a viatical
				settlement provider that is licensed in the state when you live, or, in states
				where licensing is not required, that complies with the standards of the
				National Association of Insurance Commissioners' Viatical Settlements Model
				Act.
Remember that, as when interpreting any tax laws, it's always
				  best to check with your own financial advisor.
C. Avoiding Consumer Fraud
If you have been contacted by someone who wants you to buy a
				  policy and then sell it immediately, you should contact your Mississippi
				  Insurance Department. You may be a target for fraud.
If you are asked to buy a life insurance policy for the sole
				  purpose of selling it, you may be participating in fraud.
If you are asked to invest in a viatical settlement, we
				  recommend you contact the Mississippi Secretary of State's Office to learn more
				  about the issues and risks that migh be involved in such an investment.
Step 5. Check with your state insurance
				  regulator
A. State Licensing
For a complete list of authorized viatical settlement
				  providers, brokers, and their representatives, call the Mississippi Department
				  of Insurance.
B. Seller
				Checklist
Before you sell your policy be sure you know the answers to
				  these questions
C.
				Evaluating your needs
Do you still need life insurance?
Do you have dependents who might rely on your life insurance
				  benefits should anything happen to you?
If you don't need life insurance protection now, what are the
				  chances you'll need it in the future?
D. Current policy benefits
Can you borrow from the cash value?
Can you cancel the policy for its current cash value?
Can you use the cash value as collateral to get a loan from a
				  financial institution?
Do you have an accelerated death benefit feature?
E. Taxes and other financial
				considerations
Is the money you get from selling the policy taxable?
Will the money you get from selling the policy affect your
				  eligibility for government benefits?
Do you need the advice of a tax or estate planning specialist
				  before you decide to sell our policy?
If you sell your policy, can any of your creditors claim the
				  money?
F. Understanding the
				process
If you sell your policy, who will be the legal owner?
Is the viatical settlement provider buying your policy
				  licensed?
If you sell your policy, how will the value you get be
				  calculated? What interest rate will be used?
If you sell your policy but then change your mind, can you
				  get your money back?
Will investors have specific information about you, your
				  family or your health status? How are fees or commissions paid to the viatical
				  settlement broker or provider?
G. Protections in your state
Contact the Mississippi Insurance Department to find out more
				  about the laws governing viatical settlements in Mississippi.