A Viatical Life Insurance settlement is an agreement to sell the ownership of your life insurance policy to another, unrelated person, who then becomes both the owner and beneficiary of the policy.

It is illegal for a stranger to take out an insurance policy on your life. The stranger has no insurable interest and could have an unhealthy desire to see you die sooner than nature intends, so that his can collect the death benefit.

A life insurance policy is like anything else, if you own it, you can sell it, even to a perfect stranger who has no conceivable insurable interest, who then becomes the policy owner and can then name himself as the beneficiary.

There are Viatical Insurance Buyers and Sellers of life insurance policies and they call themselves viatical settlement firms. The viatical firm buys insurance policies from people with terminal illnesses and sells them to investors.

Remember the more complicated the life insurance policy gets, the more you will find yourself relying on your agents to explain and help you. It is difficult to compare whole life insurance policy with other life insurance policies because they are complex.

Some basic questions to ask your agent to guide you through the process are:

• How much will this life insurance policy cost me each year
• How much is the Sales commissions
• How much am I charged for Administrative fees
• What is the future life insurance cash value
• How much will I pay for penalties for an early surrender of this life insurance policy
• When do the penalties stop for early surrender
• What is guaranteed in this life insurance policy
• Are interest rates declared monthly or annually
• How long should I plan to keep this life insurance policy
• Should I keep it for a few years or for decades

Take your time to decide before you sign any forms and talk to one other person in your family or a friend.

Term Life Insurance is the simplest form of life insurance, the terms are the easiest and the cheapest to shop for. Ask yourself and your agent a lot of questions and here are some suggestions:

• Decide how much you need (the amount of death benefits)
• How long you want the life insurance to cover you (1, 5,10, 15, 20, or more years)
• Compare insurance premiums with other companies
• Find out if the insurance policy fees are built into the premiums
• Ask is the life insurance policy is renewable
• Find out if it is convertible to whole life insurance
• Ask if participating life insurance policies are available (potential for dividends)

You can purchase term life insurance from an insurance agent but some companies market term insurance through the mail, internet or TV.

Most life insurance policies permit you to “accelerate” the death benefit. This provision make it possible to collect on your own life insurance before you die. It is sometimes called “living benefit” provision.

This provision may be built into the policy or offered as a rider. It is intended to let you use death benefits to pay hospital or medical bills connected with terminal illness. It will require that you must have your “terminal illness” backed up by a doctors prediction that you will die within a set period of time. The amount of time will be specified in the policy. The policy may limit the dollar amount you can take out.

If you accelerate and use the death benefit, there will be less left in the policy for your family or other beneficiaries when you die.

I was recently asked this question,”What is a life insurance rider?” I did not realize that someone would not know what it really means.

The best way to explain what a life insurance rider is as follows:

Riders are modifications to the basic insurance policy added at the same time the policy is issued. Riders are used to either add or limit benefits to the policy. Riders change the basic policy to provide some feature desired by the policy holder. The policy holder will have to pay an extra amount to cover the rider.

When your agent includes riders to your policy to calculate your premium, ask the agent to price each rider separate. You then can decide whether your believe the added benefits any rider provides is worth the extra cost.

The most common riders I know of are:

Accidental death: Double indemnity. It means that the benefits paid by your policy will be 2 times the face amount of the policy if you die in an accident. It is known that 20% of all policy holder die in accidents. The cost for an accidental death rider is generally inexpensive. This rider is worth considering.

Waiver of Premium: This rider let you stop paying premiums whenever you become disabled and can no longer work. It is important to understand what the rider define “disabled” In most cases it means that you can not do any kind of work not just the work you had when you signed the policy. You may want to consider getting a disability policy to protect your from financial hardship due to a disability. Depending on the type of policy you buy, it could provide money to pay for all your living expenses and not just your life insurance premiums.

Mortgage Protection: This rider attaches a mortgage life policy to your main policy.

Other Insured: You can add life benefits for your spouse or children.

Guaranteed Insurability: This rider would typically be added to a whole life or universal life policy. Whereby it gives you the right to buy a new policy or increase the limit on your existing policy without passing another medical/physical exam. The rider will also specify how much you can add and when to do it.

Accelerated death benefit: This rider will let you sue some part of your death benefit when you have a terminal illness.

When financing large items purchased on credit such as an automobile, furniture, stereo set, boat etc., you will be asked by the lender to purchase a credit life and credit disability Insurance.

Credit Life Insurance promises to pay your debt of the insured purchased item when you die. This Insurance is a decreasing term policy and the insurance premiums are usually added into the loan contact. This type of insurance is always optional, and it can be expensive. Your lender cannot require you buy credit life but it will be offered to you.

A Credit disability policy will make your payments if you become disabled and unable to work. This policy provides you with protection and peace of mind. The lender cannot require you buy this policy.

Although credit life and credit disability insurance may have similar features, they are not mortgage life insurance.

Always read the fine print and ask questions if something is not clear before you sign the documents.

If you own a house and have a mortgage, chances are that the lender included a letter when you signed your mortgage recommending that you buy a mortgage life insurance policy.

Mortgage Life Insurance is sold by insurance companies. It is called mortgage insurance but it is really a decreasing term life insurance that will pay off your mortgage if you die. You buy mortgage life insurance to protect your survivors from having to pay the mortgage.

The premium is structured where the policy begins with a death benefit that is equal to your current mortgage balance. The death benefit decreases at the same rate as your mortgage balance. The premium payments never change but may stop prior to the loan payment. The lender may agree to add the premium payments to your monthly mortgage payment.

It makes good sense to want enough insurance to cover your funeral expenses.Before your purchase a funeral insurance make sure that the policy does not cost more than it will pay out.

The typical “funeral policy” is a whole life policy with a small death benefit for about $5,000.00

There is an alternative to funeral insurance if your concern is paying funeral expenses. The traditional alternative is a pre-need contract with a funeral director. Here is how it usually works:

1. The funeral director contracts to provide a funeral for a specified amount.

2. Your payments go into an escrow fund

3. The money remains yours

4. Unlike life insurance, you can withdraw your money from the pre-need escrow fund.

.

The best way to describe Universal Life Insurance is that it is a specific type of flexible life insurance that provides coverage similar to term life insurance with the benefits of tax deferred savings.

The advantages to Universal Life Coverage are the policy has the potential for cash value to earn more than the minimum interest rate. Also the premium amounts and death benefits are flexible. You may be able to change the amount of your payments or your death benefit after you buy the policy. You can also increase your coverage by paying larger premium but you will be required to answer health questions or get a physical to increase the benefits on your policy.

It is possible that the cash value could grow faster than is needed to pay the cost of insurance. In most cases the policy holder can choose how that money is used. Talk to your agent about the options that are available.

Your Universal Life Insurance policy has 2 death benefit options:

1. Level death benefits is equal to the policy’s face value

2. Increasing death benefit is equal to the policy’s face amount plus the policy’s account value. The premiums will be higher for option 2.

Read and understand your policy.

Whole Life Insurance policy gives the policy holder a lifetime coverage at a premium rate that does not increase with age after it has been purchased. This insurance policy typically requires that the owner pay premiums for the life of the policy.

This policy builds cash value and the policy holder can use the cash value to get a policy loan. The loan can only be for the amount up to a percentage of the policy cash value. The loan of course will accrue interest. Note though that if the loan plus interest amount exceeds the cash value, the policy will expire with no value.

The advantage of a Whole life insurance policy is that the policy can return money to the policy holder in the form of dividends, if the company earns a surplus because of profitable operations. Since earnings such a surplus depends on many variables, dividends are never guaranteed.

There are different type of Whole Life Insurance. The most common types are:

Joint Whole Life- provides basic whole life benefits, but two lives are insured under the same policy.

Last Survivor Whole Life-a Joint whole life, designed mainly for married couples.

Universal Life- the policy holder can choose your policy’s face amount and premium and to change these factors while the policy is in effect.

Adjustable Life- allows the policy holder to vary the coverage as insurance needs change.

Indeterminate Premium Life- specifies 2 premium rate- a guaranteed maximum and a lower rate you actually pay. Your premium can never be more than the guaranteed maximum.

Interest Sensitive Whole life- similar to indeterminate premium life, but taken a step further as cash value can increase beyond the state guarantee if economic conditions warrant.