9th
Aug
2013

Life Settlements Vs. Viatical Settlements

Posted by Admin

One common misconception we hear from investors at Pacific West Capital is the belief that a life settlement is a viatical settlement. Although the two vehicles have similarities, they have important differences.

A Brief History Of Viatical Settlements

A viatical settlement is a transaction where a company buys the life insurance policy of someone with a terminal illness, for less than the death benefit but for more than the surrender value. A policyholder who has no dependents sells the policy to create an influx of cash to cover rising medical bills.

The oldest viatical settlement on record was from 1911 but the transactions were rare. Viaticals became popular in the late 1980s as the AIDs epidemic peaked. Most of the AIDs patients at the time were without traditional life insurance beneficiaries: spouses and children. Since the patients’ life expectancies were short, their insurance policies had value to investors but not to the insured.

Viaticals Are Not Life Settlements

The important difference between viaticals and life settlements is that viaticals involve policyholders with terminal illnesses. Pacific West Capital doesn’t deal in viatical settlements because the results are too unpredictable. Anything from a miracle cure to a misdiagnosis can skew the policy maturity and turn a lucrative investment into a poor one.

The viatical could be considered the father of the life settlement, in that the latter industry grew out of the former. However life settlements involve the purchase of life insurance policies from elderly policyholders. Pacific West Capital Group reviews policies carefully and selects only those held by people meeting certain age and health characteristics.

Pacific West Capital considers life settlements to be lower risk and higher yield than viaticals. Don’t be confused by criticism of viatical settlements that don’t apply to life settlements.

Additional Resources:

Pacific West Capital Group :: Listed on Corp Tower.com

Pacific West Capital Group :: Article on Market Index.com

Pacific West Capital Group :: Information on Data Incs.com

Pacific West Capital Group :: Article on The Biz Land.com

Pacific West Capital Group :: Listed on The Info Company.com