If you are diagnosed with a terminal illness, such as AIDS or cancer, or a chronic illness that prevents you from performing daily functions, you face many hurdles. You are likely to have medical expenses that insurance won't pay, as well as other bills. Traditionally, life insurance helps surviving beneficiaries meet expenses. There are, however, two other options available that let an insured tap into their life insurance benefits while they are still living. These options are Viatical Settlements and Accelerated Death Benefits. Show As of July 1, 2010, Illinois law places strict and specific guidelines on viatical settlements for persons who are not terminally or chronically ill. If someone offers you “free” or “no cost” or “zero premium” life insurance you may the subject of an illegal scam. Please see the section below on “Stranger-Originated Life Insurance” or call the Department toll-free at (866) 445-5364 for more information. What is a Viatical Settlement? A viatical settlement is a contractual agreement to provide a life insurance policyholder immediate cash in exchange for the sale and transfer of life insurance policy ownership rights. The person selling the life insurance policy, who is known as theviator, gives up ownership of the policy in return for a cash payment that is less than the full amount of the death benefit in the life insurance policy. If you are terminally or chronically ill, a viatical settlement lets you sell a life insurance policy you already have to a viatical settlement provider. The term viatical comes from the Latin term viaticum, which means "provisions for a long journey." Who are the parties involved in a Viatical Settlement? A viatical settlement provider is the person or company that buys the life insurance policy. The viatical settlement provider becomes the policy owner, must pay any premiums that are due, and eventually collects the full amount of the death benefit from the insurance company. The person or company who represents the seller (viator) and who can "comparison shop" for viatical offers is a viatical settlement broker. What is a terminal or chronic illness for purposes of a Viatical Settlement? A terminal illness is an illness or physical condition a physician has certified as reasonably expected to result in death in 24 months or less. A chronic illness requires certification within the preceding 12 months by a licensed health professional of: (1) an inability to perform, without substantial assistance and for at least 90 days due to a loss of functional capacity, at least 2 activities of daily living, including, but not limited to, eating, toileting, transferring, bathing, dressing, or continence; (2) requiring substantial supervision to protect the individual from threats to health and safety due to severe cognitive impairment; or (3) having a level of disability similar to that described in paragraph (1) as determined by the Secretary of Health and Human Services. What are Accelerated Death Benefits? Accelerated Death Benefits are paid by an insurance company on an existing policy as a percentage of the policy's face value, minus any outstanding policy loans. While some older policies may not grant an accelerated death benefit in the terms of the life insurance contract, many insurance companies are making this option available to their policyholders. You should check with your insurance agent or company to find out if this option is available. If you accept an accelerated death benefit payment, you may become ineligible for Medicaid or other governmental benefits and the benefits may be taxable. You should consult with your tax and/or legal advisor to determine whether or not this may be the case in your individual situation prior to entering into any financial agreement. What Should I Consider in Evaluating a Viatical Settlement or Accelerated Death Benefits? A viatical settlement or accelerated death benefit option may be a good source of funds, but you should fully understand how your choice will affect you and your survivors. Before you decide to apply for a viatical settlement or accelerated death benefits, you should:
NOTE: Effective July 1, 2010, it is a violation of Illinois law for any person to enter into a viatical settlement contract within 2 years after the insurance policy is issued unless one or more specific conditions has been met, including
the viator being diagnosed as terminally or chronically ill. You should contact the Department before entering into a viatical settlement contract less than two years after your life insurance policy has been issued. Is there anything that has to be disclosed to me before I sign a Viatical Settlement Contract? Yes. Effective July 1, 2010, the Viatical Settlement Act of 2009 (P.A. 96-739) (the Act), provides new consumer protections for individuals seeking to enter into a viatical settlement. The Act requires that certain disclosures are made to the viator no later than the time the viatical settlement application is signed. Both the viator and the provider or broker must sign the disclosures. The following information must be disclosed before you sign a viatical settlement contract:
What are the Differences Between Viatical Settlements and Accelerated Death Benefits?
What is the contract between an insurer and a customer called?An insurance agreement is a legal contract between an insurance company and an insured party. This contract allows the risk of a significant financial loss or burden to be transferred from the insured to the insurer. In exchange, the insured promises to pay a small, guaranteed payment called a premium.
What is a beneficiary clause in life insurance?One area in which there is a beneficiary clause is in a life insurance policy. The beneficiary clause or designation provision permits the policy owner to name anyone as primary and secondary beneficiaries. The policy owner usually may change the beneficiaries at any time.
What type of contract is an insurance contract?Unilateral Contract — a contract in which only one party makes an enforceable promise. Most insurance policies are unilateral contracts in that only the insurer makes a legally enforceable promise to pay covered claims.
What subrogation means?Subrogation allows your insurer to recoup costs (medical payments, repairs, etc.), including your deductible, from the at-fault driver's insurance company, if the accident wasn't your fault. A successful subrogation means a refund for you and your insurer.
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