Viatical and Life Settlements: The Secondary Market for Life Insurance Policies

  • Credits: 5
  • Format: Self-Study eBook
  • Field of Study: Specialized Knowledge
  • Author/Speaker: Paul J. Winn
Course ID: Advanced Preparation: Experience Level:
PW-816.21 None Overview
Published Date: Program Prerequisites: Other Course Formats:
© July 2020 General Understanding of Life Insurance N/A

Life insurance has been the mainstay of many families and businesses in the United States for almost two centuries, and its role in providing needed funds upon the death of a family’s breadwinner or a business’s key person in the future is likely to continue to be vital to their growth and security. The need for life insurance often changes, however, as businesses evolve and families enter new lifestyle periods.

The children whose education was financially assured by a large life insurance policy on the life of mother or dad may now be grown and educated with children of their own. Likewise, the business partner whose interest in the enterprise was to be purchased upon his or her death by a life insurance policy’s death benefit proceeds may have moved on to pursue other interests. In situations like these—and in many others too numerous to list—existing life insurance policies may no longer be needed.

Traditionally, owners of unneeded life insurance policies had limited options available to them with respect to their disposition. Typically, such life insurance policies were surrendered for their cash value or simply permitted to lapse for nonpayment of premiums. Beginning in 1989, however, those options increased dramatically with the birth, in the United States, of a secondary market that often enables a policy owner to obtain more than the policy’s cash surrender value by selling it to a third party in a viatical or life settlement.

Topics include:
In this course, we will examine the settlements that comprise the secondary market for life insurance policies. In so doing, we will consider the:

  • Markets
  • Prospects
  • Process
  • Market conduct issues and disclosure requirements
  • Taxation
  • Regulation
...associated with life settlements.

Learning Objectives:

After reading the course material, you will be able to:

  • Explain how and why the life settlement industry developed in the United States.
  • Identify the markets for life settlements.
  • Describe the process by which a policy owner obtains a settlement offer.
  • Discuss the distinctions between viatical and life settlements.
  • Identify the significant market conduct issues affecting life settlements.
  • Describe the disclosures that must be made in connection with life settlements.
  • Explain the tax treatment of life insurance policies sold in the secondary market.
  • Discuss the regulations affecting life settlements.
  • Explain the public policy concern in connection with stranger-originated life insurance and the provisions of the NAIC Viatical Settlements Model Act to eradicate it.

Who Should Attend:
  • All Certified Public Accountants (CPAs)

Qualifies and Approved with all State Boards of Accountancy and the following sponsorship’s: