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FTC statement concerning "living benefits" or "viatical settlements."

CDC National AIDS Hotline Training Bulletin #168

February 2, 1996

This is a statement from the Federal Trade Commission (FTC) concerning "living benefits" or "viatical settlements."

The Federal Trade Commission has issued a special brochure to advise terminally ill people who are considering selling their life insurance policies in order to get funds to pay their bills. Arrangements to accelerate financial benefits from life insurance policies, whether they are called "living benefits" or "viatical arrangements," have legal, financial, and tax consequences that are complicated, and they should be reviewed in advance by professional advisors, according to the FTC.

"The emotional and psychological burdens of a terminal illness are overwhelming. When you add the challenge of dealing with costly medical treatments, consumers and their families may be tempted to act quickly to get funds to settle short-term problems," said Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection. "But viatical arrangements are complicated, and must be approached cautiously and with great care," she said.

The FTC brochure states that terminally ill people have a number of alternatives for translating the face value of their life insurance policies into cash, including a loan from the original beneficiary of a life insurance policy, accelerated benefits on a life insurance policy, or a viatical settlement. In a viatical settlement, the consumer assigns his or her life insurance policy to a viatical settlement company in exchange for a lump sum payment equal to a percentage of the policy's face value. The viatical settlement company then becomes the beneficiary to the policy, pays the premiums, and collects the face value of the policy after the original policy-holder dies.

The FTC brochure cautions that certain choices may have state or federal tax implications and that collecting benefits in advance may affect eligibility for public assistance programs.

The brochure specifically advises consumers contemplating viatical or other accelerated benefit programs, before making any final decisions, to:

  • contact several viatical companies to be sure they're getting the best value
  • check with state insurance regulators to ensure that any viatical company meets licensing requirements
  • resist high pressure sales tactics
  • verify that the company has the payout money on hand and is not "shopping" the policy to a third party
  • ask about the company's policy for protecting the consumer's privacy
  • check the tax consequences and implications for public assistance benefits
  • check with a lawyer about probate estate considerations

The brochure also suggests that consumers contact the following, among other, organizations for more information:

Affording Care
East 52nd Street, Unit 4-G
New York, New York 10022-6431

American Council of Life Insurance
1001 Pennsylvania Avenue, NW.
Washington, D.C. 20004-2599

National Association of Insurance Commissioners
444 North Capitol Street, NW.
Washington, D.C. 20001

National Association of People with AIDS
1413 K Street, NW.
Washington, D.C. 20005

Free copies of the brochure, "Viatical Settlements: A Guide for People with Terminal Illnesses," are available from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, NW. Washington, DC 20580; 202-326-2222; TTY for the hearing impaired 202-326-2502. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710. FTC news releases and other materials also are available on the Internet at the FTC's World Wide Web site at:

Disclaimer: CDC Hotline Training Bulletins

The information in the "CDC Hotline Training Bulletins" is provided by CDC and NIH for use by the CDC National AIDS Hotline in responding to general questions from the public about HIV and AIDS. The bulletins are not intended to be comprehensive discussions of the subject areas. Treatment and drug therapy options change as new research and clinical experiences broaden scientific knowledge. Therefore, persons seeking information on drug therapy should refer to the product information sheet included in all drug packages for the most current and accurate information about a particular drug, especially if the drug is new or infrequently used. HIV-infected individuals should consult their personal physician for specific concerns about their health. For persons desiring more information on a specific topic, public, medical, and university libraries can provide excellent references.

The AIDS Clinical Trials Information Service (800-874-2572) can provide information about ongoing HIV/AIDS clinical trials; the HIV/AIDS Treatment Information Service (800-448-0440) can assist with information about the latest treatments for persons with HIV infection or AIDS.

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This article was provided by U.S. Centers for Disease Control and Prevention. Visit the CDC's website to find out more about their activities, publications and services.