Some Definitions and Important Facts
- A viatical settlement occurs when a person with a terminal or a chronic illness sells his or her life insurance policy to a third party (a viatical & life settlement provider), for a cash payment that is less than the full amount of the death benefit. The person selling the life insurance policy is the “viator.”
- A life settlement occurs when a person who does not have a terminal or chronic illness sells his or her life insurance policy to a third party (a viatical & life settlement provider) in return for a cash payment of less than the full amount of the death benefit.
- A viatical & life settlement provider is the person or company that becomes the new policy owner in return for a payment made to the seller. As the new policy owner, the viatical & life settlement provider must pay any premiums that are due, and eventually collects the full amount of the death benefit from the insurance company.
All viatical & life settlement providers doing business in Maine must hold a Maine license as a viatical & life settlement provider and must comply with Maine law.
Only the owner of the life insurance policy can sell the policy to a viatical & life settlement provider. If you are the insured, but not the owner, your consent to the transaction will be required if the sale involves an examination of your medical records.
If your employer provides you with a group life insurance policy, check with the insurance company that issued the policy to see if you are the owner or can become the owner. In many cases, if you leave your job the insurance company allows your employer to transfer the policy to you (which means that you become the owner of the policy).