What are the risks of investing in viatical and life settlement contracts?
Viatical or life settlement contracts allow life insurance policyholders to “cash out” of their policies while they are still alive. Investors pay for the right to receive the future death benefits by purchasing an interest in the policies, usually through a viatical company. Viatical settlements concern terminally ill individuals, while life settlements concern people who simply wish to sell their life insurance policies for the immediate cash benefit. But investing in viaticals is not like buying certificates of deposit. Viaticals have risks you need to consider before you buy: Viatical investments are not liquid investments. You receive a return only when the insured dies. In some cases, you may cancel your investment within seven calendar days of the purchase. The rate of return is not guaranteed. The return depends on when the insured dies, which is very unpredictable. Medical advances can further complicate that unpredictability. The death benefit may not be paid. The insurer may