The ORIGINS of Viaticals and Life Settlements
The terms "viaticals" and "life settlements" may be new to some of you, so please allow me to explain them. While similar transactions had occurred previously, viaticals came to the forefront in the late 1980's with the recognition of AIDS as an epidemic. Someone, I wish I new who, because he was a "compassionate financial wizard" came up with a brilliant twist on an old theme.
As the story goes he approached an AIDS patient, who, like most, was a closet homosexual in the days when that was considered a major embarrassment to most families. Families in those days, as you may recall, routinely disowned homosexuals in general, never mind those with AIDS. As a result the AIDS patient, pretty much assured of dying within two years, who probably couldn't hold a job, but who still had to meet payments for shelter, food and other daily essentials for himself in addition to paying huge medical bills often without benefit of medical insurance and family assistance, was pretty much left in a quandary.
Death just around the corner, no money to pay for essentials, a family that had disowned him. What to do?
Along came Mr. X with an idea. Let's say the AIDS patient had a $100,000 life insurance policy payable upon his death. Mr. X proposed that if the Patient would assign the death benefits of that policy to Mr. X today, payable upon the Patient's death, that Mr. X would provide the Patient with $70,000 cash immediately. The Patient could now use that $70,000 to cover costs of shelter, food and pay for his medical expenses. There would probably even be enough for the Patient to take a cruise. It would be an opportunity, for a man guaranteed to die within two years, to "celebrate his life" instead of just waiting around to die. The investor, in turn, would receive $100,000 back from his $70,000 investment in two years. That's 43% Return On Investment over two years (21.5 per year) guaranteed by the life insurance company that underwrote the policy on the Patient.
Now, that's a win-win situation, if ever there was one, don't you agree?. Good deal for the Patient, good return for the investor and compassionate to boot!!!
Because of the many AIDS cocktails presently available, few, if any, viaticals are written today on AIDS patients. Most viaticals today are on people with cancer, ALS (Lou Gehrig's disease), Alzheimer's, Parkinson's, brain tumors, cirrhosis of the liver, double heart attack or stroke victims, etc.
From this original concept grew the life settlement contract which is usually applied to people, 60 to 80+, with life expectancies of four to 10 years as determined by their attending physician and the physician representing the company funding the contract, often with the above health concerns or combinations thereof.