4.2.5 Viatical Settlements
Under the Florida Viatical Settlement Act, the Department is responsible for regulating viatical settlement contracts and providers. A viatical settlement allows an insured person with a life-threatening illness to surrender the insurance policy for cash, an amount as close as can be bargained for to its face value.
A viatical settlement can provide a cushion when the insured is diagnosed with an illness or condition that is expected to end his life (usually within two years). The insured (viator) can sell his life insurance policy as long as the sale price doesn't exceed the policy's face value. The NAIC adopted model guidelines for fair payment which allows insureds to receive anywhere from 50-80% of the policy's face value at the time of the sale, depending upon the insured's life expectancy and future premium costs. For instance, a $100,000 policy could sell for anywhere between $50,000 and $80,000 in cash.
50% of a $100,000 policy = $50,000 cash
80% of a $100,000 policy = $80,000 cash
The entity that buys the policy is called a viatical settlement provider (brokers or provider representatives help with the sale). The viatical company then becomes the policyowner, and the remainder of the proceeds are payable to the company when the insured dies.
As a result of amended legislation in 2005 of the Florida Viatical Settlement Act, Florida will no longer issue viatical settlement broker licenses. Only a licensed life insurance agent may offer or attempt to negotiate on behalf of another person a viatical settlement contract.
For more information on Florida law regarding viatical brokers, read Florida Statute Section 626.9916, which became effective October 1, 2006.
Compensation received by a life agent for activities performed as a viatical settlement broker may not be shared with another person unless the other person is also licensed as a life agent according to Florida law and properly self-appointed with regard to viatical settlement contracts. This life agent owes a fiduciary duty to the viator to act pursuant to the viator's instructions and in that person's best interest. In this context, the viator is the owner of the life insurance policy or the certificate holder under a group policy that is being sold in the viatical settlement.
