Servicing Terminally Ill

Cash for the dying

The viatical settlement industry, a business that largely sprang up to buy life insurance policies from terminally ill AIDS patients, is undergoing a transformation in the wake of medical advances in the treatment of AIDS.

Shortly after doctors attending the 11th International AIDS Conference in Vancouver, Canada, this summer announced that a combination of drugs called “protease inhibitors” had achieved significant progress in stemming the progression of AIDS in clinical tests, one of the nation’s biggest viatical settlement companies, Dignity Partners, said it would stop buying policies from AIDS patients.

Other companies said the encouraging medical news didn’t come as a surprise and that it wouldn’t affect their willingness to buy life insurance policies. However, most considered it a wake-up call, signaling that it was time for the industry to shift into the mainstream, actively offering and marketing their products to patients with incurable ailments other than AIDS.

“I wouldn’t call it a sea change yet, but a sea change is probably coming,” says William E. Kelley, executive director of the Viatical Assn. of America. “The growth in this industry is going to come from servicing people with other diseases.”

That may well be welcome news to people in the last stages of cancer or other incurable ailments.

Viatical settlement is a formal term for the purchase of a life insurance policy from a terminally ill patient. The viatical settlement company “invests” in these policies by paying the policyholder an amount of money that equates to a particular percentage of the death benefit. The more dismal the patient’s prognosis, the higher the percentage payment. (California requires 80% payments to those with a diagnosis of six months or less to live; 70% for those with up to 12 months to live; and 65% for those with up to 18 months left.)

From a patient’s standpoint, a viatical settlement can provide much-needed funds to cover living expenses and medical bills at a time when the policyholder is probably too ill to work. Viatical settlement companies, meanwhile, earn a return on their investment when the policyholder dies and the policy pays off. Viatical settlements are generally only available to those whose medical diagnosis indicates they have less than two years to live.

A recent change in the federal tax law makes these settlement payments nontaxable.

Those who are terminally ill and need cash can find out more about viatical settlements by calling the Viatical Assn. of America, which offers a free booklet that explains more about the industry and how to obtain such a settlement. The booklet can be obtained by calling (800) 842-9811 or through VAA’s Web site at https://www.cais.net/viatical

In addition, the California Department of Insurance will provide a list of viatical settlement companies that are licensed in the state and information about state law. For more information, call the insurance department’s consumer hotline at (800) 927-HELP or (213) 897-8921.

* Switching jobs? Think pension

If you’re among the millions of Americans who are planning to switch jobs this year and take your profit-sharing, or 401(k), plan with you, you ought to know the opportunities and pitfalls affecting rollover retirement plan distributions. Kemper Funds of Chicago has issued a nice booklet that explains the basics, called “Changing Jobs? Eight Tips and Eight Traps.” The company will provide free copies to those who call (800) KEMPER-1, Ext. 891.

* Small claims explained

Having trouble getting back your renter’s deposit? Think your dry-cleaner ruined your best suit? Have some other financial gripe involving less than $5,000? You may be able to take the subject of your ire to small claims court, a legal forum for people with relatively modest financial disputes.

California’s Consumer Affairs division offers free booklets that explain how the process works for both the suer and the sued. To get the 37-page primer, send a written request for “Using the Small Claims Courts: A Handbook for Plaintiffs and Defendants” to Publications, P.O. Box 310, Sacramento, CA 95802.

Consumer Checklist is a weekly feature that covers a range of pocketbook issues of interest to Californians. To contribute information about free consumer booklets, new legislation, products, services or surveys, write to Kathy M. Kristof, Business Section, Los Angeles Times, Times Mirror Square, Los Angeles, CA 90053; or e-mail [email protected]