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Viatical Disclosure Document Part A Form. This is a Kentucky form and can be use in Blue Sky Secretary Of State.
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Tags: Viatical Disclosure Document Part A, 10410A, Kentucky Secretary Of State, Blue Sky
Viatical Disclosure Document Part A
Read Before You Purchase
We are offering to sell you an investment in a viatical settlement contract. A viatical
settlement contract is an agreement for the purchase of the death benefit of a life insurance
policy.
When the insured dies the investor receives a specific dollar amount that will be greater
than the amount paid for the contract.
Some viatical companies sell entire policies to investors, and others sell partial interests
in policies. If you purchase a partial interest, the remaining interests in the policy will be sold to
other investors.
Investing in a viatical settlement contract is risky. Be aware that this type of
investment may involve risks in addition to those discussed below.
You should seek professional advice to help you understand the nature of this
investment, the terms and conditions of any contract you are asked to sign, and the tax
consequences of your decision to invest.
RISKS
1.
The annual rate of return on your investment cannot be calculated before the
insured dies.
The longer the insured lives, the lower the rate of return on your
investment will be.
2.
No one can accurately predict the actual life expectancy of a insured.
Some factors that may affect the accuracy of a prediction are:
n
The experience and qualifications of the medical personnel making the life
expectancy prediction.
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n
n
3.
The nature of the insured's illness and future breakthrough treatments and cures.
If the insured has AIDS, the definition of AIDS used by the viatical company.
You may have to pay money in addition to your initial investment.
The insurance company will cancel the policy in which you have invested if
periodic premium payments are not made to keep the policy in force. The insurance
company will not pay the death benefit if the policy is not in force.
Some of the money you invest probably will be set aside to pay premiums.
However, if the insured lives longer than expected, you may be required to pay
additional premiums to keep the policy in force.
4.
Being a beneficiary of a policy and not also an owner carries special risks.
A person who buys life insurance is the owner of the policy and decides who the
beneficiaries of the policy will be - that is, who will receive the death benefit when the
insured dies. When the policy is sold as a viatical settlement contract, investors
frequently become the new beneficiaries and therefore are entitled to receive the death
benefit when the insured dies.
The new owner of the policy may be either the investors themselves or the
viatical company. Only an owner of a policy, not a beneficiary, has the right to direct
who can make premium payments directly to the insurance company so that the policy
will remain in force.
If the funds that have been set aside to pay premiums run out, you will be
dependent on the viatical company or other entity to collect additional premium money
from investors and to ensure prompt payment of premiums. If that entity goes out of
business or otherwise fails to pay premiums, you may not be able to pay the premiums
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yourself if you are only a beneficiary.
5.
Term insurance policies carry special risks.
A term policy is issued for a specific time period. The insurance company will
not pay the death benefit if the insured outlives that time period. If you purchase a term
policy, you will be dependent on the viatical company to renew the policy when the term
expires.
6.
Contestable policies carry special risks.
The insurance company may "contest" a policy for a two-year period after its
issuance if the company finds a reason to cancel the policy.
The insurance company will not pay the death benefit if:
n
the insured dies within the contestability period, and
n
the insurance company has a reason to cancel the policy.
One example of a reason that an insurance company might cancel a policy is that
the insured did not truthfully answer a question on the policy application.
The policy may also be cancelled if the insured commits suicide within the twoyear contestability period.
7.
Group policies carry special risks.
A group policy insures the members of a specific group of people, usually the
employees of an employer. The biggest risk for someone who invests in a group policy is
that the policy can be terminated by the employer or the insurance company. Although
the policy will contain a provision allowing your interest to be converted to an individual
policy, there may be limits or restrictions on the right to convert.
Also, the insurance company may charge additional premiums once the policy is
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converted.
8.
Investing IRA money in a viatical settlement contract carries special risks.
Internal Revenue Code section 408(a)(3) requires that ''no part of trust [IRA]
funds will be invested in life insurance contracts.'' This means that the Internal Revenue
Service may not allow you the tax benefits of an IRA if you invest in a viatical settlement
contract.
Even if such an investment is allowed, you should carefully consider your age, the
life expectancy of the insured, and the difficulty in predicting life expectancy before
investing IRA funds in a viatical settlement contract. Since death benefits are not paid
until the insured dies, you may encounter a problem taking annual distributions from
your IRA that are mandatory beginning at age 70½. If the funds are not available to
take the mandatory distribution, the IRS will penalize you.
9.
An investment in a viatical settlement contract is not a liquid investment.
The death benefit on a viatical settlement contract will not be paid until the
insured dies, and there is no established secondary market for viatical settlement
contracts. This means that you will probably not be able to sell your investment in an
emergency to raise money for your immediate needs.
10.
Check any promises of guarantees carefully.
The viatical company from which you purchase your viatical settlement contract
may provide a performance or fidelity bond, or another similar instrument, with your
purchase. The purpose of these instruments is to "guarantee," or "insure," your
investment. Ask exactly what is being guaranteed. Also ask the sales person for a copy
of the guarantee instrument.
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If the company issuing the ''guarantee'' does not have the necessary financial
resources to make payments under the ''guarantee,'' you will not receive any benefit from
the ''guarantee.''
You should do a background check on the company issuing the guarantee
instrument. Contact the appropriate regulator to verify that the company exists and is in
good standing. Obtain a copy of the company's most recent financial statements.
The terms of the contract between the company issuing the ''guarantee'' and the
viatical company may also affect how valuable, or useful, the ''guarantee'' is to you. Ask
for a copy of this agreement.
11.
You could lose some of the death benefit you have purchased if the insurance
company that issued the life insurance policy goes out of business.
Insurance companies are rated based on their financial safety and soundness. A
lower rating means that the company is more likely to go out of business.
Each State maintains an insurance guarantee fund for the benefit of policyholders
of insurance companies that have gone out of business. The guarantee fund may impose a
limit on the amount that can be recovered on each policy.
Also, the payment on your viatical settlement contract would be delayed if you
needed to seek funds from this guarantee fund or from the receivership of the insurance
company. This delay would reduce the rate of return on your investment.
In the event the funds you invest are handled by some intermediary, such as the
viatical company, a trustee, or a trust company, you could lose part or all of your money
if the intermediary suffers a financial setback or failure, regardless of the financial
strength of the insurance company that issued the insurance policy subject to the viatical
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settlement contract.
Right to Rescind
By law, you have the right to rescind (cancel) the purchase of this investment by
giving written notice of your intention to rescind. To be effective, your written notice of
rescission must be either postmarked or delivered to the entity indicated below no later
than 10 days following the date on which you sign a viatical settlement purchase
agreement.
It must be mailed, postage prepaid, or delivered to:
Name:
Address:
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