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Viatical Disclosure Document Form. This is a Mississippi form and can be use in Blue Sky Secretary Of State.
Tags: Viatical Disclosure Document, VIAD1, Mississippi Secretary Of State, Blue Sky
This disclosure document is mandated by the Business Regulation and Enforcement Division of the Office of the Mississippi Secretary of State. VIATICAL DISCLOSURE DOCUMENT (FORM VIAD I) READ BEFORE YOU PURCHASE We are offering to sell you an investment called a viatical settlement investment contract. A viatical settlement investment contract is an agreement for the purchase of the death benefit of a life insurance policy. The individual whose life insurance policy is being sold is called the viator. Some viators sell their policies because they are terminally ill and need money for medical treatment or other expenses. Others are only chronically ill or are not ill at all, but want to sell their policies because their families are grown and they no longer need the life insurance. This latter type of viatical settlement contract may be called a life settlement, senior settlement, elder settlement, or other similar name. When the viator dies the investor receives a specific dollar amount that will be greater than the amount paid for the contract. Some 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. RISKS 1. The rate of return on your investment cannot be calculated before the viator dies. The longer the viator lives, the lower the rate of return on your investment will be. 2. . No one can accurately predict the actual life expectancy of a viator. Some factors that may affect the accuracy of a prediction are: • • • • The experience and qualifications of the medical personnel making the life expectancy prediction. The nature of the viator's illness, if any. Future breakthrough treatments and cures. If the viator has AIDS, the definition of AIDS used by the viatical company. 1 American LegalNet, Inc. www.USCourtForms.com Predicting the life expectancy of someone who is chronically ill or not ill at all may be even more difficult than predicting the life expectancy of a terminally ill person. Therefore, investing in the insurance policy of a chronically ill or healthy person may be even more risky than investing in the policy of someone who is terminally ill. 3. 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 viator lives longer than expected, you may be required to pay additional premiums to keep the policy in force. Also, you may be offered a policy for which no premiums are being paid because the insurance company has waived the premiums for some reason. In certain circumstances, the waiver of premiums may be cancelled, and premium payments will then be required. You may be required to pay those premiums. It is also possible that the viator will be permitted to keep certain rights under the insurance policy, even though the policy is sold to investors. These rights include the right to disability income and payment for accidental death or disability. If the viator lives longer than expected, you may be required to pay additional premiums to keep these retained viator rights 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 owner dies. When the policy is sold as a viatical settlement contract, investors become the new beneficiaries and therefore are entitled to receive the death benefit when the owner (viator) 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 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 to collect additional premium money from investors and to pay premiums promptly. If that company goes out of business or otherwise fails to collect premiums from investors, you may not be allowed to pay the premiums yourself if you are only a beneficiary. 2 American LegalNet, Inc. www.USCourtForms.com 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 viator 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. Even if the policy is renewed, premiums may increase due to change in the health or the viator. 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: • • The viator dies within the contestability period, and The insurance company has a reason to cancel the policy. One example of a reason that an insurance company might cancel a policy: The viator did not truthfully answer a question on the policy application. The policy may also be cancelled if the viator commits suicide within the 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 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 viator, and the difficulty in predicting life expectancy 3 American LegalNet, Inc. www.USCourtForms.com before investing IRA funds in a viatical settlement contract. Since death benefits are not paid until the viator 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, you will be penalized by the IRS. 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 viator dies, and there is no established secondary market for viatical settlement contracts. This means that you will probably not be able to sell your contract in an emergency to raise money for your immediate needs. 10. Tracking the whereabouts and health of the viator may not occur or may not be successful. Someone must track the whereabouts and health of the viator and, at the time of the viator's death, obtain a copy of the death certificate and file a claim for death benefits with the insurance company on your behalf. You have no way of determining whether these tracking activities are actually occurring. If the tracking system fails and a death certificate is not provided to the insurance company when the viator dies, no benefits will be paid. The longer the life expectancy of the viator, the longer the viator will need to be tracked and the more likely it will be that the tracking system will fail. Also, the viator may use money from the sale of his/her insurance policy to travel to a foreign country for experimental medical treatment, to retire, or for some other reason. If the viator disappears or cannot be located, the insurance company may not be notified of the viator's death or may be unable to verify the death, and no benefits will be paid. 11. Check any promises of guarantees carefully. The viatical company from which you purchase your viatical settlement contract may provide a performance of 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 instrument. 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". 4 American LegalNet, Inc. www.USCourtForms.com You should do a background check on the company issuing the guarantee instrument. Contact the appropriate regular 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. Do not assume that you will be fully protected by a guarantee stating that if the policy you invest in is cancelled by the insurance company for any reason, the company that sells you the investment will replace it with another one. If the company goes out of business, there will be no one to give you a replacement policy. 12. 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. 13. You should consider seeking advice from a qualified professional 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. Investing in a viatical settlement contract is risky. Be aware that this type of investment may involve risks in addition to those discussed above. The Business Regulation and Enforcement Division of the Mississippi Secretary of State is the agency of state government responsible for the registration of brokerage firms, investment advisers and their employees, the registration of investment products and enforcement of the State's securities laws. Anyone with questions or concerns about investments may call the Business Regulation and Enforcement Division of the Mississippi Secretary of State at 1-800-804-6364. 5 American LegalNet, Inc. www.USCourtForms.com