‘Lawyers in the House’ Host Explains You Can Sell Your Life Insurance Policy to a Complete Stranger – 95.5 WSB
Yes, you can sell your life insurance policy to a stranger, says AG Supreme Court
The Supreme Court of Georgia rules that it is acceptable to take out a life insurance policy for yourself with the intention of selling it to someone else.
Viatical settlements, or living settlements, are often used by people who need money for medical bills. The case judges ruled on in October involved an HIV-positive man who took out a life insurance policy on himself in 1999 but did not disclose his HIV status. He bought it with the intention of reselling it to a third party. Kelly Couch sold it and had the $500,000 policy transferred to a “friend” he had in fact never met. This man, who knew Couch’s HIV status, paid the premiums and applied for the death benefit in 2005.
The Jackson National Life Insurance Company denied the claim and went to federal court to void the contract, calling it an illegal bet on human life.
The judges overturned a lower court’s decision and approved the practice, which is regulated. The notice also noted that the allegation of “illegal betting” was based on outdated law.
“In the 18th century it became popular in England to take out insurance on the lives of strangers – for example, elderly celebrities or defendants on trial for capital crimes – as a form of gambling,” the ruling said. “These policies were considered gambling bets, not insurance against all risk of loss, as those who purchased this ‘insurance’ had no interest in the underlying ‘asset’, that is- i.e. life at stake.”
President Bryan Freeman of Habersham Funding in Atlanta said a life settlement pays cash for a life insurance policy someone may not need or can no longer afford.
“In many cases, it’s the best financial option for someone, but a lot of people don’t know that,” Freeman says. “Over 90% of all life insurance policies expire before someone dies. So they don’t pay a death benefit.
A life settlement is then an option for people to withdraw money from their life insurance policy before they die or to let the policy expire if they cannot continue to make the payments.
Freeman says only the elderly or very sick can sell their policies. Life expectancy is a major factor, so generally someone under the age of 70 should have serious health issues. The seller receives an amount of money less than the total value of the death claim of the policy.
“People use it to pay their mortgage, their car bill, their medical bills,” Freeman says. “I’m doing a transaction right now with an elder who says instead of waiting to die to give the death benefit to his grandkids after he’s gone, he wants to be able to give them money during his lifetime and enjoy it.”
Freeman, who has dealt with these types of settlements for decades from his office in Buckhead, calls it “a real shame” that more people don’t know about them. He made one of the very first regulations of this type in 1989.
“It’s helped a lot of people in those decades that I’ve done, and I’ve been proud to be able to help people,” he says. “It’s been a fun business.”
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