Business Law

Bus Law-B-Johnston-Session 2

In Grigsby v. Russell (1911), the Supreme Court ruled that people owning life insurance polices have a property interest in those polices that can be transferred to another individual. This ruling has opened the door to the viatical industry. Viaticals are life insurance polices which are sold at a discount to the face amount, or death benefit, of people who have been medically determined to have life expectancies of less than two years to live. This provides the seller an immediate cash settlement. This settlement can be used as the seller wishes with no restrictions. Viatical settlements are also known as life settlements. A terminally ill person wishing to sell his existing life insurance policy would contact a life settlement broker. At which time the broker would use the following information: policy face amount, cash surrender value of the policy, premiums, the sellers age, the type of policy and the sellers health to obtain a settlement amount. Once this information is gathered, it goes out to bid. The bid is open to private and non-private funders whom may compete to buy the policy. When the bids are returned and an offer is accepted it only takes a few days for the seller to get their money. Based upon the reading in the text on contracts, life settlements are strongly supported. First there is an “offer” from the funder to the broker, which is then “accepted” by the seller. A “written contract” is made including the “guaranty” from the “promisor” and “explicitly states all parts of the agreement” between the parties. Once the seller “assigns” a “third party”, the contract becomes “executory”. Upon the demise of the seller, the contract has been “executed”. Most types of life insurance polices can qualify, however the most common are, universal life, whole life and convertible term. Golden Gateway Financial a California based company uses the same criteria when purchasing a life insurance policy....