September 18, 1992 GAY PEOPLE'S CHRONICLE

Page 9

Selling your life insurance policy for cash: how it works

by Kevin Beaney

Recent articles in the Plain Dealer and The Advocate have explored the practice of advanced case AIDS patients "cashing in" their life insurance policies to companies, receiving enough income to pay their large debts and enjoy their remaining days.

Known in the trade as a "viatical settlement," with this approach the company first determines the client's life expectancy (usually less than two years). Then, based on months to live, administrative costs, remaining premiums to be paid and desired profit margin, the client is offered a percentage of the life insurance proceeds. In return the client names the company as the beneficiary. The client gets the money now to pay off debts and eliminate financial stress. The company gets an investment guaranteed (presumably) to pay off within two years. Both sides win.

With the growth in the practice, more attention is being paid to it, especially by state regulators who are concerned with potential fraud based on a sick person's hardship. There are also other questions such as whether any of this money should be taxed. (Currently, life insurance proceeds are exempt from federal income tax.) Financial investors, seeking to get a high rate of return, are creating or are being wooed by companies that offer this service. In cases where speculative investors are involved, the companies fall under Security and Exchange Commission trading regulations.

Insurance companies themselves have shifted to offer an equivalent service with "accelerated death benefits." Here, the sick policy holder gets a portion of the proceeds while still alive; the remainder is paid to beneficiaries after death. But this

type of policy must be bought ahead of time, before the policy holder gets sick.

Cashing in a life insurance policy raises several fundamental questions: does the client, diagnosed as terminally ill, have a valid life insurance policy with enough of a benefit to make this worthwhile? How much private medical information is being released? And what about the original beneficiaries?

Locally, Page and Associates is a gay owned and operated insurance agency that has offered these viatical settlements for over two years. Scott Page, president of the company, is proud of the services and personal attention provided to clients and he has ready answers to all of the objections.

Page explained that he got into the business due to the suffering a close friend was going through. People who are ill cannot expect to get health insurance and his friend was dealing with that frustration as well as rising medical bills.

In exploring options, Page found that Ohio law requires Health Maintenance Organizations (HMOs), such as Kaiser Permanente, to accept anyone during their open enrollment period, regardless of preexisting conditions. This step controlled continuing medical expenses for his friend, and Page urges people to keep it in mind. Before suggesting the cash for life insurance policy approach, he and his friend explored other options, such as taking a loan on the life insurance policy. In his friend's case, the optimum solution turned out to be a viatical settlement. Now he lives comfortably, and more importantly according to Page, has eliminated the incredible stress of owing a lot of money to people.

For AIDS patients, elimination of stress is a goal often urged by doctors, but not by

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their billing and collection departments. It is this fear and stress that many companies offering viatical settlements depend on for business.

As for the ethics of investors shopping for terminal patients, Page and Associates is a self-funded firm with a group of limited partners who serve as the investors. There is no solicitation of investors to trigger SEC regulations. Page claims that his company is the only gay owned, self-funded company in the country offering this service, which makes up about 90 percent of its business.

For those terminally-ill patients facing hard financial choices, contacting Page and Associates begins a process of financial counseling, needs assessment, support, care and ongoing contact, not just a quick cash settlement. One of the employees (currently five of the six are gay) begins the interviewing process which explores many financial avenues. In addition to possible HMO enrollment and loans against life insurance, clients review setting up an annuity for others beneficiaries. Often the

counselor will recommend pre-paying funeral expense and assist in the process. All aspects of the client's financial future and personal wishes are considered.

If the client can get a greater rate of return from the insurance company, the Page representative will send him or her there. Follow-up consultations, even after the client receives a cash pay-out, are part of Page and Associates' formula. More often than not a personal bond is formed between client and advisor due to the ongoing nature of the service.

Page says he continues to run seminars at the Living Room and is proud of the contribution his company is making to ease the suffering of a growing number of clients. While there are other companies offering viatical settlements, the personal, gayfriendly touch, and putting his clients' interests first are reasons Page says people should contact him. Currently, the Donahue television show is trying to schedule Page and other advocates of viatical settlements for an October appearance.

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