Gather roun' all of you stock market Nervous Nellies and conservative investors too. My network, a working group of tax and financial experts, has found a solution to disenchantment with the stock market. How would you like a guarantee that the value of your principal investment never goes down, and you always reap a profit? How? With viatical settlements. To be exact, insured viatical settlements.
An easy way to think of a viatical settlement is to think of reverse life insurance. A group of investors buys existing life insurance policies on the life of elderly or terminally ill persons, each with a life expectancy between 3 and 8 years. These people are usually under severe emotional and financial stress. When they sell their policies, they receive one large, lump-sum cash payment that they can use immediately to pay for treatments, medical bills and daily expenses. It makes their remaining days as financially comfortable as possible.
Viatical settlements are not new. They have been around for more than 40 years. Insured viatical settlements are new. A closer look tells you why. In a nutshell, insured viaticals combine the earning potential of stocks with the safety of insurance. With insured viaticals, you invest in a pool of policies offering a blended return, enjoying returns as high as 50 percent on individual policies. Best of all, your principal and high fixed earnings are guaranteed (actually insured by Lloyd's of London).
Because of market demand, companies are in the business of buying policies from sellers (as described above), forming limited partnerships for the investors and handling every detail of the transaction. Minimum investments are $100,000. Since your principal investment (say $200,000) is always returned, the key question is, how much is your guaranteed profit, in dollars and percentage? The longer the policy period (between 3 years and 8 years; you choose the period you want), the higher your percentage earnings. The following three examples tell the story. Your profit-sharing plan invests $600,000 ($200,000 for three different periods). Here are your profit guarantees: 4-year policies pay 50 percent and a $100,000 profit; 6-year policies pay 80 percent and a $160,000 profit; and 8-year policies pay 110 percent and $220,000 in profit. In each example you receive back your full investment.
Two more questions often pop up. Can you earn more than the guaranteed percentages, and when do you get paid? Each time a single policy in your partnership matures (the insured dies), you immediately get 100 percent of the proceeds. For example, a death in the first year of a 4-year policy will return to the investors every dollar invested in that policy (say $10,000) plus an immediate profit of 50 percent ($5,000).
What about policies that do not mature by the end of the period? You are still paid in full (principal plus profit) 2 years after the end of the policy period, guaranteed. For example, 8-year policies will receive 110 percent after 10 years (an 11-percent return per annum).
Now comes the ingenious part of insured viaticals—the guaranteed profit part. Just how do you guarantee the principal plus the profit and also that the money will be there—on time—to make payment to the investor? Each policy in the partnership is insured with Lloyd's of London. For example, for a 6-year policy, 2 years after the start of the partnership, Lloyd's will pay off the full face value of the policy.
Partnerships with a minimum investment of $5 million per investor yield returns of 18 percent to 26 percent per year, depending on the policy period of years. If you have substantial funds in a profit-sharing plan, IRA or other qualified plan, it is a must that you consider marrying an insured viatical settlement and a subtrust.