Cashing in on the death of others

Image caption Ghoulish? It is not only vultures who gain from death

Many industries can benefit when a person dies - funeral homes for example, but they do not sit around like vultures waiting for someone to actually take their last breath.

But that is precisely what could happen when someone sells their own life insurance policy to a third party - a procedure known as a viatical settlement.

Selling your own life insurance policy to investors who then market it like any other financial product does not sound all that wholesome.

Investors who take the premium payments off your hands in return for a lump sum are hoping you will not stick around for too long so they can get a big payout quickly.

They are basically gambling on your death.

Ticking clock

It all sounds rather ghoulish and a neurotic person might be looking over their shoulder to make sure nobody is trying to hasten their demise.

But Bryan Freeman, from Habersham Funding in Atlanta, does not think there is much risk of that happening.

"In the US it is a crime to commit murder," he says.

"In fact, it has been a crime in most of the world since God gave Moses the 10 commandments."

He also notes that if someone is murdered, death benefits are not paid out - which makes murder a somewhat redundant option.

"Furthermore, if someone is murdered and they had sold their life insurance policy, the very first people who would get looked at would be the people who bought that policy," he says.

His sentiments are shared by Ed Hinerman, of the Hinerman Group in Colorado, who returns to the Biblical theme.

"God told Moses 'Thou shalt not kill' - if he thought Moses would have understood I am sure he would also have said, 'Thou shalt not profit from the death of others'," he says.

Rolling the dice

The viatical industry was practically unheard of before the 1980s, when the rapid spread of HIV and Aids made it more commonplace.

It is now worth billions of dollars each year - but the investors do not always win.

Patrick Satterthwaite sold his policy when he tested positive for HIV, and, more than 20 years later, he is still very much alive.

"If you have an insurance policy and you are in a very tenuous health situation, there are people who are willing to purchase the proceeds of your life insurance at a discounted rate," he says.

"Having somebody willing to pay me money upfront sounded like a fairly good deal. It gave me an opportunity to do things that I really wanted to do," he says.

There are of course, conditions and restrictions about which life insurance policies the companies are willing to purchase but, for the people who fall into that narrow band, they could receive up to $100,000 (£62,000).

Individuals in theory receive more than they would by simply cashing it in, but less than the policy is worth to their estate on death.

"When the courts looked at this, universally they have said that for a policy to have the value it should, the person needs to be able to do with it what they want," says Mr Freeman.

Moral qualms

Life insurance is a piece of paper, just like a stock or a bond - and you can sell your life insurance just like you can sell stocks and bonds.

But some people believe there are moral issues to be considered.

"In Indonesia they had a tsunami that killed 250,000 people, if that had been the west coast of the US, several someones in the US would have profited greatly from that," says Mr Hinerman.

"The morals of profiting from death, someone making money from something like 9/11 or Hurricane Katrina is so against the moral principles that I live by," he adds.

Mr Freeman defends his willingness to enter into viatical settlements.

"I don't cheer when people die. I grieve for people when they die," he says, and cites the paradox that there are a lot of industries which prosper when somebody dies, yet no-one accuses them of rubbing their hands in glee when someone passes away.

However, Mr Hinerman still feels uncomfortable with the idea.

"You actually have someone who is interested in the death - not the life - of the insured," he says, "Not that they have your name, address and a picture of you so they can get a clear shot."

In fact, most people who are killed for life insurance proceeds are killed by family members who are beneficiaries of the policies.

"I have life insurance with my wife as the beneficiary and she does not appear to want to kill me - yet," Mr Hinerman says.

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