Viaticals Give Terminally Ill Access To Life Insurance Benefits ‘Death Futures’ Derided, But Help Those Who Need Money

When Donald Roadifer died last October of AIDS, he had been on Medicaid and welfare for six months.

But if he had not sold his life insurance policy for a lump sump payment two years earlier, the burden on his family and taxpayers could have been much higher.

The deal the Spokane man struck is called a viatical settlement. In brief, the terminally ill sell or assign their life insurance to a third party in exchange for a percent of its face value paid in a lump sum.

How much generally depends on how long the seller is expected to live.

Because of their grim nature, the transactions have been called “death futures” and worse. But there have been relatively few complaints, regulators say.

However, several states have adopted regulations that impose licensing and other requirements on the business, and the Washington Legislature is considering such a bill this session.

Spokesman Jim Stevenson said Insurance Commissioner Deborah Senn wants some control on viaticals as marketing expands to cancer patients and the elderly.

She does not want to shut down companies purchasing the insurance policies, he said, nor do representatives from AIDS groups, whose members have found value in viaticals.

But Cathy Ralston of Hospice of Spokane said she is concerned that clients will be victimized by bait-and-switch tactics at a time when they are not physically or mentally able to make the best decisions for themselves.

“They should receive some really unbiased advice,” she said, on such issues as taxes and their estates.

Hospice, she noted, periodically receives promotional materials from companies dealing in viaticals.

Julie Roadifer, Donald’s mother, said her son was a strong supporter of viaticals, appearing on Spokane- and Seattle-area media to discuss them.

Her son, she said, received 80 percent of the $90,000 face value of his policy from a Los Angeles company, Access Program, about two years before he died.

The funds allowed Donald to travel and live more comfortably before he returned home to Spokane from Hawaii, where he was living when he was diagnosed with AIDS.

Kevin Kurtz, a spokesman for Access Program, said Roadifer is one of about 600 clients who have sold their policies to the company.

Access pays between 50 percent and 90 percent of the face value to clients who may have as many as four years of expected life ahead, he said. Clients are attracted through referrals and advertisements.

They fill out an application, then their insurance and medical records are screened to assure the policy is non-contestable and the illness terminal.

Most clients are very sophisticated and understand the step they are taking when they decide to sell their policies, Kurtz said.

Access, he added, has no problem with the type of regulations Washington is considering adopting, having done business under similar California laws for the last few years.

“It’s not exactly a pressing issue,” said Bruce Brennen, the legislative counsel for the Washington Association of Life and Health Underwriters.

He said most major insurance companies have modified their policies to enable holders to tap the death benefit if they are diagnosed with a terminal illness.

Such accelerated benefits are reducing the need for viaticals in many cases, he said.

Because agents are usually made aware of a client’s pending decision to sign a viatical, Brennen added, they have time to ask, “Is this the best way for you to do it or is there another option?”

Senate Bill 5780 is now in the Rules Committee.