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Is it secure - or a scam?

Funny that you should post. I just talked to a guy about the same thing and I was going to post, too!

How does it work? You have people with terminal illnesses, who have 3-5 years to live. They have a current life insurance policy. But, instead of dying and leaving the money to their heirs, they would rather use the money now to pay bills and improve their current quality of life. A viatical settlement company buys the right to collect the face value of the life insurance policy when the person dies. The company is also responsible to maintain the insurance premiums. You normally collect your money when the policy matures (ie. the insured person dies).

The salesman I talked to was upfront. He started with 20%/year, simple interest, projected return, over 3 to 5 years. If the insured person dies sooner, your apparent return is greater; if he dies later, the return is less. The only thing that is guaranteed is the amount that is returned to you when the insured person dies. This kind of 'investment' is illiquid. You don't get your money until the person dies. Also, when you invest, you invest in a specific policy. You do not invest in the company, who invests in the policy. This is how it was explained to me.

E-mail me if you have more questions. I am thinking about getting into it. It's the illiquidity that bothers me.

Zev
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