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Viatical Settlement Disclosure Document Part A 08-114a - Alaska
| Viatical Settlement Disclosure Document Part A Form. This is a Alaska form and can be used in General Blue Sky Secretary Of State . |
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THIS DISCLOSURE IS MANDATED BY THE STATE OF ALASKA TO BE PROVIDED TO AN INVESTOR BEFORE A SALE IS CONSUMMATED Viatical Settlement Disclosure Document Part A READ IMMEDIATELY UPON RECEIPT AND BEFORE YOU PURCHASE We are offering to sell you an investment called a viatical settlement contract. A viatical settlement contract is an agreement for the purchase of the death benefit of a life insurance policy. Most usually, the policy insures the life of an indiv idual who has been diagnosed with a life expectancy of short duration because of illness. Other policies can be viaticated as well. The individual who owns a life insurance policy tha t is being sold is called the viator. Often, the viator and the insured are the same. When the insured dies the investor receives a specific dollar amount that will be greater than the amount paid for the contract. Some companies sell entire policies to investors, and others sell partia l interests in policies. If you purchase a partial interest, the remaining interests in the policy will be sold to other investors. INVESTING IN A VIATICAL SETTLEMENT CONTRACT IS RISKY. BE AWARE THAT THIS TYPE OF INVESTMENT MAY INVOLVE RISKS IN ADDITION TO THOSE EXPLAINED BELOW. RISKS The rate of return on your investment cannot be calculated before the insured dies. The longer the insured lives, the lower the annual rate of return on your investment will be. No one can accurately predict the actual life expectancy of an insured. Some factors that may affect the accuracy of a prediction are: The experience and qualifications of the medical personnel making the li fe expectancy prediction if the insured has a terminal illness. The nature of the insureds illness and future breakthrough treatment s and cures. If the insured has AIDS, the definition of AIDS used by the viatical company. The insureds age, occupation, and other factors which can affect lon gevity if the insured is not terminally ill. You may have to pay money in addition to your initial investment. The insurance company will cancel the policy in which you have invested if periodic premium payments are not made to keep the policy in force. The insuranc e company will not pay the death benefit if the policy is not in force. Some of the money you invest probably will be set aside to pay premiums. However, if the insured lives longer than expected, you may be required to pay additional 08-114A (4/00) Page 1 American LegalNet, Inc. www.USCourtForms.com<<<<<<<<<********>>>>>>>>>>>>> 2premiums to keep the policy in force. Being a beneficiary of a policy and not also an owner carries special ri sks. A person who buys life insurance is the owner of the policy and decides who the beneficiaries of the policy will be that is, who will receive the death benefit when the owner dies. When the policy is sold as a viatical settlement contract, i nvestors become the new beneficiaries and therefore are entitled to receive the death benefit when the owner (usually the insured) dies. The new owner of the policy may be either the investors themselves or the viatical company. Only an owner of a policy, not a beneficiary, has the right to make premium payments directly to the insurance company so that the policy wi ll remain in force. If the funds that have been set aside to pay premiums run out, you will be dependent on the viatical company to collect additional premium money from investors and to pay premiums promptly. If that company goes out of business or otherwise fai ls to collect premiums from investors, you may not be able to pay the premiums yoursel f if you are only a beneficiary. Term insurance policies carry special ri sks. A term policy is issued for a specific time period. The insurance compa ny will not pay the death benefit if the insured outlives that time period. If you purc hase a term policy, you will be dependent on the viatical company to renew the policy when the term expires. Contestable policies carry special risks . The insurance company may contest a policy for a two-year period after its issuance if the company finds a reason to cancel the policy. The insurance compa ny will not pay the death benefit if: the insured dies within the contestability period, and the insurance company has a reason to cancel the policy. One example of a reason that an insurance company might cancel a policy is that the insured did not truthfully answer a question on the policy application. The policy may also be cancelled if the insured commits suicide within the two-year contestability period. Group policies carry special risks . A group policy insures the members of a specific group of people, usuall y the employees of an employer. The biggest risk for someone who invests in a group pol icy is that the policy can be terminated by the employer or the insurance co mpany. 08-114A (3/00) Page 2 American LegalNet, Inc. www.USCourtForms.com<<<<<<<<<********>>>>>>>>>>>>> 3 Although the policy will contain a provision allowing your interest to b e converted to an individual policy, there may be limits or restrictions on the right to convert. Also, the insurance company may charge additional premiums once the poli cy is converted. Investing IRA money in a viatical settlement contract carries special ri sks. Internal Revenue Code section 408(a)(3) requires that no part of trust [IRA] fu nds will be invested in life insurance contracts. This means that the Intern al Revenue Service may not allow you the tax benefits of an IRA if you invest in a viatical settlement contract. Even if such an investment is allowed, you should carefully consider you r age, the life expectancy of the insured, and the difficulty in predicting life expecta ncy before investing IRA funds in a viatical settlement contract. Since death bene fits are not paid until the insured dies, you may encounter a problem taking annual distributions from your IRA that are mandatory beginning at age 70. If the funds are not available to take the mandatory distribution, you will be penalized by t he IRS. An investme nt in a viatical settlement contract is not a liquid investment . The death benefit on a viatical settlement contract will not be paid unt il the insured dies, and there is no established secondary market for viatical settleme nt contracts. This means that you will probably not be able to sell your contract in an emergency to raise money for your immediate needs. Check any promises of guarantees carefully. The viatical company from which you purchase
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