To Die or Not to Die?: What Is Your Life Really Worth?


Would you be interested in making money off of your death even before you die?

Normally, those insured under a life insurance policy would expect that upon their death, financial benefits would be paid out to their beneficiaries under the policy.

However, a relatively new type of investment (illegal in most Canadian provinces except Saskatchewan, New Brunswick, Nova Scotia and Quebec) allows someone with life insurance to sell their policy to an investor in exchange for an immediate lump sum cash payment. This lump sum payment would usually be much less than the policy’s actual value (usually being 50% to 70% less). The investor would take over the premium payments on the policy until the seller dies at which time the investor would collect on the insurance payout tax-free. This type of investment is called a Viatical Investment.

For example, under normal circumstances, if you had a $300,000 life insurance policy, you would be responsible for paying its premiums until the day you died. Upon your death, your beneficiaries (i.e. your family) would receive a tax-free payout for the value of the policy.

However, using the same example above, lets change the facts and say that before you died you were extremely ill, and in dire need of money to fund necessary treatment.  What if the only significant asset you had left was a life insurance policy? In that case, you might want to sell your policy to a Viataical Investor who would pay you lets say $100,000 upfront in immediate cash (albeit less than the policy value). This would provide you with immediate access to much needed money.  The investor would also take over your future premium payments until your death. Upon your death, the investor would receive the financial payout of $300,000 tax-free, which would represent a profit of $200,000 (less premium payments paid until your death).

In the United States, Viatical Investments are legal and regulated. They became popular in the late 1980s. During this time, the AIDS epidemic was at its peak. Many AIDS patients consisting of mainly gay men were extremely ill and dying in large numbers. Most of these AIDS patients with life insurance policies had no children or families and needed money to assist them with treatment. Viatical Investments were a practical way of obtaining much needed money and so the business developed from there. Generally, Viatical Investors prefer to invest in people who are terminally ill or near death. This way, premiums aren’t paid out as long and insurance payouts happen a lot faster.

Despite Viatical Investments sounding morbid to some, I think it’s a great idea and I am disappointed it is not legal in Ontario. It presents a great business opportunity with terrific profit potential while assisting those in desperate need who should be able to manage their own assets as they see fit without government interference. Section 115 of the Ontario Insurance Act sadly states:

“Any person who advertises or holds himself, herself or itself out as a purchaser of life insurance policies or of benefits thereunder, or who trafficks or trades in life insurance policies for the purpose of procuring the sale, surrender, transfer, assignment, pledge or hypothecation thereof to himself, herself or itself or any other person, is guilty of an offence”.

It is true that since these types of investments have been around in the U.S. there have been reports of fraud, and criminal activity associated with them. However, that is why regulations have been put in place. Fraud is inevitable in every industry  when money is involved. Most abuses have already been addressed in the United States. Ontario should learn from the U.S. experience and allow Viatical Investments with regulations to prevent such concerns rather than create a blanket ban on selling insurance policies.

Today with the aging population, it only makes sense to allow for this type of investment to be available given the number of vulnerable seniors with life insurance (or anyone terminally ill with life insurance) in need of instant cash to assist them. I would even go as far to say that anyone in a great state health should be able to do as they wish with their life insurance policy also and sell it for whatever value they feel is right for them on the free market whenever they choose. After all, if you own a life insurance policy that you have been paying premiums on, it’s yours. Why should the government tell you who you can and cannot sell it to at your free will?

Unfortunately, the effect of this Ontario prohibition would be that elderly people, or those who are terminally ill must suffer with their ailments and rely on the public health care system to save them. It’s a shame that their life insurance cheque will only be ready for them when they’re six feet under. Having a “cash advance” on this money through a Viatical Investment could extend their life and provide them and their family with better peace of mind to know that everything was done to extend their loved one’s life.

Those who argue that commerce and death should not be combined fail to realize that funeral homes, crematoriums, estate lawyers and florists already earn money off the death of others. The fact is that people will continue to die and at greater rates than ever before given the demographic shift of baby boomers.

After all, it’s only fair for people to meet their Viatical Investor before meeting their maker and we can all make the inevitable a little bit more profitable.



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