The evolution of viatical settlements owes its origin to a crucial Supreme Court case from the early 20th century. In 1911, Justice Oliver Wendell Holmes rendered a landmark decision in Grigsby v. Russell. This case declared that a life insurance policy is an asset, and its owner possesses the right to sell it.
Dr. Grigsby agreed to perform surgery on John C. Burchard. To pay for the operation, Burchard offered his life insurance policy to Dr. Grigsby. The arrangement involved $100 and the doctor covering future premiums. This transaction made Dr. Grigsby the policy owner and beneficiary.
When Burchard died, Dr. Grigsby tried to collect the policy’s death benefit. However, the executor of Burchard’s estate contested Dr. Grigsby’s claim. The Supreme Court ruled that life insurance policies are like other assets. This decision confirmed the policyholder’s right to sell their insurance.
Despite the Supreme Court ruling, selling life insurance policies remained rare. Decades passed before viatical settlements surfaced as a notable option. It wasn’t until the 1980s that circumstances fueled the industry’s rise. A significant driver was the emergence of AIDS, a deadly disease with no cure at that time.
AIDS patients faced bleak prospects and prohibitive treatment costs. Many were relatively healthy and young but with a terminal diagnosis. The dire need for access to funds from life insurance policies became apparent. Thus, the viatical settlement industry started to take shape, meeting this urgent need.
This new market allowed terminally ill patients to sell their policies. They received a lump sum, a portion of the death benefit, while buyers took over premium payments. Buyers then collected the full death benefit when the insured passed away. This arrangement provided vital financial relief for patients during their difficult times.
Over time, medical advancements extended the lives of AIDS patients. Viatical settlements, confined to those with less than 24 months to live, fell short of helping everyone. This limitation led to the creation of life settlements with broader eligibility. Life settlements expanded assistance beyond terminally ill individuals.
State regulations govern the viatical settlement industry, varying widely. Prospective sellers must familiarize themselves with their state’s specific rules. The history of viatical settlements is ongoing, with frequent discussions about stronger regulations.
We are keenly aware of the profound impacts of these legal and medical developments on viatical settlements. Our focus is on helping clients navigate these complex financial options. We aim to empower policyholders by offering resources and expert guidance on life insurance and settlement choices. Our commitment remains to assist individuals in making informed decisions about their future.
