We provide this free financial resource to visitors of the Community Room of SeniorSSuperStoreS in an effort to keep baby boomers, seniors and the elderly informed of matters that can affect their health and lifestyle.

Did you know that you can sell the death benefit of your life insurance policy? Did you know that you can buy the life insurance benefit of someone else's policy? Although this sounds sort of morbid, there are some situations in which this makes some sense for some people.

The concept of buying the life insurance benefits of someone else's policy has been around awhile. It started with buying out the death benefits of the terminally ill, mainly those with AIDS. AIDS victims sold their policies and received a discounted amount of money to make their last years or months more comfortable. Despite these noble motives, the industry has fallen victim to con artists and disreputable business people who took advantage of the owners of the policies and tainted the process.

The process is called "viaticating" and the business is called viaticals, a term that comes from the Latin word "viaticum," which means "money for a journey." In this case the money is to sustain the traveler on his last journey.

A viatical settlement allows the terminally ill (or the extreme elderly, as the case may be) to sell their policies, at a discount from the face amount, before they die. This way, the owner gets the personal use of a portion of the death proceeds rather than leave the proceeds to their beneficiaries, heirs or estates.

The policy is purchased at a discount by the viatical company, which in turn bundles the policies and sells them to investors. For example, the policyholder may sell his $100,000 policy for $80,000 to a company that resells the policy to an investor for $88,000. The insurance company that issued the policy pays the investor $100,000 when the insured dies. But remember that in order for the policy to remain in force, the new owner must continue paying the premiums. If the seller lives too long, the buyer can end up paying too much in premiums - thus diluting his investment return.

Generally, the industry is unregulated, except for a few states. Florida, which was a hotbed of viatical fraud where fraudulent operators bilked both investors and the insurance companies, is only one of the few states to begin regulating the industry.

Fortunately, the honorable operators in the industry are making a sincere effort to restore a good name by forming two trade associations which are encouraging self-regulation. The National Viatical Association (NVA) and the Viatical and Life Settlement Association of America (VLSAA) list their members and have adopted codes of ethics.

The industry is now evolving into not just buying policies from the terminally ill and/or the extreme elderly, but by buying life insurance policies from healthy and younger individuals. The insurance industry calls these "life settlements."

Sometimes people have accumulated wealth and resources to the extent they no longer need the insurance. In some situations, family, domestic splits, poor investment returns and changing estate circumstances have forced people to cash out of these policies and invest the money elsewhere, provide domestic settlements, or simply have money to make ends meet.

According to some industry experts, the value of one's life settlement depends on a number of factors, including the size of the policy, the age of the seller and the health of the seller.

Ironically, the factors affecting the value of your life settlement are contrary to the ones that applied when you first purchased the policy. At that time, the better your health and your prospects of living longer, the lower your premium. When looking for a life settlement, the poorer your health and the greater your expectations of dying, the better your settlement.

Selling your life insurance can add comfort to final years or release funds that are tied up in policies your survivors won't need. But shop around and tread carefully and slowly before rushing to take advantage of these opportunities.