What is the duration of the prohibition on viatical settlements for life insurance?

The prohibition on viatical settlements for life insurance lasts for a duration of five years. This timeframe is significant in the context of life insurance policies because it is intended to deter potential abuses and ensure that viatical settlements are a well-considered decision made only after a reasonable period has elapsed following the purchase of the insurance policy.

Viatical settlements involve the sale of a life insurance policy to a third party, usually at a discounted rate, which can complicate the original terms and intent of the policy. By prohibiting such settlements for five years, regulators aim to provide stability and protect insurers from premature sales that could reflect negatively on the life insurance market. This duration also allows policyholders ample time to reconsider their options and ensure that they are making informed financial decisions regarding their life insurance.

In contrast, shorter prohibitions may not offer the same level of consumer protection, while longer ones could unduly limit the policyholders’ options and flexibility.