AIDS and the Law Page: 12 of 24
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AIDS AND THE LAw
gation to tell you that your policy has lapsed for nonpayment. Once
your policy has lapsed, it will be very difficult for you to obtain cover-
age. However, if your policy lapses and is reinstated immediately by
paying all past due premiums, you will be able to keep the policy but
the lapse would likely cause the contestability period to begin again.
This means your insurer has the option of refusing to pay and claiming
misrepresentation for up to two years from the time of the lapse.
Is there any time limit on an insurance company claiming misrepre-
sentation ?
Yes. In the case of life insurance, once the policy has been in effect for
two years, the insurance company can no longer claim misrepresenta-
tion.
If I've had the same policy for more than two years, is there any prob-
lem with purchasing more coverage?
Yes. Buying more coverage may restart the contestability period for the
entire policy, not just the additional coverage. This would once again
allow the insurer to claim misrepresentation.
VIATICAL SETTLEMENTS
What is a viatical settlement?
A viatical settlement is a private transaction in which the owner of a life
insurance policy (the insured) sells the policy to a buyer while the in-
sured is still living.
How does a viatical settlement work?
While the insured is still alive, the buyer gives him/her an amount less
than the policy's full value. Upon the death of the insured, the buyer
cashes in the policy at its full value and makes a profit. If the policy
requires a monthly payment of premiums, the buyer pays the premiums
between the time of purchase and the death of the insured. In order to get
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AIDS and the Law, pamphlet, Date Unknown; (https://texashistory.unt.edu/ark:/67531/metadc1457499/m1/12/?rotate=270: accessed July 17, 2024), University of North Texas Libraries, The Portal to Texas History, https://texashistory.unt.edu; crediting UNT Libraries Special Collections.