 March 1999 - Death Watch - page 3When Betty Paxton's son learned about her viatical investments, he was suspicious. After he and his financial adviser did some digging, the suspicion turned to anger. Paxton's son discovered many risks that his mother hadn't been warned about--such as that the policyholders could outlive their life expectancies and leave Paxton without access to her money for years to come. (The insureds could live even longer than the 80-year-old Paxton.) If she tried to resell the policies before the policyholders died, she'd probably get 25% to 50% less than her original investment--if she could find a buyer. The salesman didn't explain that the 24% total return would become a smaller annualized return each year the insured people lived beyond their life expectancy--or that Paxton could even be forced to pay additional premiums to keep the policies in force. And if anyone who invested in the same policies didn't pay the premiums, the policies could lapse and she'd lose her investment. Paxton wasn't given any medical information about the policyholders until after she had invested her money. Because the policyholders wanted privacy, there was no way she could get a second opinion and verify that their life expectancies were reasonable. Paxton's son and his financial adviser even looked up the full 60 Minutes quote and discovered it was taken out of context from a 1995 program about AIDS--before medical advancements extended patients' life expectancies--but none of the people Paxton invested in had AIDS. After the Ohio Department of Insurance told Paxton's son that the agent had been the subject of several complaints for misrepresentation, he sent certified letters to Beneficial Assistance, the Baltimore, Md., company that sold the policies, asking to have his mother's money refunded because this was clearly an unsuitable investment for her. So far, he has received no response. Page 1: For more than a decade... |
