Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: MONDAY, October 23, 1995                   TAG: 9510230080
SECTION: MONEY                    PAGE: 6   EDITION: METRO 
SOURCE: JANE BRYANT QUINN WASHINGTON POST WRITERS GROUP
DATELINE: NEW YORK                                LENGTH: Medium

COPING WITH FINANCIAL SIDE OF TERMINAL ILLNESS

A new way to raise cash is to sell your individual insurance policy and some group policies, too. But this shouldn't be done lightly. Some companies take advantage of the sick by offering them too little money. Besides, there may be better ways of finding the money to pay your bills.

How you handle your assets, if you're facing a terminal illness, depends on life expectancy, whether you have a family to support and the sources of money on hand. Financial planner David Petersen, president of Affording Care in New York City, makes these suggestions:

Company insurance: When you leave your job, you can keep the medical coverage for 18 months (29 months, if you're totally disabled), by paying the premiums yourself. This policy may be worth more than any other asset you have. You can also convert group life insurance to an individual policy - leaving you the option of selling that policy at some future date.

Company savings plans: As long as you're working, keep contributing to a 401(k) or other tax-deferred plan. You'll then have extra savings when you leave the job. The usual 10 percent tax penalty, for money withdrawn from 401(k)s before you reach age 591/2, is waived if you're permanently and totally disabled.

Liquid assets: If you own a piece of real estate or a business that your family or heirs won't want to manage, sell it now. With that cash in hand, you may not have to sell anything else.

Cash advances on credit cards and home-equity loans: You can repay the minimum every month. Sometimes you can buy credit-life insurance that will pay off these debts at death.

Personal loans against your life-insurance policy: The policy's beneficiary may want to advance you money to help pay your bills. He'll be repaid, and more, by receiving all the policy's proceeds at your death.

Living benefits: Many insurers pay life-insurance benefits early, to policyholders with just six months or a year to live. Ask your insurance agent about it. Also ask your company, if you're still working. Some group plans offer this benefit, too.

If all else fails, Petersen said, consider selling your life-insurance policy. These deals are called ``viatical'' settlements. The word comes from viaticum, the communion given to Christians who are dying or in danger of death.

Viatical companies typically give 60 percent to 80 percent of the policy's face value to people with two years or less to live. At death, the companies, or the private investors they find, get the policy's proceeds. But in this largely unregulated business, you have to ask a lot of questions to get the best deal. For example:

Are you on Medicaid? Selling your policy may make you too ``rich'' to qualify. It may also reduce or eliminate any disability payment you're getting from Social Security.

Is the price fair? Offer your policy to several companies to see which will pay the most, financial planner Patti Drivanos of Bandfield and Drivanos in New York told my associate, Kate O'Brien Ahlers. There are two viatical associations, each of which will send you a free list of members: Viatical Association of America lists companies that buy policies directly, (800) 842-9811 or (202) 429-5129; National Viatical Association includes both direct buyers and brokers, (800) 741-9465.

Do you want to use a viatical broker? If you don't want to shop the policy yourself, you might ask a broker to do it for you. But brokers earn high commissions from the companies, up to 6 percent of the policy's face value, which reduces the payout you get.

Do you want to use a fee-only planner? These planners shop the policy but generally charge around $150 an hour in lieu of sales commissions. Because they're not motivated by commissions, they might get you a better deal.

Is your money safe? Be sure that your payment is safely in escrow, before handing over your policy to a new owner. Florida shut down the Credit Life Corp. in May, after it acquired insurance policies and then failed to pay.

Do you have to sell all of your policy? You can sell just a portion of it, reserving the rest for your heirs. You can also reserve the benefits for accidental death. The more of your policy you can keep, the better off your heirs will be.