The Jewish Ethicist: Living Benefits
How can the terminally ill tap into their life insurance?
Q. Some terminally ill patients are in desperate need of cash despite having life insurance policies worth a fortune. Shouldn't they be able to tap into these assets?
A. A fascinating letter from a reader brought this subject to my attention. There are many people who due to age or disease seem to be nearing the end of their lives, and are in desperate need of money to make their lives a bit longer or more comfortable. Some of these people own life insurance policies which pay out hundreds of thousands of dollars at their death, which is expected in only a few years. Various ways have been discussed to help them realize their life insurance policies.
I don't believe that Jewish law dictates any specific position on this issue, but I do believe some remarkable precedents from Jewish law can help provide some valuable perspective.
One obvious way for people to benefit from their life insurance policies is merely to sell them. In many places it is permissible for people to sell their policies to companies who specialize in this business, which are known as "viaticals". Yet in some jurisdictions these sales are restricted, out of the fear of various abuses.
The concern for abuse is understandable. A basic principle of insurance is that the beneficiary needs an "insurable interest," basically meaning that he is insuring against a personal loss and not merely betting that disaster will strike. Among other things, this lessens the chance that a person has an actual interest in disaster. As I explain to my economics students, how secure would you feel knowing that some stranger just took out a million dollar policy on your life?
However, this doesn't have to mean a total ban on viaticals. Jewish law has an ancient and hallowed form of life insurance known as a ketubah, which grants the wife a substantial sum of money whenever her husband dies. However, the ketubah can be sold, and few restrictions are placed on the sale. (1) In Jewish law, I have found the concern for "betting on disaster" on death benefits only in the case of children being cared for by beneficiaries who are not members of the immediate family. (2)
There has also been concern that some companies use their position to extract overly generous terms from the policy owners. I can't really evaluate this claim, but it does seem to me that it could be resolved by some kind of regulation short of banning the sales altogether.
Another proposal for helping these needy individuals is to enable them to turn directly to the insurer to borrow against their policy or obtain an advance. A few insurers have policies enabling this kind of flexibility, while others are resistant.
Jewish law has a precedent for encouraging this kind of flexibility. The usual rule is that a person cannot sell anything that is not in his possession, even if he has every expectation that it will enter his possession. For this reason, a person can not sell his inheritance while the parent is alive. However, the Sages made a special regulation allowing selling part of the estate when the parent is already dying, "because of the dignity of the parent", in order to ensure that essential burial and funeral expenses will be available. (3) Encouraging an arrangement which would enable the policy holder to take advantage of part of the insurance (which is like an inheritance as it becomes available only after his death) in order to promote his dignity and comfort in his final days seems to me a logical parallel.
This topic seems a bit arcane, but I thought it was worthy of treatment for a number of reasons. Some people may have these options already available, due to lenient laws or insurer policies, but not be aware of them. Perhaps this article will enable them to avail themselves of an additional option to lighten the burden of age or illness. In other places, it may be that the obstacles to enabling some of these options (viaticals or insurer advances) are minor, but there is a need for a bit of political will which perhaps more coverage will bring. Not least, I discuss the topic because it shows some of the remarkable precedents we find for modern-day issues in the wellsprings of our tradition.
SOURCES: (1) Shulchan Arukh Even HaEzer 105. (2) Babylonian Talmud Ketubot 102b. (3) Babylonian Talmud Bava Metzia 16a.
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