DEFINITION of 'Clean Sheeting'

The fraudulent act of purchasing a life insurance policy without disclosing a pre-existing terminal illness or disease. This type of fraud is often done with both the knowledge of the purchaser and the agent involved.

BREAKING DOWN 'Clean Sheeting'

In cases of clean sheeting, the policy is often sold shortly after it is purchased in a viatical settlement, but the money received is a lot less than what a legitimate settlement would yield. This is because there is a higher chance that the fraudulent policy will be rescinded. This type of fraud provides huge gains for the person who buys out the purchaser because he or she is able to buy the policy at a large discount, somewhere around 10% of the policy's face value.

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