What Is Viatical Settlement and How Does It Work

A viatical settlement is a financial transaction that allows a policyholder to sell their life insurance policy to a third party for a lump sum payment. This can be a lifesaver for people with a terminal illness or a short life expectancy.

The policyholder assigns ownership of the policy to the buyer, who then assumes all future premium payments. The buyer receives the death benefit when the policyholder passes away.

Viatical settlements are typically used by people with a short life expectancy, such as those with a terminal illness like cancer or HIV/AIDS.

A viatical settlement is a specific type of life settlement involving individuals suffering from a terminal illness.

The transaction is usually made tax-free by the IRS, as long as the insured meets specific criteria stated by a medical professional.

It's a legal and viable option for individuals suffering from a terminal illness to sell their life insurance policy for an amount that is more than the cash surrender value but less than the claim amount.

In exchange for transferring ownership, the insured receives a cash settlement that can often be four times greater than the cash surrender value.

A viatical settlement is not a loan; it is a one-time cash transaction that results in a complete transfer of ownership in exchange for a lump sum.

The money belongs entirely to the policy seller and can be spent at his or her discretion.

Viatical settlements can also be in the form of a paid-up death benefit.

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To qualify for a viatical settlement, the policyholder must meet specific criteria, including having a life-threatening illness, such as cancer, ALS, or another serious condition.

The policyholder's eligibility is assessed based on factors like the type of life insurance policy they hold and the policy amount. Our team will assess your situation to determine if a viatical settlement is the right option for you.

The evaluation process involves assessing the policyholder's life expectancy, policy value, and premium payments to determine eligibility and offer.

The provider evaluates medical records and policy details to present a fair offer that reflects the individual's specific circumstances.

Here's a breakdown of the typical viatical settlement process:

This streamlined process allows policyholders to receive immediate financial assistance during a desperate time, covering medical expenses, living costs, or other financial needs.

A viatical settlement can provide immediate cash to cover living costs and medical expenses, such as urgent medical bills and prescription costs.

To qualify for a viatical settlement, an individual must have a serious illness and their life insurance policy must have a face-value amount of $150,000 or more. Specific health conditions that may qualify a person for a viatical settlement include cancer, ALS, Alzheimer’s, dementia, and advanced heart or kidney disease.

The policyholder must also have a life expectancy of fewer than two years to be eligible for a viatical settlement. Most types of life insurance policies qualify for a viatical, including term life.

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Here are some common eligibility criteria for viatical settlements:

The average payout of a life insurance sale is 4-6 times the policy’s cash surrender value, but some companies like Abacus Life pay an average of 6-8 times the cash surrender value.

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Having a life insurance policy can be a lifesaver, especially during difficult times. Immediate cash is available to cover living costs and medical expenses, such as urgent medical bills, prescription costs, and alternative treatments.

Financial relief is also a major benefit, as it reduces the burden of high insurance premiums by converting the policy into a lump sum cash payment. This can be a huge weight off your shoulders, allowing you to focus on getting better.

Here are some specific benefits you can expect from having a life insurance policy:

This can be a game-changer for those who are terminally ill or chronically ill, as it allows them to receive a lump sum payment to help with medical expenses and improve their quality of life.

To be eligible for a viatical settlement, you must have a serious illness, such as cancer, ALS, Alzheimer's, dementia, or advanced heart or kidney disease. The policy must also have a face-value amount of $150,000 or more.

The life expectancy of the insured is a crucial factor in determining eligibility. Policyholders must have a life expectancy of fewer than two years to qualify.

You can sell most types of life insurance policies, including term life, through a viatical settlement. This can provide financial relief and improve your quality of life.

To determine eligibility, an in-house medical underwriter will review your medical records and calculate your life expectancy. This is done at no cost to you.

If you're struggling to afford premium payments, a viatical settlement may be a viable option. This can help you cover living costs and medical expenses.

Here's a breakdown of the minimum percentage of face value less outstanding loans that you can receive, based on your life expectancy:

It's essential to consider the potential loss of life insurance coverage when selling your policy. You should also be aware of the possibility that your decision to sell may change if your health or financial situation improves.

Health Status and Life Expectancy play a significant role in determining eligibility for a viatical settlement. The policyholder's medical condition, diagnosis, and treatment history are required for the application process.

Certain diseases can qualify a policyholder for a viatical settlement, including Cancer, ALS, Alzheimer's, Dementia, and Advanced Heart or Kidney Disease.

The policyholder's life expectancy is also a crucial factor, as viatical settlements are designed for individuals with a life expectancy of fewer than two years. This is in contrast to life settlements, which are designed for individuals aged 75 or above without significant health issues.

To determine eligibility, the policyholder's medical condition, diagnosis, and treatment history are reviewed. This information helps determine the policyholder's life expectancy and whether they qualify for a viatical settlement.

Here are some common conditions that may qualify a policyholder for a viatical settlement:

These conditions can significantly impact the policyholder's life expectancy, making them eligible for a viatical settlement.

Selling a life insurance policy through a viatical settlement can provide much-needed financial relief for policyholders with life-threatening illnesses.

However, it's crucial to understand the key considerations for both sellers and buyers.

Loss of Life Insurance Coverage is a significant consideration for sellers. Once you sell your policy, you no longer have the life insurance coverage it provided.

This is a personal decision that should align with your current and future needs, and your priorities may change if your health or financial situation improves.

Buyers also need to consider the Life Expectancy of the seller, which can affect the time frame of returns.

They also need to think about Premium Payments, which may still be required even after purchasing the policy.

Additionally, buyers should be aware of Liquidity risks, as viatical settlements are generally long-term investments that may not be easily sold before maturity.

Buyers should also review Valuation and Carrier Stability to ensure the accuracy of policy valuation and the stability of the insurance carrier.

Here are some key considerations for sellers and buyers:

If you're considering a viatical settlement, it's essential to weigh the pros and cons of each option. Life settlements, for example, are a viable alternative for healthy senior-aged individuals over 75 who no longer need or can afford their life insurance policy.

You have three main options to consider: the Traditional option, the Hybrid option, and the Guaranteed Percentage option. The Traditional option involves selling your full life insurance policy for a cash amount above the policy's surrender value.

The Hybrid option is a combination of two, where you would sell a portion of your life insurance policy. This option allows you to receive a cash payment now, and your beneficiary will receive a guaranteed percentage of the benefit when the policy ends.

Here are the key benefits of each option:

If you're considering a viatical settlement, it's worth exploring other options. Life settlements, for instance, are designed for healthy senior-aged individuals over 75 who no longer need or can afford their life insurance policy.

Weighing the pros and cons of each option is crucial. This will help you make an informed decision that suits your needs.

Considering life settlements can alleviate financial pressures during challenging times. It's essential to understand the implications of each choice.

If you're unsure about which option to choose, take some time to research and compare the benefits. This will help you make a well-rounded decision.

You can also consider the following options:

When considering your life insurance policy options, you might be surprised at the number of choices available. There are actually three main alternatives to explore.

The Traditional option is to sell your full life insurance policy for a cash amount above the policy's surrender value. You'll receive a lump sum payment, and the buyer will take over future premiums.

The Hybrid option combines two of these alternatives, offering a cash payment now and a guaranteed percentage of the benefit when the policy ends. This option also eliminates your future premium payments.

You can also opt for the Guaranteed Percentage, where you receive a guaranteed percentage of the benefit when the policy ends, with no future payments or obligations.

Here's a quick comparison of the options:

A viatical settlement can provide immediate financial relief, allowing you to focus on your well-being and medical care. You can use the lump sum payment to cover medical costs, including travel and stay expenses. The proceeds typically range from 50% to 80% of the death benefit.

You can no longer afford premium payments if you're experiencing financial difficulties, such as increased medical bills, legal issues, or tax issues. The insurance market and policy performance can also drive up premium prices. Changes in the insurance market can make it difficult to afford premium payments.

Some financial resources are available to help you navigate the process, including the Abacus Life Settlement Calculator and the Learning Center. You can also find information on brokers and agents, as well as the Abacus Scholarship.

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Once the policyholder accepts the offer, the closing process begins. This involves analyzing and signing closing documents.

The contract, a legal document, outlines terms such as payment details and cancellation rights. The policyholder must carefully review these terms to understand their obligations.

Transferring policy ownership is a crucial part of the closing process. This ensures a smooth transition of the policy from the old to the new owner.

The lump sum payment provides immediate financial relief, allowing the policyholder to focus on their well-being and medical care. This payment is typically made in full at the time of closing.

Viatical settlements are designed for individuals suffering from a serious or chronic illness, while life settlements are for those aged 75 or above without significant health issues.

A key difference between the two is the payout, with viatical settlements generally offering higher payouts due to the shorter life expectancy of the policyholder.

The payout for viatical settlements typically ranges from 50% to 80% of the death benefit, while life settlements offer a range of 30% to 70% of the policy's value.

Policy age and value requirements also vary, with viatical settlements typically requiring a minimum policy age of two years and a minimum policy value of $150,000.

Here's a comparison of the two:

Overall, understanding the differences between viatical and life settlements can help policyholders determine which option is best suited to their unique circumstances and financial needs.

You can access a wealth of information on viatical settlements through the Abacus Life Settlements Learning Center. The Abacus Scholarship is also available for those who want to learn more about this financial option.

Financial resources are crucial when considering a viatical settlement. You can find brokers and agents who specialize in life settlements through the Abacus Life Settlements website.

The Abacus Life Settlement Calculator is a useful tool for determining the value of your life insurance policy. This can help you understand the financial implications of a viatical settlement.

Viatical settlements can provide immediate financial relief, allowing you to focus on your well-being and medical care. The lump sum payment provides a tax-free gain, as long as the insured meets specific criteria stated by a medical professional.

The following resources are available to help you navigate the financial aspects of a viatical settlement:

You can sell your life insurance policy without tax penalties if you're terminally ill and have less than two years to live.

In some cases, if you're chronically ill but not terminally ill, the funds you receive from a viatical settlement may only be tax-free if you use them to pay for qualified long-term care services.

The IRS allows proceeds from a viatical settlement to be received as a tax-free gain, but only if the insured meets specific criteria as stated by a medical professional.

You'll need to consult a tax advisor to ensure you're meeting all the necessary requirements for a tax-free viatical settlement.

Under the Health Insurance Portability and Accountability Act, viatical settlements are income tax-free to the seller.

A medical professional, usually a doctor, confirms the terminal diagnosis, which is a requirement for a tax-free viatical settlement.

Here's a summary of the tax implications of viatical settlements: