What Is the Main Feature of a Viatical Settlement?

A viatical settlement is essentially a sale of a life insurance policy by a policyholder who is terminally ill or has a serious illness. This sale is made to a third party, known as a viatical settlement provider, who pays the policyholder a lump sum.

The main feature of a viatical settlement is the sale of the policy's death benefit, which can provide the policyholder with much-needed cash to cover medical expenses, living costs, or other financial obligations.

Viatical settlements typically involve policies that have a significant cash value, as the policyholder can tap into this value to receive a payment. This cash value can be substantial, often in the hundreds of thousands of dollars.

For another approach, see: Cash Advance Settlement

A viatical settlement is essentially a financial transaction where a policyholder sells their life insurance policy to a third party, known as a viatical settlement provider, for a lump sum payment.

The policyholder typically has a terminal illness or is elderly and can no longer afford the premium payments. This lump sum payment is usually a fraction of the policy's face value.

For another approach, see: Life Settlement Policy Appraisal

The policyholder receives a cash payment, which can help cover medical expenses or living costs. The policyholder's life expectancy is a key factor in determining the lump sum payment amount.

The viatical settlement provider then assumes the policy's death benefit, paying out the remaining balance to the policyholder's beneficiaries upon their passing. This process typically involves a review of the policyholder's medical records and life expectancy.

The policyholder is usually free to use the lump sum payment as they see fit, but they must disclose their medical condition to the viatical settlement provider.

A fresh viewpoint: Negotiating Medical Bills after Settlement

A viatical settlement is a way for terminally ill individuals to sell their life insurance policy for a lump sum payment. The seller relinquishes their right to the death benefit, and the buyer becomes responsible for paying future premiums.

The primary feature of a viatical settlement is that it allows terminally ill policyholders to sell their life insurance policy for a discounted price. This provides immediate cash to cover medical expenses or improve their quality of life.

In a viatical settlement, the policy seller has a projected life expectancy of no more than two years. This is a key factor in determining the settlement value.

Viatical settlement payouts tend to be higher than life settlements as they are more specialized. Typically, policyholders receive 50-70% of their overall insurance policy value.

The timing of the policyholder's death determines the investor's return on investment in a viatical settlement. If the policyholder passes away sooner than expected, the return will be higher.

Viatical settlements offer a way for individuals in the later stages of a terminal illness to get immediate cash. This can be used to cover care and ensure comfort during their remaining days.

Here are some key facts about viatical settlements:

Regulation plays a crucial role in the life settlement industry.

Forty-three states regulate life settlements, covering approximately 90% of the US population. Some states, like Maryland, refer to any life settlement as a viatical settlement.

New Mexico and Michigan only regulate viatical settlements, while Wyoming, South Dakota, Missouri, Alabama, and South Carolina, and Washington, D.C. have no regulations for viatical settlements.

The Life Insurance Settlement Association (LISA) promotes legislation and regulation in the industry and awards the Alan H. Buerger (AHB) award annually.

The Institutional Longevity Markets Association, Inc. (ILMA) regulates the life settlement and longevity marketplace.

The European Life Settlement Association (ELSA) represents European investors and sets standards for the European life settlement industry.