What is a Viatical Settlement?


What is a Viatical Settlement?

A viatical settlement is a financial transaction in which the owner of a life insurance policy sells the policy to a third party for a lump sum of cash. The seller, known as the viator, is typically someone who is terminally ill and expects to die within two years. The buyer, known as the investor, is typically an individual or institution that is looking to profit from the death benefit of the policy.

The price of a viatical settlement is typically a fraction of the face value of the policy. The amount of the settlement depends on a number of factors, including the insured’s age, health, and the current interest rates.

Viatical settlements can provide a number of benefits for the viator, including:

  • Access to cash. The viator can use the proceeds from the viatical settlement to pay for medical expenses, living expenses, or other financial obligations.
  • Peace of mind. The viator can have peace of mind knowing that their loved ones will be financially secure after their death.
  • Tax benefits. The viator may be able to take advantage of tax benefits associated with viatical settlements.

However, there are also some risks associated with viatical settlements, including:

  • The policy may not pay out. If the viator does not die within the expected two years, the investor may not receive the death benefit.
  • The investor may not be able to sell the policy. If the investor is unable to sell the policy, they may lose money on the investment.
  • The viator may be subject to fraud. There are unscrupulous companies that prey on people who are considering viatical settlements. These companies may make false promises or misrepresentations about the amount of money the viator will receive or the tax implications of selling their policy.

If you are considering a viatical settlement, it is important to do your research and work with a reputable company. You should also speak with a financial advisor to get their advice on whether or not a viatical settlement is right for you.

Here are some additional tips for considering a viatical settlement:

  • Get multiple quotes. There are many companies that buy life insurance policies, so it is important to get multiple quotes before making a decision.
  • Be prepared to negotiate. The initial offer from a viatical settlement company may not be the final offer. Be prepared to negotiate to get the best possible price for your policy.
  • Read the fine print. Before you sign any contracts, be sure to read the fine print carefully. This includes understanding the fees involved, the tax implications, and the risks involved.

If you have any questions or concerns about viatical settlements, you should speak with a financial advisor.