A viatical settlement is a specific type of life settlement that only certain applicants can qualify for. Essentially, in a life settlement, a policyholder sells their existing life insurance policy to a third-party buyer in exchange for a lump sum cash payout.
Typically, the payouts are for more than the policy’s cash surrender value but less than the net death benefit. After the life settlement transaction, the buyer becomes the new beneficiary and will receive the death benefit upon the original policy owner’s passing.
There are many reasons one might seek out a life settlement, and they can do so by either working directly with a life settlement company or by hiring a broker to find the best offer.
If one no longer needs their policy or simply can’t keep up with their premiums, then a life settlement makes perfect sense.
In the case of viatical settlements specifically, they can be a great option for those with serious illnesses to afford treatment or cover other debts.
Viatical Settlement History
Ultimately, the viatical settlement can be traced to the same origin as the life settlement: the 1911 United States Supreme Court case of Grigsby vs. Russell.
This case upheld that life insurance policies were personal property and could be sold as such. It also specified that the new investor in the insurance policy is entitled to the undiminished rights of the previous owner.
While this event can be seen as the birth of the life settlement industry, the viatical settlement industry didn’t boom until the 1980s AIDS crisis.
Viatical settlement providers exploded in popularity, and gained a morbid reputation, by advertising to the HIV community.
Patients with the virus and short life expectancies began to sell their policies, and viatical settlements were criticized for profiting off the epidemic and betting on people’s deaths.
In truth, however, many patients were able to afford treatments and significantly outlive their original life expectancy estimate thanks to their settlements.
How Does One Qualify?
In order to qualify for a viatical settlement, a patient generally must have a chronic illness that affects their daily activities and a valid life insurance policy.
Some viatical settlement companies may specify that it must be a terminal illness and may have a life expectancy requirement of two to four years. Most life insurance policies are acceptable to sell including whole, term, and group policies.
The American Life Fund Viatical Setlement Company helps cancer patients and others with serious illnesses to get money when they need it.
Potential viators can check their eligibility by filling out a brief application form detailing some information about their disease and life insurance policy.
The lump-sum payment amount can be influenced by a few factors during the viatical settlement process, but companies like American Life Fund can offer up to 70% of a policy’s value.
Factors that affect the payout generally include the face value of the life insurance policy, the price of premium payments, the type of disease the applicant has, and the stage of the disease. Once a viator qualifies, funds can be received in just a few days.
Advantages vs Other Options
One of the greatest benefits of a viatical settlement is that it provides nearly immediate access to money that can be used for anything the viator wants.
They have full financial freedom to use the money for medical expenses, alternative treatments, or even a family vacation. Even better, unlike life settlements, viatical settlements are completely free of income tax, so viators get the best price they can.
Everyone’s financial situation is different, and a viatical settlement provider can help viators pay off their debts, cover lost wages due to illness, travel, or anything else to improve their quality of life.