Everything You Need to Know about Viatical Settlements

By on July 27, 2019

A viatical settlement is selling a terminally ill person’s life insurance to a third party or a viatical settlement provider. They will get an amount that is higher than what they would have got for canceling the policy, although lower than the value of the death benefit. If you have life insurance and you have a terminal illness, learn more about viatical settlements as it’s something that could be useful for you.

Difference between a viatical settlement and a life settlement

While the two both involve the selling of life insurance to a third party, there is a difference between them. A viatical settlement is for those diagnosed with a terminal illness and who are expected to live for a maximum of two years. It doesn’t matter how old you are since anyone can be stricken by a deadly condition anytime. A life settlement, on the other hand, is only for a specific age range, and that is often from 65 to 70. You don’t need to have a terminal illness to get a life settlement. 

Life insurance with terminal illness coverage

Some life insurance companies offer terminal illness coverage that will provide compensation if you are diagnosed with a critical illness, while still keeping your death benefits available for your beneficiaries. However, not all providers offer this, and not all policyholders get this coverage. Moreover, other insurance companies offer accelerated death benefits or ADB that allow the policyholder to make an advance from the death benefit. It will then be deducted from the amount that the beneficiaries will receive. 

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The latter is similar to a life settlement, but the insurance company provides it instead of a third party. Plus, the buyer of the life insurance will get the death benefits upon the death of the original policyholder, instead of the beneficiaries getting them like with ADB.

When to consider a viatical settlement?

You may consider a viatical settlement if there is no longer anyone to benefit from your life insurance upon your death. For instance, your original beneficiary may have passed, or you no longer want to leave them with anything for a personal reason. Another reason is if you need a large amount of money for ongoing medical expenses, carer pay, and to make your remaining days as comfortable as possible. You may also use the money that you will get to make the most out of your life by doing things that you have always wanted to do, like traveling.

Steps for a viatical settlement

The first step is to find a viatical settlement company to buy your life insurance. Show them a copy of the insurance and fill out the necessary forms to complete the application. They will process the application to determine your eligibility, as well as the amount to be offered. If you agree with the offer, then you can sign the agreement, and the insurance company will get a notification about the settlement. The insurance company will confirm it, and you will get the money from the settlement company. 

The complete viatical settlement process can take from 4 to 10 weeks depending on various factors such as the assessment period on the end of the settlement company and how responsive the insurance company is.


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Everything You Need to Know about Viatical Settlements