How is life settlement transaction similar to a viatical settlement transaction?
life settlements. Just like a life settlement, a viatical settlement involves a life insurance policyholder selling their life insurance to institutional investors, who then assume all premium payments and become the beneficiaries of the policy.
A life settlement differs from a viatical settlement because the insured in a life settlement is usually healthy, while a viatical settlement pertains to a sale by an insured with a terminal illness.
A viatical settlement occurs when a person with a terminal or a chronic illness sells his or her life insurance policy to a third party (a viatical & life settlement provider), for a cash payment that is less than the full amount of the death benefit. The person selling the life insurance policy is the “viator.”
Viatical settlements. cash payments made to individuals who sell their life insurance for a substantial percentage of the death benefit. provide an alternative to surrendering the policy for its cash value.
A life settlement is the sale of a life insurance policy to a third party called a life settlement provider. The owner of the life insurance policy sells the policy to the life settlement provider and receives an immediate payment in return.
The main difference between life settlements vs. viatical settlements has to do with the policyholder themselves. In general, life settlements are for healthy seniors, while viaticals are reserved for those living with a life-threatening illness, regardless of their age.
Viatical Settlements: Bottom Line
In most cases, a policy must exceed $100K in face value to be eligible for a viatical settlement. Additionally, most states require that a policy must be owned for at least two years before a policyowner can sell it. Some states require ownership of a policy for five years.
Viatical settlements enable you to sell a life insurance policy for a lump sum. Beneficiaries will not get the death benefit, but you can get money for health care and other needs. Before committing to a settlement, explore alternatives, including accelerated death benefit options with your existing insurance policy.
A viatical settlement shouldn't be considered a liquid investment because no return on the investment is received until the death benefit is paid and your interest in the viatical settlement is not readily marketable.
The difference between viatical settlements and accelerated death benefits is that with accelerated death benefits, the policyholder must continue to make monthly premium payments. With viatical settlements, the third party who purchase the policy is responsible for monthly payments.
What is the meaning of viatical?
viatical. / (vaɪˈætɪkəl) / adjective. of or denoting a road or a journey. botany (of a plant) growing by the side of a road.
The primary advantage of opting for a viatical settlement is simple: you receive immediate cash. This can be especially critical if you are facing medical bills or other significant expenses due to your terminal condition.