Many older Americans struggle to understand the process and advantage of a viatical settlement. Essentially, these fiscal options are there for you if you are thinking about letting your insurance policy lapse because you no longer need the coverage or can’t afford it any longer. But there are other, more beneficial options out there.
Viaticals offer a unique financial option for these individuals, and evaluating the settlement process is something that you owe to yourself. Instead of letting a policy lapse, the life insurance policy holder (you) are able to cash in a portion of the face value in exchange for the death benefit that would be due to your named beneficiaries. When you finalize a viatical settlement, you hand over the death benefit payout, but you also shed the responsibility to pay the premiums on the account.
Simply put, a viatical settlement contract transfers the entire responsibility and eventual payout to a third party company in exchange for an average lump sum payout of around 60% of the eventual life settlement on the policy.
Viatical settlements and life settlements offer a quick payout to cover medical expenses.
A viatical settlement is the selling of a life insurance policy after receiving a terminal diagnosis with a life expectancy of two years or less remaining. This can be a scary time for an individual who has received a terminal diagnosis, but it can also be an expensive time. Visiting doctors, trips to the hospital for injections, medication, and tests can erode the remaining savings of even the most frugal patient. Whether you are insured or not, these bills can add up quickly and make a significant dent in your remaining cash assets. A viatical settlement is a great way to circumvent the financial toll of a suddenly short life expectancy.
In contrast, many life insurance policy holders choose a life settlement instead. These are viatical-based settlements that give those with a longer life expectancy, or not strictly terminal diagnoses, options when it comes to selling their life insurance policies. The viatical business is a large one, and third party viatical settlement brokers are often willing to work with clients who come with a variety of different backgrounds, medical histories, and reasons for wanting to vacate their life insurance coverage and receive some compensation in return.
One reason why a viator might choose to sell their life insurance policy benefit is to pursue experimental or expensive treatment options. For those suffering from one of many types of seizures (focal seizure, epilepsy, partial seizure, atonic seizure, or a myoclonic seizure), for instance, a viatical settlement that brings in the cash necessary to treat a particular type of seizure or epilepsy can be a Godsend when it comes to paying for hospital visits or medication.
Perhaps it’s best to keep your policy current.
A viatical settlement is a great option for many who need to pay the insurance company or improve the equity share in a real estate property—some even choose a viatical in order to enjoy a carefree, luxurious vacation with loved ones.
However, selling your policy to a broker isn’t always the best option. Some benefit more fully by continuing to pay the premiums on the policy and locking in the death benefit for their family upon their passing. For those with large debts or a mortgage responsibility that remains after they’ve gone, maintaining the death benefit can be the best way to work around estate issues in which creditors try their best to eat away at any remaining assets first. For those with large outstanding debts, creditors may actually be able to extract cash directly from your beneficiaries if you don’t have the life insurance payout to hedge against these obligations.
Making the decision to sell a life insurance policy is a big one. Make sure you have all the facts as you consider your options here.