How does a viatical settlement work?
A viatical settlement is an arrangement where a person with a terminal illness sells their life insurance policy to another person or party for more than its cash surrender value but less than its net death benefit. This allows the individual to benefit from the proceeds of their life insurance policy while they’re still alive. Here are a few more details on this process.
The Financial Side of Viatical Settlements
When you decide to take a viatical settlement, you receive a lump sum payment for your policy. The new owner then becomes the beneficiary and is responsible for paying the insurance premiums for the remainder of your life.
The History of Viatical Settlements
Viatical settlements are not new. In fact, they are over 100 years old, and the process has improved over that time. In 1911, a patient in need of surgery sold his life insurance policy to his doctor for $100. When his family contested the arrangement, the Supreme Court decided that it was fine. Justice Oliver Wendell Holmes, Jr., delivered the opinion of the court, and he stated that it was just to consider insurance policies to be property. With that judgment, the viatical settlement industry was born.
For nearly 80 years, viatical settlements were relatively rare, but the AIDS epidemic changed that, as people with HIV began selling their policies to cover their medical costs and other expenses. At that point, states began to standardize the viatical settlement process to protect the interests of policyholders. That helps to ensure the process is as safe as possible for you.
Tips to Consider Before Getting a Viatical Settlement
If you are thinking about taking out a viatical settlement, keep the following tips in mind to help ensure that you get the best deal for your financial situation.
- Get quotes from several companies to make sure you get the best offer.
- Consult with your tax advisor to determine whether or not your settlement funds will be tax-free. In most cases a viatical settlement is deemed tax-free.
- If you’re in debt, make sure that your creditors don’t claim your settlement.
- If you’re on public assistance, double check that the payout won’t affect your benefits.
- Be honest on your application so that you don’t risk losing your settlement.
- Make sure to put the funds in an escrow account for your protection.
The Process at American Life Fund
At American Life Fund, we have a simple, step-by-step process that’s easy to follow.
- Contact American Life Fund via phone or our online form and we will provide you a simple, two-page form to complete.
- Once the information you’ve provided is verified, we will provide you with an offer for your policy.
- If accepted, funds will be provided in as little as 1-2 weeks.
If you have questions regarding the viatical settlement process, the experts at American Life Fund are available to answer any questions you may have. To learn more, contact us today at (877) 421-0148 to speak with a dedicated counselor or you can use the online tool to get an estimate.