Diagnoses of life-threatening illnesses are financially and emotionally challenging. On top of worrying about their health, patients must also contend with the expensive treatment costs that usually accompany such diagnoses. This is where this guide to viatical settlements comes in handy.

A viatical settlement is a financial service that allows individuals to sell their life insurance policy to help pay for medical costs and other related expenses.

What is a Viatical Settlement?

A viatical settlement is a financial transaction in which the insured of a life insurance policy sells the policy to a third party. They receive a payout less than the policy’s face value but more than the cash surrender value.

The buyer then becomes the new policy owner and is responsible for paying the premiums. Viatical settlements are used by people with a life-threatening illness who need cash to pay for medical expenses or other purposes. 

Are All Policies Eligible For a Viatical Settlement?

A viatical settlement may be right for you if you meet the following qualifications:

  • Serious Illness – To qualify for a viatical settlement, the policyholder must be diagnosed with a life-threatening illness such as cancer or ALS. 
  • Policy Age – The policy must be at least two years old to qualify. 
  • Policy Value – The face value of the policy must be at least $150,000.

Elderly couple considering Viatical Settlement

What Happens to Your Life Insurance Policy?

If you take out a viatical settlement, you no longer have to worry about your life insurance policy. You don’t have to make the premium payments anymore, and you can use the cash you receive however you like. When the insured passes away, the viatical settlement company receives the payout for the life insurance policy.

Viatical Settlement vs. Life Settlement

Although life and viatical settlements may appear to be the same, there are several contrasting features of these deals.

  • Life settlements are available to people over75, while viatical settlements are those with serious illness, regardless of age.
  • Viatical settlements tend to have a larger payout than life settlements. This can benefit the policyholder because they may have expensive medical bills.
  • Most of the time, you won’t have to pay any federal income tax on the money you get from a viatical settlement. Learn more about Viatical Settlement Taxation here.
  • You can keep all of the cash. But if you get money from a life settlement instead, you’ll need to include it as income on your taxes. Please consult a tax professional before making decisions.

What About an Accelerated Death Benefit?

An accelerated death benefit (or ADB) is when an insurance company pays a living policyholder part of the death benefit if they have been diagnosed with a serious illness. While not all policies offer this option, it is something you can inquire about with your insurance company.

However, it is essential that you research this decision fully, as there are several drawbacks to consider. For example, the amount of your death benefit could be taxed, or you may not qualify for Medicaid or other assistance programs.

Guide to Viatical Settlements

Pros & Cons of Viatical Settlements

Although viatical settlements can be helpful, they are not always the best option. Weighing the pros and cons are important to see if it may work better for you than other choices.

Here are some benefits you should know:

  • You will be given a lump-sum cash payment.
  • The money can be used to pay for medical costs.
  • The cash is yours to spend on whatever you desire.
  • You no longer have to make premium payments.
  • The IRS does not tax viatical settlements.

Here are a few cons to be aware of as well:

  • You might not be qualified for Medicaid benefits.
  • Your beneficiary might not receive any money from the policy.

viatical settlement contracts

What Can I Expect From The Selling Process?

The viatical settlement process is generally straightforward. You will first need to find a viatical settlement company that you trust. Make sure to research, as only some companies are created equal.

Once you have found a reputable company, the next step is to request a free quote. This will estimate how much cash you can expect to receive from selling your policy.

The company will order a life expectancy report if you decide to move forward with the sale. This document is critical as it will be used to determine the value of your policy.

Once the life expectancy report is received and all other medical and policy information is verified, the company will make you an offer for your policy. If you accept the offer, the money will be sent to you as a lump-sum payment.

Choosing a Viatical Settlement Company

There are numerous viatical settlement companies on the market, and you need to choose the company you work with carefully. Ideally, you want to work with a company that specializes in helping cancer patients. That helps to ensure that they understand your situation and provide the help and empathy you need on this journey.

Additionally, you should look for a company that has a fast and easy process that you can start online from the comfort of your home. To see how other clients feel about the company, take some time to review client testimonials. If other people have enjoyed working with the company, that is a sign that you will benefit from working with that company as well.

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.

  • 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.

Are You Looking to Explore a Viatical Settlement?

Now that you understand the ins and outs of a viatical settlement, you can start planning. But don’t worry; you don’t have to go through this process alone.

American Life Fund is here to help you choose the best viatical settlement payout option. viatical settlement

We understand that you may be overwhelmed with your options, and we want to help you find the best solution for you and your family. Call us at 877-959-5855 or complete our simple form to find out how we can help you today. If you have any questions, our team is available 24/7.

About the Author: Lacey

Lacey is a compassionate and dedicated marketing director at American Life Fund, a leading life and viatical settlement company. Lacey has made it her mission to help patients with life-threatening illnesses and their families get the financial support they need during difficult times.

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