At American Life Fund, we understand that a terminal cancer diagnosis can bring many challenges, including financial ones. If you need funds to pay for medical bills, living expenses, or other costs associated with your diagnosis, a viatical settlement may be an option. However, it’s important to understand the pros and cons of a viatical settlement and determine if it’s the right choice for your unique situation.
There is nothing easy about being diagnosed with a life-threatening illness.
Receiving a diagnosis inevitably impacts every aspect of one’s life, from the physical to the emotional, psychological, and financial. Caring for a serious illness is expensive—and many patients become worried about how to afford it. Many may even worry about what will happen to their family or loved ones due to their illness and the financial burdens it can cause.
Regardless of your motivations or needs, you might find yourself looking at various options for accessing cash to get you and your family through this trying time. One often-overlooked resource for funding is your life insurance policy.
A life insurance policy is considered an asset you own, meaning insurance policyholders can sell their life insurance for a lump-sum cash payment, also known as a viatical settlement.
Unlike life settlements, viatical settlements are designed for insurance policyholders with life-threatening illnesses, reduced life expectancies, or chronic health issues.
Here’s how it works:
Patients with life insurance policies can enter agreements with third-party buyers to sell their life insurance policy in return for a lump-sum cash settlement (more than the cash value of the life insurance policy but less than the death benefit).
The life settlement company takes over by paying the monthly insurance policy premiums and receives the death benefit after the seller’s passing.
Additionally, with a viatical settlement, the funds are tax-free and non-regulated, meaning YOU decide how they are spent.
Not only can you pay towards your medical expenses, the cost of living expenses, or even a luxurious vacation with your loved ones. As the settlement holder, the freedom and the choice are uniquely yours!
But what are the cons? Here’s our list of pros and cons of a viatical settlement.
Viatical Settlement Pros
Deciding to cash in your life insurance policy is a major financial decision. However, in many circumstances, the pros outweigh the cons.
Here’s why a viatical settlement may be the right choice for you and your family:
- You’ll receive your funds quickly, within a matter of weeks. Once you’ve reached out to a company that intends to sell your policy, you’ll go through a verification process, review your offer, and complete the necessary paperwork. Once you receive your settlement, you’ll have complete access to your money to spend as you see fit.
- You’ll no longer have to pay monthly premiums. With mounting medical bills and outstanding debts, every dollar counts. Eliminating one monthly payment could make a big difference in your financial situation.
- Your viatical settlement funds are yours to use however you choose! Your broker, buyer, and life insurance company do not place any restrictions on how you can spend your settlement.
- With a viatical settlement, your family can share the proceeds of your life insurance settlement with you. In other words, everyone, including you, can enjoy the money.
- Speaking of family, a viatical settlement can give you more time to spend with yours. A viable settlement can make a dream vacation, time off, or even early retirement possible by granting you access to money you wouldn’t otherwise have.
- Viatical settlement proceeds are tax-exempt, meaning you won’t pay taxes on your funds. However, it’s still a good idea to consult your tax advisor when considering any settlement.
- Your settlement amount will be more than you would receive if you were to surrender your policy for its cash value. Typical offers range from 50-70% of the face value of a policy.
- Oh, and did we mention peace of mind? The alleviation of financial stress that a viatical settlement can offer to a patient and their family is truly a gift worth celebrating. Because let’s face it, when you’re not stressing over how to afford treatment, you can focus on the things that truly matter.
If you’re considering selling your life insurance policy, American Life Fund is here to help. For us, the most important thing is alleviating the financial burden associated with life-threatening illness care, reducing stress, and enabling you to spend more time on the things that matter.
Through our hassle-free application process, American Life Fund will help you get an immediate cash offer for your insurance policy.
Viatical Settlement Cons
When making any major financial decision, it is important to consider all potential aspects. Let’s continue to weigh the pros and cons to determine if a viatical settlement is the right choice for you.
Some potential drawbacks of a viatical settlement include:
- Your beneficiaries will no longer receive the face value of your life insurance policy as a death benefit when you pass away. Depending on your family’s needs and financial situation, it may or may not make sense to keep your policy for payout to your loved ones after you pass.
- If you have any creditors, they may make claims against your lump-sum viatical settlement payment. To avoid this, ensure you’re up-to-date on all your creditor payments, so there’s no need to collect any outstanding debts.
- Sometimes, a viatical settlement can make you ineligible for public assistance programs like Medicaid or food stamps. Keep this in mind if these are programs you rely on.
- The medical community may discover a cure or life-prolonging treatment for your serious illness. While this would be a personal blessing for you and your family, it could mean you live many years without any life insurance coverage. Your serious medical history could make you uninsurable and unable to take out a new policy in the future.
- Speaking of medical history, you should know that sometimes the buyer of a viatical settlement is entitled to periodically check in on your health condition — although no medical exam is required to qualify for a viatical settlement.
Viatical Settlement Best Uses
By now, you may be asking yourself what some of the best uses are for a viatical settlement.
Here are some of the most popular ways to make the most of your viatical settlement:
- Even with insurance, proper treatment care for a serious illness is much more expensive than many of us can afford. This is where your viatical settlement comes in–you can use these funds to cover the necessary costs of your treatment.
- You can also use your viatical settlement to help supplement travel costs for medical treatments, reimbursement for lost wages, medications, home health care, etc.
- Let’s be honest; there are other ways you may want to spend your viatical settlement and afford your necessary care. Maybe you want to check those last few things off your bucket list–like that family trip you always said you’d take but never did (you know, the one). Or perhaps you’d enjoy a second honeymoon to spend quality time with your spouse.
- Maybe you’d like the opportunity to pay off existing financial obligations like a mortgage, credit card debt, or even student loan debt. A viatical settlement makes becoming debt-free a possibility.
- Another option you have with your viatical settlement is to prepay monthly household bills so that you won’t have to worry about making ends meet. You could also create a financial safety net for your family or spouse.
Is a Viatical Settlement Right for You?
If you’ve been diagnosed with a life-threatening illness and are considering if a viatical settlement is right for you, it’s always a good idea to reach out to a company specializing in this type of financial transaction. Dealing with your diagnosis is hard enough; you don’t want to worry whether the company you’re working with is reputable and gives you the best value on your settlement.
Look for a company that will speak with you one-on-one and understands your situation’s sensitivity. You’ll also want to ask about their confidentiality policies. Because your medical records and necessary personal information will be reviewed and verified, the company should have internal and external safeguards to protect your details.
To see if your current life insurance policy qualifies for a viatical settlement, contact us at American Life Fund for a free consultation. American Life Fund specializes in viatical settlements for cancer patients and strives to make the application and settlement process hassle-free, confidential, and immediate.
Viatical Settlement Eligibility Requirements
Most individuals with a chronic or life-threatening illness and an existing life insurance policy qualify for a viatical settlement. The policy can be term, whole life, universal, group, or joint.
For a policy to be eligible, it must have been in effect for at least two years and have a face value of a minimum of $100,000.
If you meet these criteria but still aren’t sure about your particular situation, you can find out instantly if you qualify using our easy online form in just a couple of minutes.
Frequently Asked Questions about Viatical Settlement Pros and Cons
Who benefits from a viatical settlement?
Patients seeking extra financial resources to fund the cost of their care and treatment for a serious illness are likely to benefit from a viatical settlement. Additionally, patients who are interested in having access to their own funds to use however they’d like, are likely to benefit from the advantages offered by a viatical settlement. Patients and their families also benefit by having access to cash now, instead of later.
Is a viatical settlement ethical?
A viatical settlement allows patients’ to make a decision on how they want to spend their own money, thus putting the power back into their hands.
How much do viatical settlements pay?
Typically 50-70% of the patients’ insurance policy’s face value is paid in a viatical settlement.