Viatical settlements is an arrangement where a person with a life-threatening illness sells their life insurance policy to another person or party for an immediate lump sum payment. This allows the individual to benefit from the proceeds of their life insurance policy now. Here are a few more details on this process.
The Financial Side of Viatical Settlements
When you complete a viatical settlement, you receive a lump sum payment for your policy. You don’t have to pay any income tax on the lump sum. You get to put all the money you receive directly into your pocket. The new owner then becomes the beneficiary and owner of your policy.
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.
The History of Viatical Settlements
Viatical settlements are not new. In fact, they are over 100 years old, and the process has improved significantly over that time period. In 1911, a patient in need of surgery sold his life insurance policy to his doctor. The patient got the surgery, and the doctor took ownership of the life insurance policy.
However, the patient’s family was not happy about the deal, but when they contested the arrangement, the Supreme Court decided that it is a reasonable, legal practice. In fact, Justice Oliver Wendell Holmes, Jr., delivered the opinion of the court, and he stated that it was fair to consider insurance policies to be property, and as a result, it was perfectly fine for people to sell their life insurance policies to other people or businesses. With that Supreme Court decision, 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.
Using a Viatical Settlement
If you decide to take out a viatical settlement, you can use the money you receive freely. There are no restrictions, and you don’t have to tell the viatical settlement company what you plan to do with the money.
You can use the funds to cover medical bills, but you can also explore alternative treatments or medical travel costs that aren’t covered by your healthcare plan. If you want or need to quit your job, you can use the viatical settlement as a wage replacement. Need help around the house? Then, you may want to use your settlement to hire a caretaker, a maid, a nanny, or other professionals to help you.
Some patients use their settlements to pay a friend or family member to help them — having family around when you have cancer can be very rewarding, but unfortunately, many family members can’t afford to take time off work unless you can help them financially with a settlement.
However, you can also use the money for fun. You deserve the chance to de-stress and enjoy your family. A viatical settlement can give you the financial freedom to take a family vacation or make other memories with your loved ones.
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.
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.
The Process at American Life Fund
At American Life Fund, we have a simple, 3-step process that’s easy to follow:
- Contact American Life Fund via phone or our online form and we will provide you a simple, three-page application form to complete. The application includes a one-page questionnaire asking for basic information on the insured, their policy, and their health status. Also included are a policy authorization form so we can verify the policy’s details and a HIPAA allowing us to order medical records on the insured’s behalf to verify their listed diagnosis.*
- Once the completed application is returned, if you qualify, we will provide you with an offer for your policy.
- If accepted, the necessary paperwork will be signed by both parties and funds will be provided as soon as the ownership and beneficiary changes to the policy are made.
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 our online form to see if you qualify.
*If represented, your broker is responsible for acquiring medical records from healthcare providers.
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