If you have a life insurance policy, you may be able to take out a viatical settlement or loan against your policy. There are key differences between both of these options, and you should review the differences carefully to ensure you make the right choice for your situation. Here’s what you need to know.

The Meaning of Viatical

The term “viatical” translates to “provisions for a journey”. The word is used to describe a class of transactions that allow terminally ill patients to cash in their insurance policies early. In some cases, people refer to these products as life settlements.

How Viatical Loans Work

With viatical loans, you take out a non-secure loan against your life insurance policy at a higher than usual interest rate and additional fees. The company gives you a loan based on the value of your policy and your current health conditions. In all cases, the amount of the loan is reduced to account for any future life insurance premiums that still need to be paid, plus anticipated investment returns to the lender.

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How Viatical Settlements Work

In contrast, viatical settlements are similar, but they are somewhat simpler, without loan interest or origination fees to track. With a viatical settlement, a company gives you a lump sum of money in exchange for your life insurance policy. With this option, you get all the funds you need upfront and are typically a higher payout than a loan.

If you want to set aside some money for your family or your funeral, you can do that with the lump sum payment. You don’t have to wait for the life insurance policy to cash out or hope that the loan amount exceeds the death benefit value if you “outlive” the viatical loan.

Similarities Between a Viatical Settlement and a Loan

There are also some similarities between these two products. Generally, in most cases, your credit history and credit score are not taken into account. These loans and settlements are based on the value of the life insurance policy as well as some other factors listed above. They aren’t dependent on your credit score like traditional loans. These programs also don’t take into account your employment status or your assets.

If you want to apply for a viatical settlement, contact American Life Fund today. We have a quick and easy application process that only involves two easy forms. Then, we look at your medical records, and if you qualify, we send you out documents to finalize everything.

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