What is a Viatical Settlement?
It’s quite possible that you’ve never heard of the term ‘viatical settlement’ until this very moment. That’s because viatical settlements, while being common occurrences, aren’t widely discussed.
Many people have no idea what a viatical settlement is or how it can benefit cancer patients. A viatical settlement takes place when a person with a serious illness, such as cancer, sells their life insurance policy for funds. It’s a viable financial solution for cancer patients who often need a large amount of financial assistance for items such as medical treatments or living expenses.
Who Provides Viatical Settlements?
Viatical settlements are usually done through a viatical settlement broker or a viatical settlement company. A broker is someone who negotiates a viatical settlement on behalf of the insured. A viatical company is an organization that’s licensed to purchase the life insurance policy directly. Another key difference is that a broker normally charges the insured a fee to help negotiate an offer while a viatical settlement company does not.
Who Qualifies for a Viatical Settlement?
If you have a life threatening illness such as cancer, ALS, etc., and an existing life insurance policy, you may qualify for a viatical settlement. All policy types are accepted including whole, term, group, and universal. Keep in mind that viatical settlement companies have different qualifications. Each company takes various factors into account including the type of disease, the stage the disease is in, the type of policy you have, the policy’s face value, policy premiums, and other relevant information. They use these factors to calculate the offer amount presented to the patient.
How Do You Get a Viatical Settlement?
You start by getting a free estimate. Then, you talk with a counselor about your questions or concerns. You submit a short, two page application along with any medical records or policy information you have on hand. Then, the viatical company reviews and verifies this information. Once confirmed, the company presents you with an offer for your policy. If you accept the offer, you sign and send back the final paperwork. Within days, the company becomes the new policy owner and you receive a large lump sum for your policy. It’s that simple.
How do Viatical Settlements Differ from Other Cancer Financial Resources?
The main difference between viatical settlements and other cancer financial resources is the level of financial assistance available. Viatical settlements are able to provide a large sum of money since the amount is usually a large portion of an already large life insurance policy amount. For example, if someone were to sell their $100,000 policy, they could receive as much as $70,000 from that policy. Note, however, that the settlement amount varies based on the unique factors listed above. Additionally, viatical settlements are completely tax free. In contrast, when you take the cash surrender value of your life insurance policy or if you wait until your death, the proceeds of your life insurance may be subject to income tax or estate tax.
Other resources, such as those provided by nonprofit cancer organizations, usually only help with small items such as gas cards, wigs, groceries, discounts on prescriptions, and other items. In contrast, a viatical settlement can often help with numerous larger expenses.
Another option cancer patients may choose to pursue is a loan through a financial institution. While this option can provide a large amount of funds just like a viatical settlement, they tend to be extremely high-interest. In many cases, the individual may not be able to pay back the loan amount, and then, they become further in debt than they were before they took out the loan. Additionally, even if you can get a low interest loan, you have to pay the monthly payments. In contrast, with a viatical settlement, you no longer have to pay your monthly life insurance premiums so in addition to getting the settlement, you also reduce your monthly bills.
How Can You Use a Viatical Settlement?
Now, that you know the answer to the question “what is a viatical settlement”, you may be wondering how you can use your viatical settlement. Here’s the good news — there are absolutely no restrictions on the cash you receive from your viatical settlement. Once you have the funds, you can use them exactly as you like. Here are just a few of the ways that people decide to use their viatical settlements:
- Pay off medical bills
- Pursue additional treatment
- Pay for experimental cancer treatments, not covered by insurance
- Travel to receive medical care
- Cover their wages so they can quit their jobs or take time off
- Allow their family members to take time off work
- Pay for home care
- Get extra help around the house with cleaning, child care, etc.
- Reduce other debts
- Pay off their home mortgages
- Reimburse family members for their care
- Take a trip with their family
If you have an idea on how to use your viatical settlement and it is not listed here, that’s fine. Again, you can use the funds however you want. Unfortunately, financial stress can get in the way of healing and when you have a bit of extra money, you can truly focus on recovery and spending extra time with your family.
Overall, a viatical settlement is a great option for cancer patients because it provides the level of financial assistance needed without any costly fees or interest rates.
We hope this guide helps answer the “what is a viatical settlement” question for you. If you would like to learn more about the viatical settlement process and see if you qualify for one, read more about the process.
At American Life Fund, we are committed to helping our clients get the funds they need as quickly as possible. If you’d like to speak with one of our caring and dedicated counselors, please call us at 877-297-4592, or reach out to us online.
Wondering how much money you can get from a viatical settlement? Get an estimate online now.