Viatical Settlement Companies

Viatical life settlement companies are investment companies that buy life insurance policies from terminally ill patients for a percentage of the full value. This transaction is called a viatical settlement.

While life insurance provides financial protection for your loved ones when you die, some terminally ill individuals might need access to the money while still alive. If you accept a viatical settlement, you get an immediate lump sum payment to use however you choose. The company pays any continuing premiums and receives the full amount of the death benefit.

Most states have legislation in place that covers viatical settlements. The National Association of Insurance Commissioners (NAIC) drafted a Viatical Settlements Model Act in 2001 and have amended it several times since.

Viatical settlements are similar to life settlements in that you sell your life insurance policy to a third party at a discount in exchange for an immediate payment. However, in a viatical settlement, the seller — also known as the viator — is terminally ill. Viatical settlement taxes also differ from those of a life settlement.

If you decide to sell your life insurance policy, a licensed viatical settlement company or broker will collect detailed health and policy information from you during the application process. When all the information has been verified, you will receive a buyout offer. If you accept, the buyer will pay the agreed-upon amount within a short period, take over the payments of any premiums and collect the full death benefit.

Viatical settlement companies became prevalent during the AIDS crisis of the 1980s. The practice gave many people immediate access to money they needed to pursue treatment. Companies usually buy policies for less than their ultimate value but more than their surrender value. Above all, you get access to that money immediately and can use it however you choose.

Choosing a viatical settlement is a major financial decision, so consider consulting with a trusted financial advisor and your beneficiaries first. Below are some other things to consider before determining the best viatical life settlement company for you.

State governments usually offer directories of approved viatical settlement companies working within your state’s boundaries. Some of the major names are listed below.

When pursuing a viatical settlement, you’ll want to work with a licensed viatical settlement broker or viatical settlement company. Though the two often work in tandem, and both are licensed under state laws, they are not precisely the same thing.

A viatical settlement company is an organization that buys life insurance policies from sellers and makes its profit from the death benefit.

A broker is an organization or individual that acts as an intermediary between viators and settlement companies. Brokers are paid by fee and/or commission.

A viatical settlement is a sensitive and personal decision, one that is not necessarily appropriate for every person or situation. Before opting for a viatical settlement, you’ll want to discuss all the ramifications with a trusted financial or legal advisor, as well as family and your original beneficiaries.

If you do not want or are not eligible for a viatical settlement, there are other alternatives to discuss with your insurance broker or provider.

Whatever you choose, be sure you understand any tax implications before determining whether it’s right for you.