A viatical settlement is the sale of a life insurance policy, in exchange for immediate cash payout. This payout is almost always above the cash surrender value but below the death benefit amount. Life settlements are different from viatical settlements because they are paid out immediately.
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What Are Viatical Settlements? Definition
A viatical settlement is the sale of a life insurance policy, in exchange for an immediate cash payout. This payout is almost always above the cash surrender value but below the death benefit amount. To qualify for a viatical settlement, the insured on the policy is terminally ill with a life expectancy of under 2 years. This is opposed to a “Life Settlement”, which is the sale of a senior’s life insurance policy who is not terminally ill.
Your life insurance is an asset – and the insured can sell it just like your house or your car. When you sell your policy, you’re given an upfront cash offer. This “viatical settlement” generally can be anywhere from 30% or 70% of the value of the insured’s life insurance death benefit – however, the settlement offer will differ widely from policy to policy.
52% of Americans think life insurance is too expensive.
A Viatical Settlement Can Fund Your Healthcare Costs
As viatical settlements are meant for people with some sort of critical illness (such as cancer), it can be a smart option to keep your finances in order. Cancer treatment costs can often skyrocket, so if you would prefer to sell your life insurance policy, it is a valuable option.
With treatments as expensive as they are, you can use your life insurance to fund the treatments. It’s important to not lapse or surrender your policy before checking if you qualify for this option. If you qualify, St Ives can help you get the fair market value for your life insurance policy.
The Viatical Settlement Process
A viatical settlement can take 4 to 6 weeks from beginning to end. There are several steps in the process. St Ives will match insureds with regulated Viatical settlement providers. These are licensed companies which specialize in purchasing people’s life insurance policies. The insured can use our calculator to help figure out if you qualify, and if so, match the insured with licensed providers.
Once the insured is in contact with a provider, they will inquire about both their policy and their health. While confidential information, their health is an important part of the transaction, so there is then a diligence period where the provider will order and review copies of your medical records.
Once the diligence is complete, the provider will hopefully make you an offer for your policy. If you like the provider and agree on the offer price, the next step is to transfer ownership of the life insurance policy. This is something the provider can help take care of. In the meantime, the settlement offer will be escrowed so that you see the funds. The conditions for release of funds are a successful transfer of policy ownership.
St Ives matches you with licensed buyers to purchase your policy. It is free to get an offer from one of these licensed providers. We work with large institutional providers to make viatical settlements accessible to consumers. You can learn more about the settlement process here.
What is the Process After a Viatical Settlement?
1. The Insured Receives a Payout
The insured will get paid when the policy ownership and beneficiary is transferred to the buyer.
2. The Insured Stops Paying Premiums
Once the ownership of the policy is transferred, the insured is no longer responsible for paying premiums. The licensed provider will continue to make premium payments directly to the insurance company.
3. The Insured Is No Longer Covered
When an insured sells their policy, it then belongs to the licensed provider who purchased it. This means that when the insured passes away, their beneficiaries will not collect the death benefit from that policy – the investor will.
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When someone is looking for a life settlement, they generally find St Ives. In 2020, policy sellers received an average of about 21% of their policy’s face value* in a life settlement payout.
