What is a Viatical Settlement?

If you own a life insurance policy, you have probably heard the term "viatical settlement" thrown around. Most people who take out life insurance will never need one, but for those few who do, it can be a tremendous benefit during one of the hardest times. So what is a viatical settlement and who might need one?

To understand viatical settlements, it's important to know how life insurance works. Normally, a life insurance policy is meant to help your relatives—frequently your spouse, partner and children. It is one of the only types of insurance that does not benefit the person taking out the policy, but rather those around them. With a life insurance policy, the policy is paid out upon your death, with the money often helping relatives pay for final expenses and compensate for the loss of your income. In most cases, this is when the money is needed most.

However, sometimes money is needed more in the years leading up to death than it is when the family is grieving. For example, imagine if you were diagnosed with an illness certain to take your life—perhaps a severe form of cancer. This news would not only be tragic, it would also herald a period of intense treatment options that are almost certainly going to exceed what is covered by your health insurance. That means that in the months or years after receiving such a diagnosis, possibly the final years of your life, you will need a lump sum of money more than ever.

It's during this extremely difficult time—when medical bills today outweigh final costs tomorrow—that many people choose a viatical settlement. With a viatical settlement, you essentially sell your life insurance to an outside party. This does not cancel the policy, but it does make two important changes:

• The buyer takes over the premium payments. You never pay another cent on the policy.
• The buy becomes the beneficiary.

In exchange, the buyer pays you cash up front, so that you have the money you need to pay for medical bills and to maintain a comfortable life during difficult years. 

Viatical settlements have existed for many years and are closely regulated by insurance laws. In most cases, only someone with a life-threatening illness can qualify for a viatical settlement. In those cases, it is a big decision, but often allows a person to dramatically improve life for themselves and their family. At Asset Funding Corporation, we want to help people live comfortably and manage their expenses. Don't wait to inquire about a viatical settlement!