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! 

4 Reasons to Sell your Life Insurance Policy

Have you ever found yourself wondering whether or not you can sell your life insurance policy? The answer is "yes." Some people don't know that an insurance policy is considered property and, as such, can be bought and sold.

When a policy is sold, the term used to describe this action is usually "life insurance settlement." When the owner of the policy officially sells it, all the rights and responsibilities are transferred over to the new owner. That person is then responsible for making all of the premium payments until the insured person dies. When that happens, the beneficiary collects the full benefit amount.

But why would a person sell their life insurance policy in the first place? Some may think that it defeats the purpose of the endeavor, but there are many good reasons that people decide to sell. Here are some of the most common reasons explained:

To Pay for Medical Expenses – Many seniors live on fixed incomes and rising healthcare costs can create a financial burden. Often, Medicare doesn't cover all of the expenses, leaving seniors responsible for paying the difference -- something they may not be able to afford. Selling their life insurance policies in exchange for cash offers seniors (as well as people who have been diagnosed with illnesses) the opportunity to pay their medical debts and lessen the financial stress in their lives.

Policy is in Danger of Lapsing – If a person missed payments (and will be unlikely to manage them in the future) and the policy is in danger of lapsing, then selling the life insurance is a good option. After all, if the policy lapses, the owner walks away with nothing. It's better to just sell the life insurance policy and get something out of the deal.

Premium Payments are no Longer Affordable – Sometimes people's financial situations change -- people lose jobs, property taxes go up, seniors may lose some income, etc. In these cases, policy holders may no longer be able to afford to pay the premium, and selling the insurance may be the best course of action.

To Provide a Monetary Gift to Family Members or Charity – Sometimes people choose to sell their life insurance policies simply because they want to give money to family or charities while they are still living.

In these tough economic times, asking yourself the question "can I sell my life insurance policy?" doesn't seem like such an unreasonable thing to do. It's a great way to make money to pay down debt, and to unload excess stress and anxiety.

FAQ's for Selling a Life Insurance Policy

More and more life insurance policy holders are hearing about the concept of being able to sell their existing policy for a cash payout.  While there are plenty of opportunities available, there are still some aspects that everyone should be aware of; check out these common questions to get answers!

I'm 42 and in great health; will someone purchase my policy?

The standard answer to that question would be no.  The types of life insurance policies that are purchased are generally from those who have a serious illness.  The other group that would be considered are from senior citizens that are around 75 to 80 years of age and over.

How long does my policy have to be in effect?

A life insurance policy needs to be at least two years or older in order to be considered for purchase. 

What is the best way to sell?

There are different companies around that will purchase life insurance policies via intermediaries and other methods; however the most efficient and effective way to sell is with a company that deals directly with the customer. 

If I have further questions, whom should I speak with beforehand?

It is recommended to seek a reputable life settlement funder, or a broker if preferred, or speak to their insurance agent. Speak with your tax professional before proceeding may also be helpful, since by law, the companies that purchase life insurance policies do not have the ability to legally advise of anything within the process. 

If you are one of the thousands of individuals asking "Can I sell my life insurance policy?", hopefully these FAQ's helped you understand the process a little better.  If you are in need of cash, and have an unwanted life insurance policy, consider selling today.