Viatical Settlements

What Is a Viatical Settlement?

A viatical settlement is the sale of an existing life insurance policy by someone who has been diagnosed with a terminal or chronic illness. The policyowner receives a lump-sum cash payment that is greater than the cash surrender value but less than the death benefit. The buyer takes over premium payments and eventually collects the death benefit.

Viatical settlements were created to give people facing serious illness a way to access the value of their life insurance while they are still living. The cash can be used for medical bills, treatment costs, living expenses, or anything else the policyowner chooses. There are no restrictions on how the money is used.

The key feature of a viatical settlement is that the insured person has a shortened life expectancy, typically two years or less. This is what distinguishes a viatical settlement from a standard life settlement, where the insured may be healthy but simply no longer wants or needs the policy.

Viatical Settlement vs. Life Settlement: What Is the Difference?

The two terms are often used interchangeably, but there are important differences:

In simple terms: every viatical settlement is a life settlement, but not every life settlement is a viatical settlement. The difference comes down to the health of the insured person.

Who Qualifies for a Viatical Settlement?

To qualify for a viatical settlement, you generally need to meet these criteria:

• A terminal or chronic illness diagnosis: The insured has been diagnosed with a condition that significantly shortens life expectancy, typically to two years or less. This includes conditions like cancer, ALS, advanced heart disease, and other serious illnesses.
• An eligible life insurance policy: Universal life, whole life, variable life, and convertible term policies can all qualify. The policy must be in force, with premiums current.
• A policy face value of $50,000 or more: Some buyers will consider policies with lower face values for viatical settlements, since the shorter life expectancy makes smaller policies economically viable.

If you are not sure whether your situation qualifies as a viatical settlement or a life settlement, call Allan. He will listen to your situation and give you an honest assessment of your options.

How Much Can You Receive?

Viatical settlement amounts vary based on several factors:

• The face value of the policy
• The insured's life expectancy as assessed by medical underwriters
• Ongoing premium costs the buyer will need to pay
• Current market conditions and buyer demand

Because the insured has a shortened life expectancy, viatical settlements typically pay a higher percentage of the policy's face value than standard life settlements. In some cases, the settlement can be 50% or more of the face value.

Settlement outcomes vary based on age, health, policy type, and market conditions. Past results do not guarantee future outcomes. Allan will give you a realistic estimate during your free consultation.

Tax Treatment of Viatical Settlements

Viatical settlement proceeds may be tax-free under certain conditions. If the insured is terminally ill (certified by a physician as having a life expectancy of 24 months or less) or chronically ill (unable to perform certain activities of daily living), the proceeds may be exempt from federal income tax under the Health Insurance Portability and Accountability Act (HIPAA).

However, tax laws are complex and subject to change. State tax treatment may differ from federal treatment. We strongly recommend consulting with a qualified tax advisor to understand how a viatical settlement would affect your specific tax situation.

This website does not provide tax, legal, or financial advice. Nothing on this page should be interpreted as tax advice.

How the Process Works

The viatical settlement process is similar to a life settlement, but typically moves faster because of the medical circumstances involved:

• Step 1: Call Allan. Allan will personally review your situation, your policy, and your diagnosis. No intake team, no handoffs.
• Step 2: Allan evaluates your policy. With 50 years of insurance experience, Allan can quickly assess your policy's potential and give you a realistic estimate.
• Step 3: Allan shops every buyer. He contacts multiple licensed buyers directly and makes them compete for your policy. More competition means a better offer for you.
• Step 4: You get paid. The highest offer wins. You accept, sign, and receive your lump-sum payment. Viatical settlements can often close in 30 days or less.

Alternatives to a Viatical Settlement

A viatical settlement is one option, but it is not the only one. Depending on your situation, you may also want to consider:

• Accelerated death benefit: Many policies include a rider that allows you to access a portion of the death benefit while living, if you are terminally ill. Check with your insurance company.
• Policy surrender: You can surrender the policy for its cash value, though this is typically the lowest value option.
• Keeping the policy: If premiums are manageable, keeping the policy in force preserves the death benefit for your beneficiaries.
• Speaking with your financial advisor: A qualified professional can help you evaluate all options in the context of your overall situation.

Talk to Allan About Your Options

If you or a loved one is facing a serious illness and wondering what to do with a life insurance policy, call Allan. He will listen to your situation, explain your options in plain English, and help you understand whether a viatical settlement makes sense. There is no cost and no obligation for the conversation.

Allan answers his own phone. He treats every caller with the respect and urgency their situation deserves.