Viatical Settlements
- Reviewed By George
- Posted June 21, 2022
- Last Updated June 23, 2022
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, ClearVue 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. ClearVue 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.
ClearVue 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.
Get A Life Settlement Quote Today
Why Would Someone Get a Viatical Settlement?
If you are interested in the option, ask if any of the following are true:
1. The Insured has large medical expenses
The insured is going through medical challenges that are expensive to cover. Maybe they would even lapse the policy because it’s getting too expensive to pay both the medical costs and the premiums. Many people turn to this solution to cover their cost of medical expenses.
2. The Insured wants a better retirement
Extra funds provides for a better retirement. Life is short and it only happens once, so if you want to live well… a viatical can fund a retirement lifestyle that you’ve always wanted.
3. The Insured no longer needs the policy
Are the children all grown up and financially independent? Do they still need the parent to continue to provide the safety net of your life insurance? Has the spouse passed on before the insured?
In addition, we can also provide viatical settlements services for business-related life insurance policies such as key-man policies.
Laws and Regulation of Viaticals
In 1911, the U.S. Supreme Court declared that life insurance is a person’s personal property, and that the policy owner can assign its ownership at their own discretion. This unlocked another option for people in need of funding to cover medical expenses – as an alternative to surrendering their life insurance. Insurance is regulated on a state basis, so depending on the state the policy owner lives in, there may be different laws surrounding the transaction. Viatical settlements are a heavily regulated industry overseen by the state insurance commissioner.
Viatical Settlement Providers
Settlement providers are licensed Policy buyers that ClearVue works with. After the viatical settlement is complete, the provider or other institutional investor will continue to pay the ongoing premiums directly to the old insurance company. Upon the insured’s death, the policy buyer is paid out the policy by the old insurance company.
Frequently Asked Questions
What is ClearVue?
What affects my offer?
Your offer is mainly dictated by your age, health, life insurance premium costs, and policy value. Offers are not based on financial standing or credit scores.
What is the average viatical settlement offer?
Offers can range from 30% to 70% of the death benefit in cash. It is totally dependent on your health, the cost of the insurance and the buyer's cost of capital. Each situation is unique.
How long does the process take?
The entire sale process can take approximately 3 to 8 weeks. Most of this time is collecting medical information and transferring the ownership of the policy with your life insurance company.
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We help a lot of people.
When someone is looking for a life settlement, they generally find ClearVue. In 2020, policy sellers received an average of about 21% of their policy’s face value* in a life settlement payout.
