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Terminally ill patients who are having trouble making ends meet may have several options. Life insurance policies can have riders called accelerated benefits that pay out in the event of a terminal illness. These riders are often parts of a policy, but if you have no such coverage, then a viatical settlement might be the best option.

Viatical settlements are when a life insurance policy is sold to a company for a lump cash payment. The policyholder assigns their life insurance policy to the viatical settlement company in exchange for a percentage of the policy's face value up front. The company can then keep the policy and pay the premiums or sell the policy to another company or investor. They will collect all of the benefits upon your death.

Understanding Your Financial Options

If you or someone you know is terminally ill and struggling to pay for care, there are plenty of options available to raise funds. Sometimes insurance companies will let you borrow against the cash value of the policy without involving a third-party. If you do decide to sell your life insurance policy through a viatical settlement, make sure you have help understanding your options.

Viatical settlements are a complicated legal process, so an experienced lawyer will be able to help guide you through the process. They require time and attention from physicians, your life insurance company, accountants, or financial planners. The process isn't instant, either. State laws differ on the grace period for returning the funds from a viatical settlement, too.

The eligibility requirements for a viatical settlement depend on the individual company, but some baseline requirements to understand include:

  •  You must have owned the insurance policy for at least two years.
  • Your current beneficiary must sign a release or waiver of rights.
  • Most companies require the policyholder to be terminally ill with a life expectancy of less than two years.
  • You provide the buyer access to your complete medical record.

The settlement company will calculate risk based on your medical condition and the length of the insurance policy. The value offered depends on how much the life insurance policy is worth, your current age, and your life expectancy.

Financial Implications

Make sure you understand the full financial implications of selling your life insurance policy before you proceed with a viatical settlement. Your original beneficiary will no longer receive the face value of your life insurance policy. Most proceeds from a viatical settlement are tax-free if the life expectancy is less than two years and the viatical company is licensed. However, state tax may be owed.  For this reason, you should consult with a financial advisor or tax professional before agreeing to sell your life insurance policy.

Make sure you get multiple offers from different companies before deciding, too. Since the value you're paid out is calculated on individual factors, you will get a wide variety of offers. These companies will also make more competitive offers if they know you are shopping the policy around to multiple viatical settlement companies.



A Guide to Viatical Settlements for Terminally ill Patients
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