Viatical Settlements: An Overview

Viatical Settlements: An Overview

Wondering what a viatical settlement is, or how one may benefit you? A viatical settlement, commonly/often referred to as known as a life settlement, is the sale of an existing life insurance policy to a third person. Ownership of the policy is transferred from the original owner to a new owner for a lump sum. The original policy holder receives an amount of money that is significantly higher than the policy’s cash value (but lower than the actual death benefit). The new owner then assumes the policy (sometimes called a “viatical life insurance” policy) and the responsibility for making premium payments on it.

You should know that while “viatical settlement” and “life settlement” are often used interchangeably, a viatical settlement generally refers to a transaction that involves a policy holder who is terminally or chronically ill. A life settlement, on the other hand, involves a policy holder who is typically over age 65 and who has had a change in health status. Often, however, a viatical settlement and a life settlement are used to refer to the same general transaction — the sale of a life insurance policy to a third party for a lump sum.

Read on for a closer look at the viatical settlement process. We’ll cover how a viatical settlement company or viatical broker can help you obtain the highest amount of money for your life insurance policy.

What Is the Viatical Settlement Process?

Once you’ve decided to consider selling your life insurance, you’ll have to locate potential buyers. It’s smart to enlist the assistance of a viatical broker to sell your policy. He or she can help you negotiate a higher payout for your policy than you might receive on your own.

The viatical settlement process typically includes the following steps: 

  1. You provide your policy to your viatical settlement broker. Your broker will determine whether an offer can be made on the policy, and what its potential may be.
  2. If your policy can be sold, you’ll complete an application that includes your health history and current health status. You’ll have to provide the names and contact information for doctors and other medical professionals you’re currently seeing.
  3. After submitting your policy and application, your broker will estimate your life expectancy. Assuming that you meet all qualifying standards under your state’s law, your broker will obtain bids or offers on your policy from possible purchasers (also called viatical settlement providers). Whether you accept an offer is up to you.
  4. If you accept an offer, the proceeds of the sale are placed in escrow until the transaction is completed. Your life insurance company will change the ownership and beneficiary of the policy. Once this has occurred, the proceeds of the sale are released to you. Numerous factors determine how quickly you can sell your life insurance policy. However, it typically takes about one to three months to complete all of the steps of the transaction.

Choose IMS Settlements as Your Viatical Broker

IMS Settlements can help you determine whether a viatical or life settlement is an option for you — and how to ensure you receive the highest amount of money possible for your policy. We’ve been helping financial professionals and life insurance policy owners maximize the value of their existing policies for years and can make the policy pain- and worry-free for you. Contact us to learn more.