Viatical Settlement Eligibility

Viatical settlements are meant for life insurance policyholders who are terminally ill, usually meaning they have less than two years to live. To be eligible for a viatical settlement, you must meet that requirement and have a policy large enough to make a settlement worthwhile.

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    Christian Simmons

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    Christian Simmons is a financial writer who has worked professionally as a journalist since 2016. As an active member of the Association for Financial Counseling & Planning (AFCPE), Christian prides himself on his ability to break down complex financial topics in ways that Annuity.org readers can easily understand.

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  • Updated: September 6, 2022
  • This page features 2 Cited Research Articles
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APA Simmons, C. (2022, September 6). Viatical Settlement Eligibility. Annuity.org. Retrieved October 6, 2022, from https://www.annuity.org/selling-payments/viatical-settlements/eligibility/

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Chicago Simmons, Christian. "Viatical Settlement Eligibility." Annuity.org. Last modified September 6, 2022. https://www.annuity.org/selling-payments/viatical-settlements/eligibility/.

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Who Is Eligible for a Viatical Settlement?

You may be eligible for a viatical settlement if you are terminally ill. The idea behind a viatical settlement is that you sell your policy to a third-party company in exchange for an immediate lump sum of cash. The company will receive the death benefit when you die.

Since you are not expected to live long after you sell the policy, the company does not spend much time paying premiums on the policy. The company’s goal is to make a profit since the lump sum you receive is less than the total death benefit.

You will also likely need to have a policy with a death benefit large enough for a transaction to make sense for both you and the company. Smaller policies are often not ideal for viatical settlements since the lump sum you receive would be very small and the third party does not stand to make much money.

You could also be eligible for a viatical settlement if you are chronically ill, but there are typically strict qualifications for this and there could be tax implications depending on how you spend the payout.

What Kind of Paperwork Is Required?

To receive a viatical settlement, you will likely have to fill out an application form, as well as other paperwork. This typically includes providing medical information, such as your medical records. You also may have to take a medical exam.

The third party interested in buying your policy may need a doctor to confirm that you are in fact terminally ill and have a life expectancy within a certain range to qualify for a viatical settlement.

In addition, you must provide information about your life insurance policy along with any other relevant information.

What Types of Life Insurance Policies Qualify For Viatical Settlements?

Many types of life insurance policies can qualify for a viatical settlement. If there is a death benefit to be paid out that can be transferred to a third party, then a viatical settlement is usually possible.

Remember that the lump sum payout you receive will typically be smaller than the death benefit of your policy.

Who Is Allowed to Offer a Viatical Settlement?

Viatical settlements involve a third party. This means that a company or provider outside of the entity that issued the policy is interested in buying it.

Providers and companies that deal with viatical settlements are typically registered and licensed. They are regulated on the state level, and your state may grant you access to the list of licensed companies.

It is critical to make sure you are working with a company that is licensed to buy policies. If a company or provider requires you to buy a policy in order to sell, then it could be considered fraud.

Make sure you are dealing with a legitimate and reputable company, especially before handing over any personal information or making a big financial decision.

Are There Other Federal or State Eligibility Requirements for Viatical Settlements?

Most of the regulations and requirements for viatical settlements and the companies that participate in them exist at the state level. So, the options available to you will vary by state.

Did You Know?
Viatical settlement companies and regulations are typically determined at the state level.

The main requirement that you will see consistently is the status of your health. Healthy people are not eligible for a viatical settlement anywhere. If you are healthy but still nearing your end stages of life, then you may qualify for a life settlement instead.

Remember that you must adhere to the laws and requirements of your state when seeking out a viatical settlement.

If I’m Not Eligible For a Viatical Settlement, What Are My Other Options?

If you are not eligible for a viatical settlement, there are still some other options available to you. If you are ineligible because you are not terminally ill, then you could look into a life settlement.

Life settlements operate similarly to viatical settlements, allowing you to sell your policy in exchange for a lump sum. While you can still be eligible if you are healthy, you typically must have a low life expectancy and a valuable policy.

You should also check if your life insurance policy has any options for an accelerated death benefit or terminal illness rider. You may be able to get access to some or all the death benefit while alive without having to deal with a third party.

Depending on the type of policy you have, you may also be able to get cash directly from your policy.

Please seek the advice of a qualified professional before making financial decisions.
Last Modified: September 6, 2022

2 Cited Research Articles

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  1. Cornell Law School. (n.d.). Investor Protection Guide: Viaticals. Retrieved from https://www.law.cornell.edu/wex/investor_protection_guide_viaticals
  2. U.S. Securities and Exchange Commission. (n.d.). Viatical Settlements. Retrieved from https://www.investor.gov/introduction-investing/investing-basics/glossary/viatical-settlements