Reasons To Get a Viatical Settlement

Viatical settlements can be helpful to those who are terminally ill by offering them an immediate lump sum of cash. That cash can be used in a lot of different ways. The seller may be able to put it toward medical bills relating to their condition or may be able to pay off outstanding debt. Selling your policy may also be a way out of paying unaffordable premiums.

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    Christian Simmons

    Christian Simmons

    Financial Writer and Certified Educator in Personal Finance

    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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    Savannah Pittle

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    Savannah Pittle is an accomplished writer, editor and content marketer. She joined Annuity.org as a financial editor in 2021 and uses her passion for educating readers on complex topics to guide visitors toward the path of financial literacy.

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    Thomas J. Brock, CFA®, CPA
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    Thomas J. Brock, CFA®, CPA

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    Thomas Brock, CFA®, CPA, is a financial professional with over 20 years of experience in investments, corporate finance and accounting. He currently oversees the investment operation for a $4 billion super-regional insurance carrier.

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  • Updated: June 23, 2023
  • 4 min read time
  • This page features 2 Cited Research Articles

What Are Some of the Reasons Why Someone Should Get a Viatical Settlement?

If you are terminally ill and have a life insurance policy, a viatical settlement can offer you a straightforward way to cash in on that policy while you are still alive.

The process works by you selling your policy to a provider or company. In exchange, they will give you a significant lump sum of cash. They then own the policy and, when you die, its death benefit will be paid to the company.

There are several different scenarios that may lead to having interest in the potential payout from selling your life insurance in a viatical settlement.

Paying Debt

If you have a terminal illness and are seriously in debt, then a viatical settlement could help to offer you a way out. Remember that the lump sum that you receive will likely be significantly less than the death benefit attached to your policy.

But since many life insurance policies include a significant benefit, the lump sum will likely still be a significant amount of money. This immediate cash can offer you a quick and straightforward way to get out of debt.

There is essentially no expense from your side of the transaction. You sell the policy and receive the payout.

No Longer Need Life Insurance

You may be interested in a viatical settlement if you are terminally or chronically ill and no longer need life insurance. You may have purchased the policy at a time when you had family or a beneficiary that would have needed the death benefit if you died.

If those circumstances have changed for whatever reason and you no longer have a beneficiary or family member who would need that money when you die, it may make sense in some cases to opt for a viatical settlement.

This allows you to get a lump sum of money for your own use that you can have while you are still alive, instead of it going to someone else after you die.

Health

Many terminal illnesses come with serious expenses. Medical bills and the cost of care can quickly overwhelm some Americans.

A viatical settlement offers a way to get immediate cash to pay for those expenses. Since viatical settlements are available to those who are terminally ill, you should qualify for one if you are dealing with a terminal health condition.

But opting for this route does come with a cost, since the company you sell your life insurance policy to will then receive the death benefit when you die instead of your family.

If you are thinking about taking a viatical settlement because of costs that you can’t handle, make sure you have considered all of your other options.

According to the Maine Bureau of Insurance, you can also check to see if you can get an accelerated death benefit from your life insurance policy instead of selling it. You could also check to see if there is any cash value to your policy.

Need Money for Various Expenses

You may have pressing expenses that are separate from medical bills or paying off debt. The payout from a viatical settlement could be put towards those expenses.

Remember that the trade off is that your beneficiaries will no longer receive the death benefit from your policy when you die. And you also will only be eligible for a viatical settlement if you are chronically or terminally ill.

Life Insurance Premiums Have Become Unaffordable

One issue that you may run into is that you can no longer afford to pay your life insurance premiums. If you are terminally ill, then a viatical settlement could help to solve this problem.

When a provider or company purchases a life insurance policy from you, it takes on everything that comes with the policy. That means that it is responsible for paying any future premiums.

Opting for a viatical settlement has the double benefit of getting you off the hook of paying premiums and also giving you a lump sum of cash.

You Want to Pay Off Your Mortgage

Depending on the size of your life insurance policy, the lump sum you receive from opting for a viatical settlement could be used to help pay off your mortgage. If this is a pressing issue, then a viatical settlement could be a fast way to get cash.

But remember that your family or beneficiaries no longer receive the death benefit once you sell your policy. If you are terminally ill, it could make more sense for your family to use the death benefit to pay off the mortgage after you die.

Remember that the death benefit will be worth significantly more than the lump sum you would receive from selling the policy.

Please seek the advice of a qualified professional before making financial decisions.
Last Modified: June 23, 2023