What are Viatical Settlements?

Viatical settlements refer to agreements wherein a policyholder sells their life insurance policy to a third party, typically an investment company or a viatical settlement provider, for a lump sum payment. This option is especially relevant for those who are terminally ill and in need of immediate cash, as they can receive a portion of the policy’s death benefit while still alive. The investor becomes the beneficiary of the policy and assumes the responsibility of continuing premium payments until the insured passes away.

This understanding highlights the unique financial arrangements that viatical settlements provide, distinguishing them from other insurance-related options like policies that require no premium payments, loans against cash value, or coverage that guarantees full death benefits. Each of these alternatives serves different functions and is structured differently from a viatical settlement, which specifically involves the sale of the insurance policy itself.