Options for Your Life Insurance

What is a Viatical Settlement?

A viatical settlement is a specific type of life settlement that involves individuals who are suffering from a terminal illness. The transaction is usually made tax-free by the IRS, as long as the insured meets certain criteria stated by a medical professional. At its core, a viatical settlement is essentially the same as a Life Settlement, with the major difference being the insured is living with a serious illness and has a life expectancy of less than two years. A Viatical Settlement is a legal and viable option for individuals suffering from a terminal illness to sell their life insurance policy for an amount that is more than the cash surrender value but less than the claim amount.

Below you will find a quick primer on what a Viatical Settlement is. However, we have also built an In-Depth Settlement Guide for those that want to deep dive into research on the industry. We are also always happy to answer your questions at 800-561-4148.

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1

of Americans are aware that their policy has a market value

143

BILLION is forfeited back to life insurance companies each year in the U.S.

90

of seniors state they would have considered a life insurance settlement option if they knew it existed

76

MILLION Americans will be of retirement age by 2020

Is a Viatical Settlement Right for Me?

 

The definition of Viatical Settlement is the sale of a life insurance policy for an amount that is more than the cash surrender value but less than the claim amount. On average, Abacus life provides clients with 6-8x more money than the cash surrender value. This means that you can receive up to 8x more for your policy by choosing to sell rather than surrender.

In 1911, the United States Supreme Court ruled that life insurance is personal property. Similar to a mortgage payment, with each premium payment you pay towards your life insurance policy, you build equity. In the same way as your house, you have the option to sell your life insurance policy.

Our goal at Abacus is to provide you with OPTIONS. In a time when you want to focus on healing, we want to empower you with the knowledge and finances to be able to do so with a Viatical Settlement.

“Stuart did an excellent job in handling our account. He was extremely professional and expedient. My wife and I appreciated the fact that he kept us informed and made it a very easy process for us.” – Frank Pringle

How Is This Option Different Than Normal Life Insurance Purchases?

With the cost of healthcare rising, viatical settlements can be a strong financial solution for those who are facing a terminal illness. Patients and their families can receive immediate funds to pay for medical care or quality of life experiences. Funds can be used to pay off bills or try alternative treatments that may not be covered under health insurance. Many people who are insured want to be able to see their family enjoy their life insurance money now, rather than not being present to share their happiness.

Selling your life insurance policy to pay for medical needs is specifically for individuals suffering from a terminal illness. The transaction can typically be done tax-free, so long as the insured meets certain criteria as stated by a medical professional. At its core, it is essentially the same as other life settlement options; with the major caveat being the insured is typically suffering from a terminal illness and has a life expectancy of less than two years.

While there are several different methods of securing a Life Settlement, at the top level there are four primary varieties; Traditional, Retained Death Benefit, Income For Life, and Hybrid. Each type offers a unique set of advantages that should be thoroughly considered when deciding what’s right for you. 

For a more detailed breakdown of each option please visit our Types of Life Settlements page. 

There are some other slight variations between the two. Below, you can see a comparison of the types.

Viatical

  • The insured is terminally/chronically ill.
  • The proceeds typically range from 50% to 80% of the death benefit.
  • The IRS allows proceeds to be received as a tax-free gain so long as the insured meets certain criteria as stated by a medical professional.

Senior

  • The insured is typically a senior in their late 70s.
  • The proceeds are usually around 10% to 80% of the death benefit, depending on life expectancy.
  • The funds are normally subject to taxation unless they meet IRS guidelines.

When Is The Right Time To Pursue Viatical Settlement?

 

For many individuals facing a terminal illness, a viatical sale can be a strong financial solution. Patients and their families can receive funds to pay for medical care or quality of life experiences. We commonly see clients use their funds to tackle their “bucket-lists.” Many insured want to be able to see their family enjoy their life insurance money now, rather than not being present to share in their happiness.

Coping with a medical crisis while still worrying about medical bills works against the goals of palliative care and hospice. With the cost of healthcare continuing to rise, even those with excellent health insurance are struggling to keep up with medical expenses. Viatical settlements can provide an inflow of funds that can be used to pay off bills or fund experimental/alternative treatments that may not be covered under insurance.

If you are struggling with medical bills, having an issue keeping up with your premiums, or just want immediate income, a viatical settlement could be right for you. We at Abacus advise that anyone considering a settlement take a close look at their life insurance and financial situation to make sure they are making the correct choice for themselves and their family. If you do not have an immediate need for a lump sum of cash, we suggest not seeking a life settlement as realistically, the greatest payout you can receive is the death benefit.

In contrast, if you are considering letting your policy lapse or surrendering it, contact us. We want to help you get the most out of your policy.

Regulations

 

Over the past decade, the market has become incredibly well regulated. The entire life settlement market is regulated on a state-by-state basis instead of nationally. Therefore, the responsibility falls on each state’s government to make sure that companies are behaving ethically. The majority of states do require specific licensing and practice strict oversight to ensure customer safety. Whoever you choose to work with, you should make sure they follow the correct guidelines; there are still some companies in the industry that do not operate under the appropriate licensure. Here at Abacus, we are proud to share that we are licensed for life and viatical settlements in many different states.

Next Steps

 

It is easy to find out how much your policy is worth! In as little as 24 business hours we can provide you with a policy valuation, and it’s as simple as filling out our online calculator by clicking here. We don’t believe that you should have to wait the industry standard 45-60 days for life-saving treatment.

Selling your life insurance policy allows you to focus on what is most important right now, healing.

While every provider handles the Life Settlement process differently, it really boils down to a six-step process. 

  1. Qualification 
  1. Underwriting & Pricing 
  1. Acceptance & Contracting 
  1. Verification 
  1. Change of Ownership 
  1. Funding 

For more specifics on what each step entails, please click here. 

Financial Resources

Patient Advocate Foundation Co-Pay
CareCredit
Partnership for Prescription Assistance (PRNewsFoto/PPA)
Go Fund me
PAN Foundation
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