Viatical Settlement Guide

At Abacus, our goal is to become your trusted source for information about viatical settlements. By providing you with up-to-date knowledge, we hope to help you understand more about viatical settlements, and if this option is right for you!

Get one step closer to learning the value of your policy today!

One-Step Qualifier

Definition

Case Studies

Eligibility

Should I Sell?

Options

Policy Valuation

The Process

Regulations

Taxation

Getting Started

Viatical Settlement Guide

At Abacus, our goal is to become your trusted source for information about viatical settlements.

Get one step closer to learning the value of your policy today!

One-Step Qualifier

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What is a Viatical Settlement?

A viatical settlement is a specific type of life settlement involving individuals suffering from a terminal illness. The transaction is usually made tax-free by the IRS, as long as the insured meets specific criteria stated by a medical professional.

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.

In exchange for transferring ownership, the insured receives a cash settlement that can often be four times greater than the cash surrender value.

A viatical settlement is not a loan; it is a one-time cash transaction that results in a complete transfer of ownership in exchange for a lump sum. The money belongs entirely to the policy seller and can be spent at his or her discretion. Viatical settlements can also be in the form of a paid-up death benefit.

 

Terms to Know

  • Life Settlement – Transferring a life insurance policy from a policyholder to a third-party buyer for a cash payout.
  • Cash Surrender Value – The amount of money a policyholder receives if they cancel a policy. The total amount received is the policy’s cash value minus fees associated with policy cancellation.
  • Death Benefit – The money a beneficiary (or beneficiaries) receives upon the death of the person insured on the policy.

How Is This Option Different Than Normal Life Insurance Purchases?

Selling your life insurance policy to pay for medical needs is specifically for individuals suffering from a terminal illness. The transaction can typically be tax-free, so long as the insured meets specific criteria stated by a medical professional.

It is essentially the same as other life settlement options at its core. The significant caveat is that the insured is typically suffering from a terminal illness and has a life expectancy of fewer than two years.

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 specific 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 generally subject to taxation unless they meet IRS guidelines.

Case Studies

Sam, 75, of Boca Raton, Florida

$150,000 Policy | Abacus Offer: $90,000

Sam was recently diagnosed with stage 4 rectal cancer and needed funds immediately to assist with treatment. He had a term policy that had a face value of $150,000, and he was planning to surrender it so he could utilize those monthly payments towards his treatment. Instead, he discovered life settlements and reached out to Abacus.

After we reviewed his case, Abacus offered her $90,000, which helped him pay for the treatment plan she wanted to pursue.

Alyssa, 79, of Houston, Texas

$600,000 Policy | Abacus Offer: $390,000

Alyssa had a $600,000 permanent policy and was prepared to surrender the policy for a cash value of $2,500 from the life insurance carrier.

She was able to receive $390,000 for the policy, and the owner was able to use the proceeds to cover their medical costs because of Abacus.

Viatical Settlement Eligibility

To be eligible for a viatical settlement, the policyholder must be terminally ill or chronically ill with a life expectancy of fewer than two years.

Most types of policy types qualify for a viatical, including term life.

The average payout of a life insurance sale is 4-6 times the policy’s cash surrender value. At Abacus Life, we pay a policyholder an average of 6-8 times the cash surrender value of their life insurance policy.

Being a direct buyer, Abacus has created a streamlined process to make selling your policy fast while cutting out the middle man so we can pay you more.

Man In Wheelchair With Doctor Overlooking The View Life Settlements Settlement Viatical Senior Couple Seniors Life Settlement

When Is The Right Time To Pursue a Viatical Settlement?

For many individuals facing a terminal illness, a viatical sale can be a strong financial solution.  You may be able to cover all or part of the costs involved in your medical care, including travel, stay, and your actual medical costs. Some of the most common reasons you may consider a viatical settlement include:

You Can No Longer Afford Premium Payments

Depending on the terms of your policy, changes in the insurance market and poor policy performance could drive up the price of the premium payments you pay. Or you may have experienced an unexpected financial issue – like increased medical bills, legal issues, assisted living costs, or tax issues – that’s now stretching your budget.

 

Funds Are Needed To Pay For Medical Care Or Some Other Expense

Coping with a medical crisis while still worrying about medical bills works against palliative care and hospice goals. With healthcare costs continuing to rise, even those with excellent health insurance struggle 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.

 

Additional Money To Improve Your Quality Of Life

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.” However, many insured want to see their family enjoy their life insurance money now, rather than not being present to share their happiness.

 

If you are struggling with medical bills, having an issue keeping up with your premiums, or want immediate income, a viatical settlement could be right for you. However, we at Abacus advise that anyone considering a settlement take a close look at their life insurance and financial situation to make sure they make 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.

How Many Different Options Are There?

Retained Benefit

The Retained Benefit option means you would no longer pay any premiums and retain a portion of your benefit.

When the policy ends, beneficiaries will receive a guaranteed percentage, but you have no further obligations or payments to make.

  • Guaranteed Percentage
  • No Future Payments
RDB STORY

Traditional

The Traditional option is to sell your full life insurance policy for a cash amount above the policy’s surrender value.

You have no further obligations or claims to the policy, with all future premiums paid by the buyer.

  • Cash Lump Sum
  • No Future Payments
TRADITIONAL SUCCESS STORY

Hybrid

The Hybrid option is a combination of two, where you would sell a portion of your life insurance policy.

With this option, you receive a cash payment now, your beneficiary receives a guaranteed percentage of the benefit when the policy ends, and you have no further obligation to pay future premiums.

  • Guaranteed Percentage
  • Cash Lump Sum
  • No Future Payments
HYBRID SUCCESS STORY
Senior Man Looking At Laptop With Woman Life Settlements Settlement Viatical Senior Couple Seniors

How Much is My Policy Worth?

Each case is specific, and there is no one-size-fits-all answer. We handle each case individually and with utmost confidentiality and sensitivity, as understanding your options will require knowledge of personal details:

  • Policy Type
  • Policy Face Value
  • Age
  • Health Status

To see exactly how much your policy is worth, we recommend you to get an estimate now using our calculator or contact us at 800-561-4148 to learn more.

Settlement Calculator

Viatical Settlement Process

As a direct buyer, Abacus has created a streamlined process to make selling your policy fast while cutting out the middle man so we can pay you more. Abacus Life breaks down the method of how to sell your life insurance policy into eight simple steps.

1. Deciding to Sell

Before deciding to sell your policy, the policyholder and their beneficiaries must consciously pursue this option. That means contacting your financial advisor or the Abacus team and looking into all alternatives to ensure that it is the most beneficial solution for you.

There is no cost or obligation to accept an offer at any time.

2. Determining Eligibility

Certain specifics determine if an individual will qualify, such as premiums, the life expectancy of the insured, and the death benefit.

The information disclosed will be used by an in-house medical underwriter who will calculate the insured’s life expectancy using medical records and determine how much the policy is worth at no cost to the insured.

3. The Offer

Abacus, or the chosen buyer, would then extend an offer to the insured. The proposal would be more than the price but less than the net death benefit. The buyer must be licensed in the state in which the owner of the policy resides.

4. Acceptance

If the amount offered by the licensed buyer is acceptable to the policy seller, they can choose to accept the offer and request the required documents for review.

5. Contracts

At this time, the licensed buyer generates state-approved contracting documents.

These documents record the life settlement transaction and spell out the agreement between the seller and the purchaser. Both parties must sign and notarize the contracts.

6. Verification

Once the contracts are executed and all the required accompanying documents are received, the verification process begins. Often completed by a third party like a law firm, this verification agent will check that all the contracting forms have been completed correctly. They may also check that the policy is in full force and good standing with the insurance company.

They will verify that the funds for the purchase are in an escrow account for the policy seller.

7. Change of Ownership

Subsequently, we send a request for an ownership change to the insurance carrier. This ensures that the owner is changed from the current policyholder to the buyer or the financing entity that the buyer names as owner.

8. Funds Transfer

After the insurance carrier has confirmed that the purchaser is listed as the owner, the escrow agent is instructed to release the funds to the seller. The new owner is now responsible for all premiums, and the seller has received payment for the transaction.

This is the last step of the process and concludes the transaction. The insured is then free to use the money at their discretion.

Are Viatical Settlements Taxable?

 The transaction is usually made tax-free by the IRS, as long as the insured meets certain criteria. A medical professional, usually a doctor, confirms the terminal diagnosis.

For more information on how life insurance proceeds are taxed, visit the IRS.

Viatical Settlement 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. Here at Abacus Life, we are proud to share that we are licensed for life and viatical settlements in many states.

Abacus Life is licensed in these states:

Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wyoming

Abacus Life Licensed States For Life Settlements And Viatical Settlements
Senior Couple On Hospital - Life Settlements Bed With Woman Life Settlements Settlement Viatical

How Do I Get Started?

To get started, you can fill out our free and instant Life Settlement Calculator!

Abacus will supply you with an initial, no obligation to sell offer within 24 hours of contacting us, assuming you qualify.

Abacus Life Settlements is a licensed life settlement company that takes a client-first approach.

We don’t believe that you should wait for the industry standard 45-60 days for life-saving treatment. A Life Settlement allows you to focus on what is most important right now…healing.

Viatical Settlement Calculator

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