Viatical Settlements Can Be A Surprising Source Of funds To Fight Terminal Illnesses
For many individuals facing a terminal illness, a viatical settlement can be the optimal solution to assist patients and their families with funds to pay for medical expenses or to finance quality of life experiences while the patient is still living.
Coping with a medical crisis while worrying about medical bills can run counterproductive to the goals of palliative care and hospice. With high insurance deductibles and expensive co-pays, even those with health insurance coverage still struggle to keep up with medical bills and other expenses.
That’s why many consumers today are exploring alternative sources of funds to finance their care, including ways to access the value of their life insurance policies through either a viatical settlement or a life settlement.
A viatical settlement is the sale of one’s life insurance policy to an institutional investor operating in the secondary market for life insurance. For those with a short life expectancy of less than 24 months, accessing the value of a capital asset such as one’s life insurance policy by way of a viatical settlement can be the ideal solution for those who have run out of other options and need immediate cash for medical bills.
The high cost of medical treatment for those with terminal illnesses often forces many patients and their families to incur debt, or even lose their homes. As noted by CNBC, a recent study found that the lack of financial resources for medical bills is the leading cause of personal bankruptcies in the U. S.
Faced with undergoing treatment while dealing with the stresses associated with the cost of care, today patients with limited financial resources are exploring all possible solutions ranging from crowdfunding sites, to fundraising appeals on social media, to entering free clinical trials. Still others who have had some degree of success with Internet fundraising are researching alternatives to crowdfunding due to transaction fees which can range from 5-20% per donation.
What many consumers may not realize is that a life insurance policy is considered “personal property” that can be sold just as any other asset. The proceeds from the sale of a life insurance policy – which can be as high as 80% of the death benefit – is often an unexpected source of cash to help terminally ill patients and their families finance medical care, or provide funds for travel and other enjoyable activities while they are still living.
How does a viatical settlement different from a life settlement?
Although the transaction processes are very similar, viatical settlements differ from life settlement transactions in a number of ways:
- In a life settlement transaction, the seller is not required to be terminally ill.
- While the average age for a life settlement is a senior in their late 70s, a viatical settlement may apply to anyone with a terminal illness and limited life expectancy, irrespective of age.
- Depending on the nature of the seller’s terminal illness, the proceeds from a viatical settlement can range from 50% to 80% of the death benefit.
- With a life settlement, the proceeds from the transaction may represent a lower percentage of the death benefit, but can range from 10% to 80% of the policy’s face value depending on the seller’s life expectancy.
- According to the IRS, the proceeds from a viatical settlement are generally excluded from income (for tax purposes) if the insured is terminally or chronically ill. However, with regard to life settlements, the IRS has issued guidelines indicating that the proceeds from a life settlement may be subject to taxation depending on certain factors.
While pursuing a viatical settlement for one’s life insurance may be an uncomfortable thought for some, many consider it an unexpected blessing that eases their financial burden.
What’s the next step?
To pre-qualify your life insurance policy, we encourage you to use our confidential Online Qualification Tool. Or, if you prefer to speak with one of our representatives, simply call us at (800) 561-4148.