What is a Viatical Settlement?
A viatical settlement is a form of life settlement that is specifically for individuals suffering from a terminal illness. The life settlement industry was initially brought about by the need for viatical settlements during the AID’s epidemic. Patients utilized their settlements to fund what turned out to be incredibly effective HIV/AID’s treatments. Eventually, the life settlement industry expanded into what it is today, but viatical settlements are still a popular option.
Viatical settlements have become incredibly well regulated in the past decade. A majority of states require specific licensing and practice strict oversight to ensure customer safety. We are proud here at Abacus of our long business history without a single regulatory issue. Consumers are better protected than ever before in the viatical and life settlement industry. There are several viatical settlement companies, many of them without proper licensing and short company histories. Don’t fall victim to a viatical settlement company that doesn’t have your best interest in mind. We are more than happy to connect you with reputable viatical companies even if you decide not to work with us directly. Since Abacus Settlements is one of the only viatical settlement providers the industry, we are often able to make the strongest possible offer in every case.
When is the Right Time to Pursue a Viatical Settlement?
For many individuals that are facing a terminal illness, a viatical settlement is a strong financial solution. Patients and their families can receive immediate funds to pay for medical expenses or quality of life experiences. We commonly see clients use their funds to experience their “bucket lists”. Many of our clients want the opportunity to see their family enjoy their life insurance money now, rather than not being present to share in their happiness. Selling a life insurance policy to a third party can even have a positive effect on health. The financial and medical relief often leads to a marked increase in life expectancy, as seen in our multi-year client longevity study, here.
Coping with a medical crisis while still worrying about medical bills actively runs counter to the goals of palliative care and hospice. With the cost of healthcare continuing its year-over-year rise; even people with excellent health insurance are struggling to keep up with medical expenses.
If you are struggling to afford medical bills, having issues keeping up with your premiums, or just want immediate income, a viatical settlement is likely right for you. That being said, we encourage clients that can easily handle their premiums to take a serious look at their life insurance situation. If there is no need for an immediate lump sum of cash, we typically suggest that they don’t pursue a life settlement at all. Realistically, the greatest payout you can receive from a life settlement is from receiving the full death benefit when the insured passes. However, your insurance company wants your policy to lapse, they will either encourage you to take a low ball surrender value or lapse the policy altogether; contact us first!
Financial Aspects of a Viatical Settlement
A life settlement is the sale of one’s life insurance policy to an institutional investor operating in the secondary market for life insurance. At its core, a viatical settlement is a financial transaction between you (policyholder) and a licensed provider. The provider and policyholder are the only two parties that are mandatory in a viatical settlement, meaning working directly with a provider is the best way to maximize your settlement value. Companies that act as intermediaries often take up to 30% of your settlement value, and lead generation or marketing companies take a share as well. Read our What Sets Abacus Apart page for more information on the structure of the life and viatical settlement industry.
What many consumers do not realize is that a life insurance policy is considered personal property, which means it can be sold just like any other asset. The proceeds from the sale of a life insurance policy can be as high as 80% completely tax-free. Instead of selling your home or personal belongings, why not sell your life insurance policy?
The high cost of medical treatments for those with terminal illnesses 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 United States. Faced with undergoing treatment while dealing with the stresses associated with the cost of care. Modern patients are trying everything from clinical trials to crowdfunding websites, to making appeals for help on social media. The issue is that these methods are often not enough to cover their medical bills, and websites like GoFundMe typically take 5-20% per donation for themselves.
How Does a Viatical Settlement Differ from a Life Insurance 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 viatical settlements are exclusive to those with a short life expectancy.
- 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, regardless 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 insurance 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 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.
The First 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.
Alternative Ways to Pay for Medical Care
Viatical Settlements aren’t the only financial option for those suffering from a critical illness. The Abacus Settlements Paying for Medical Treatments page is a constantly updated list of financial options that we personally approve. If you know of a company or individual that should be included, please contact us directly.