Viatical/ Senior Life Insurance Settlement: The Hidden Truth

A senior life insurance settlement or viatical, is a process in which the insured sells the right to name the beneficiary on his or her insurance policy in exchange for a cash settlement. The cash settlement often exceeds the amount the insured has paid into the policy but is less than the death benefit. That difference in payout is the attraction many investors have to viaticals.

Advantages of a Viatical

The advantage of a life insurance settlement for the insured is obvious: immediate access to funds which would other wise only be paid at death. If the insured is suffering from a fatal disease and has only a short time to live, early access to these funds can be crucial. Because of the aging population in the United States, early settlements on life insurance policies are becoming more common. Your policy may even have an accelerated benefits clause.

Disadvantages of Viaticals

The biggest disadvantage of viaticals is that it changes the actuarial data for insurance companies, who base their costs on an average number of people who let their policies lapse or do not collect their benefits. Since viaticals prevent a certain number of policies from lapsing that otherwise would, payouts are higher. This can increase the cost of life insurance for everyone.

Furthermore, the purchaser of your life insurance becomes the beneficiary, and you have no access to anything more than the payment they make to purchase the life insurance. Without proper planning, this can put your family at risk.

Other Options

Before considering a viatical settlement through an investment firm, talk to your life insurance agent. Your policy may already include an accelerated benefit, or you may be able to take out a loan against the cash value of the policy without sacrificing the benefits your family may need when you die.

If you do decide to proceed with a viatical settlement, be cautious. Don't fall for high pressure pitches or feel you must accept an offer. Even if you initially agree, you can change your mind. Make sure the company you choose actually has cash available for an immediate payout. You can check with your state's department of insurance to find out the status and reputation of settlement companies who make you an offer. Check with your attorney general's office to make sure there are no consumer complaints against the company before signing any agreements.


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