Viatical Settlements

What is a Viatical Settlement?

A viatical settlement is essentially the same thing as a life settlement, in process. A viatical life insurance settlement is the sale of your life insurance policy as it is in a life settlement. The difference is that you would have to be deemed terminally ill to have the transaction treated as a viatical life settlement. The fact that you are terminally ill will allow you, depending upon your state guidelines, to treat the proceeds as a tax free advance of your death benefit.

If you are chronically or terminally ill, you may very well have certain policy provisions or riders on your life insurance policy that allow you to receive an advance of some of your death benefit. You should always start by checking your life insurance policy to see if it has an accelerated death benefit provision.

Life Expectancy in Viatical Settlements

An important part of the viatical settlement process is life expectancy. A viatical settlement company has a life expectancy provider assess your life expectancy based upon your medical information and your physician’s prognosis of your health. You may discover that if your life expectancy is greater than six months, and you have no cash surrender value; that your ability to get an advance on your life insurance policy death benefit is likely non existent.

Viatical settlement companies attempt to fill the void. A viatical life settlement provider is the buyer or represents the buyer in the transaction. They fill order requests for viatical settlement investors and in some cases purchase life insurance policies for their ‘house’ account.

Viatical Settlement Brokers

The viatical life insurance settlement broker has a fiduciary responsibility to you and you would be called the viator. You have the right to go directly to a viatical provider, but most people choose to use the services of viatical settlement brokers. If you decide you want to shop or should shop your life insurance policy in the secondary life insurance market, you should attempt to arrive at a rough value first and remember that beyond regulated fair practice standards, the viatical provider does not represent your fiduciary interest.

A viatical broker, if they are a good one, will likely shop your policy to most if not all of the investors that would likely have an interest. Viatical brokers will confirm that the buyers or their providers are licensed to do business in your state and should be able to show you multiple offers.

An important function that happens behind the scenes is attaining your life expectancy factor (LE.) The life expectancy provider assesses your life expectancy based upon your medical information and your physician’s prognosis of your health. Once the life expectancy provider has provided an LE, the viatical providers can then do their internal calculations on your policy to arrive at a value in the viatical market.