Viatical settlements are a means for an insured person to collect life insurance payouts prior to their death. Many insured persons have loved ones that they want to leave with financial resources in the event of their death. Sometimes these plans are drastically altered by sickness, death, divorce and other unforeseeable events. Instead of leaving behind a sizeable estate to others, the insured prefers to use the proceeds to maintain their own lifestyle in the immediate future, perhaps to receive help with medical bills or some other unexpected expense.
To access the proceeds for a life insurance policy prior to death, this settlement allows a portion of the death benefit to be collected by a third party/investor who buys the policy from the insured for a discount. Life settlement company such as Harvest ACS, can be a good start to find out your options. Both the investor and the insured are subject to risks. The investor risks paying out a large sum of money and still continuing the premium payout for an unspecified length of time. The insured runs the risk of not getting the full value of his/her insurance policy and perhaps living a lot longer than expected.
A life settlement broker can explain the factors an investor considers when determining the value of a life insurance policy. Life expectancy of the insured is a major concern, because someone expected to die of natural causes versus someone with a terminal illness who has a limited life expectancy determines how long premiums will have to be paid to keep the policy in force. The more paid out in premiums, the less profit earned. Responsibility for the premiums will be assumed by the investor and must be paid until the insured’s demise. This is one more cost the investor must calculate before deciding how much to pay for the settlement. Whether the insured has a term policy, a whole life policy or a policy with cash value, each of these facts detract or add to the value of the policy. Lastly, the total death benefit of the policy determines the possible value of the settlement.
This option are ideal for insured persons 60 years of age or older. A 76 year old male who owns a whole life policy with a death benefit of one million dollars and a premium payment of $7200 annually, with no outstanding loans against their policy can obtain a settlement of 80% of the value of the policy. That’s $800,000 he and his family can enjoy during his lifetime. If the insurance owner’s goal is to live a more comfortable life prior to a terminal illness ending his life, a viatical settlement could make that quality of life a reality.
If you are considering a viatical settlement, keep in mind the factors that will determine its value to an investor. Your life expectancy, the premiums, the policy type and the death benefit all determine the value of your policy to an investor. Ultimately, these predetermined factors will dictate what you can receive in total compensation from a settlement.