A viatical settlement is a life insurance policyholder's sale of their life insurance policy to a third party for more than its cash surrender value, but less than its face value. The third party becomes the new owner and beneficiary of the policy and pays the policy premiums. When the original policyholder dies, the third party receives the death benefit.
Viatical settlements are typically used by policyholders who are terminally ill and do not have a need for the life insurance death benefit, but want to receive some value from the policy while they are still alive. The policyholder can use the proceeds from the sale to pay for medical costs or other expenses. Who pays the premiums on a viatical settlement? The premiums on a viatical settlement are paid by the policyholder.
How do viatical settlements work?
A viatical settlement is a transaction in which the owner of a life insurance policy sells the policy to a third party for more than its cash value, but less than the face value of the policy. The third party becomes the new owner of the policy and is responsible for paying the premiums. When the original policyholder dies, the death benefit is paid to the third party.
Viatical settlements are typically used by people who are terminally ill and need money to pay for medical expenses. They may also be used by people who are facing financial hardship and need to raise cash.
Viatical settlements are not right for everyone. Some people may be better off keeping their life insurance policy and using it as collateral for a loan. Others may be better off selling the policy outright. And some people may not be able to find a buyer for their policy.
If you are considering a viatical settlement, it is important to understand how they work and to speak with a financial advisor to see if it is the right option for you.
Which of the following correctly describes what happens under a viatical settlement? A viatical settlement is a life insurance policy settlement in which the policyholder sells their life insurance policy to a third party for more than its cash value, but less than its face value. The policyholder receives a lump sum of cash, while the third party becomes the new owner of the policy and is responsible for paying the premiums. When the policyholder dies, the third party receives the death benefit.
When can viatical settlements be issued?
A viatical settlement is an agreement between a life insurance policyholder and a third party (viatical provider) in which the policyholder sells their life insurance policy for a cash payment that is less than the face value of the policy. The policyholder typically uses the money from the viatical settlement to pay for medical expenses or other costs associated with a terminal illness.
Viatical settlements can be issued for any type of life insurance policy, including whole life, term life, and universal life. However, most viatical settlements are issued for whole life insurance policies because they typically have a higher face value than other types of policies. In addition, whole life insurance policies do not typically have a expiration date, so the policyholder can continue to receive benefits from the policy even after it has been sold.
Who must approve viatical settlements?
The primary requirement for approving a viatical settlement is that the insurance company who issued the policy must approve the transaction. The insurance company will review the policy to make sure that the viatical settlement is in compliance with the policy terms and conditions. They will also review the health of the policyholder to ensure that they are still insurable.