What is a viatical settlement?

A viatical settlements is a large amount of cash given to terminally ill people, known as viators. This money is given in exchange for the death benefits of their life insurance. The word viatical or viator comes from a Latin origin, known as viaticum, which means provisions of a journey.

These sorts of settlements are often found attractive to viators (sellers) because of the fact that they will receive a large amount of money during their final days. Viatical settlements are especially attractive to investors for their high rates of return.

This simplest way that it works is if the investor pays some percentage of the value of the policy.

For example, if the person pays 50%, and then becomes the beneficiary of the policy, the investor will then be responsible for paying the premiums that are associated with his life insurance policy.

If the viator survives for several years past the predicted life expectancy, then the investor will lose money. However, if the viator dies shortly after the transaction is completed, then the investor will make a large amount of money.

However, both parties have risks. The viator’s main risk is settling at a too low price. The investor’s major risk is not receiving the death benefit if the company goes bankrupt or if the insured committed some sort of fraudulent information on the application.

However, you must be aware of the fact that this investment is not regulated, meaning that there will be little or no protection for investors.

Tips for potential viators:

  • Many viators take into account Investigational New Drugs (IND) when pricing policies. Make sure that you price accordingly
  • You have no obligations to a second buyer
  • Check with your insurer to find out if your policy includes Accelerated Death Benefits. If you qualify, you can make a lot more money.
  • Don’t apply to only one viatical company. See who gives you the most money.

Tips for Investors:

  • Don’t use your (IRA) for viatical settlements.
  • Don’t buy a policy within the contestability period. It’s too big of a risk.