What are Life and Viatical Settlements?
Life and Viatical Settlements are where an individual sells his or her life insurance policy to a third party. The proceeds of the sale will be for an amount less than the policies face amount (death benefit) and paid to the individual in a lump sum. The cash can be used today for whatever reason the individual desires.
Employees and employers should be aware that this service is available. It can be a tremendous help to a family when struggling with the financial stresses of a chronic or terminal illness. It is also a source of cash to corporations who have key man or other corporate owned life insurance where the primary need for the insurance is no longer applicable.
A Life Settlement is the term where the sellers life expectancy is greater than 24 months.
A Viatical Settlement is the term used when a sellers life expectancy is 24 months or less
Life settlements provide immediate cash that can be used at the sellers discretion for a variety of uses. The sales proceeds can be used to supplement or replace lost income, offset the cost of a medical expenses, pay for an experimental medical treatment not covered by insurance, finance the cost of long term care, finance the cost of an Assisted Living or Elder Care facility stay, relieve financial stress without having to sell hard to sell assets (i.e. a house) to name a few.
Many employees today are in the “Sandwich Generation” meaning that they have dependents on bothj sides of the famiuly spectrum- children and parents. This presents a unique and challenging financial hurdle for many families, especially as the parents of the employuee get older and need some form of elder care. Knowing that an existing life insurance contract on a parent can be sold for cash may solve this need without the employee significantly impacting his or her own estate planning.
How Much Cash?
The selling price is determined primarily by the current health condition of the insured, the type and age of the policy and the premium required to keep the policy in force. Depending on the sellers life expectancy a policy may be sold for as little as 10% of the face amount or as great as 80%. Each situation is different.
For the right situation, life and viatical settlements can be a great source of funds. Speaking with a specialist is the best way to proceed should the need arise to look into life and viatical settlements.