Viatical Settlements

2007-03-08 10:33:40

( Financial )



What are Life Insurance Settlements?
Life insurance settlements are transactions which allow the benefits of an insurance policy to be enjoyed by the owner or the beneficiary of the policy.

What Kinds of Settlements Are Available?
Life insurance settlements can be availed of with the company that granted the life insurance, or with a third-party. These settlements can be classified as full cash settlements, viatical settlements, senior life settlements, and trust agreement settlements. This article focuses on viatical settlements and senior life settlements.

Viatical Settlements
Viatical settlements are basically contracts of sale. What is sold is the right to receive the benefits of the insurance policy. This sale is made to a third-party that is interested in buying the benefits at a discount. This means that the company will offer an amount less than the face value of the policy. The seller is a person who is terminally ill, and who is interested in using the life insurance policy to fund daily needs for the final moments of life.

The viatical settlement involves two things. The first is the sale of the right to receive the benefits, which is accomplished through an absolute assignment of ownership and a designation as beneficiary. The second is the payment of the settlement to the seller of the policy.

Senior Life Settlements
The goal of senior life settlements is similar to that of viatical settlements. It is to allow the seller of the policy to enjoy the benefits of the policy before death. A senior life settlement is also a contract of sale. It is entered into with a third-party that is interested in purchasing the policy at a discount.

The senior life settlement will involve the same thing as a viatical settlement. There is an absolute assignment of the right to receive benefits under the policy, and there is payment made to the seller.

How Do Companies Make Money From Settlements?
As noted above, the settlements are always made at a discount. This ensures that in time, the face value of the policy will be paid to the company. The full amount, when paid, allows the company a reasonable profit. Meanwhile, the money that was paid to the seller gives them a means to be self-reliant.


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