Viatical Life Tips for Seller and Buyer

2007-03-08 10:33:40

( Insurance )



What is Viatical Life?

"Viatical" comes from the Latin word "viaticum" meaning "provision for a journey" and refers to a type of cash settlement that is increasingly popular in the country. A person with an active life policy sells it back to the insurance company or to a viatical life company for an amount ranging from 25-100% of the insurance coverage amount. The only other qualification is that he must have been diagnosed as terminally ill and expects to "move on" within two years.

The insurance or viatical services company either keeps the policy or resells it to a third party for a higher price than the settlement amount. The purchaser continues any remaining premium payments and becomes the new beneficiary of the policy. Upon death of the policyholder, the investor claims the face amount of the policy. The amount of profit that the investor makes is equivalent to the face amount of the policy less the purchase price and remaining premiums he has paid before the policyholder's demise.

A viatical life settlement may sound absurd or even morbid, as the investor is speculating on exactly when the policyholder will pass away. However, there is good reason for the policyholder to resort to this, as he may have incurred huge medical bills due to his illness which he is unable to pay with his savings, or does not want to pass the burden to his children or relatives. He may also need the funds for any other compelling reason that cannot wait until his death.

Tips for the Seller

Before deciding to sell your policy, discuss the matter carefully with your loved ones and your family lawyer. Selling your policy will also mean depriving your loved ones of being the true beneficiaries of the insured amount. Determine what part of your medical and other liabilities can be covered by your health insurance or social security benefits.

If you are really determined to sell your policy, seek out a reputable viatical life service company which can pay you a better amount for your policy compared to your insurance company. Talk and negotiate with several companies first to get the best price for your policy.

Tips for the Investor

Buying a viatical life policy can be a question of ethics as it means taking a gamble on the life expectancy of another person. It is wise to confirm about the insured's true state of health before investing.

If you feel uncomfortable about buying the policy directly from the policyholder, you can contact a viatical life company. Focus more on the premiums you need to pay on the insured person's behalf, rather than the purchase price of the viatical life policy. Keep in mind that when you buy this type of investment, you are doing someone else a huge favor of alleviating him from costly pre-death expenses and giving him peace of mind while he waits for the final moment.


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