In a viatical settlement transaction, people with terminal illnesses assign their life insurance policies to viatical settlement companies in exchange for a percentage of the policy's face value. The viatical settlement company, in turn, may sell the policy to a third-party investor. The viatical settlement company or the investor becomes the beneficiary to the policy, pays the premiums, and collects the face value of the policy after the original policyholder dies. Decisions affecting life insurance benefits can have a profound financial and emotional impact on dependents, friends, and care-givers. Before you make any major changes regarding your policy, talk to your friends and family as well as to someone whose advice and expertise you can count on a lawyer, an accountant, or a financial planner.
Many options exist for people with terminal illnesses when financial needs are critical.
For example, you may consider a loan from someone such as the original beneficiary of your life insurance policy. Or, if you've already ruled out less expensive alternatives to raise cash, you might sell your life insurance policy through a viatical settlement. Many life insurance policies in force nationwide now include an accelerated benefits provision. Companies offer anywhere from 25 to 100 percent of the death benefit as early payment, but policyholders can collect these payments only under very specific circumstances. The amount and the method of payment vary with the policy.