It is seldom wise for a terminally ill person to cash in a life insurance policy to pay for current expenses because the net cost will be very high. This 1998 FTC brochure describes why people contemplating such settlements should investigate carefully. You may be thinking about life insurance, too. They are the proceeds of life insurance policies that are paid by the insurer to policy holders before they die. Occasionally, these benefits are included in policies when they are sold, but usually, they are offered as riders or attachments to new or existing policies.
Viatical settlements involve the sale of a life insurance policy.
If you have a terminal illness, you may consider selling your insurance policy to a viatical settlement company for a lump sum cash payment. 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 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.