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Viatical Information

If you have a terminal illness or if you are caring for someone who is terminally ill chances are you're giving a great deal of thought to time and money. You may be thinking about life insurance, too. It’s in that context that you may hear the phrases "accelerated benefits" and "viatical settlements."

Accelerated benefits sometimes are called "living benefits." 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 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.

Guidelines for Consumers

The daily physical and emotional demands of a terminal illness can be overwhelming, and financial burdens can seem insurmountable. If you are considering making a viatical settlement on your life insurance policy—or if you are helping someone with this decision—these consumer guidelines should help you avoid costly mistakes and make the choice that's right.

  • Contact two or three viatical settlement companies to make sure offers are competitive, and be aware of prevailing discount rates. A viatical settlement company may pay 80 percent of the face value of a policy to a person whose life expectancy is six months or less.
  • Check with your state insurance department to see if viatical settlement companies or brokers must be licensed. If so, check the status of the companies with whom you are considering doing business.
  • Don't fall for high pressure tactics. You don't have to accept an offer, and you can change your mind. Some states require a 15-day cooling off period before any viatical settlement transaction is complete.
  • Verify that the investor or the company has the money for your payout readily available. Large companies may have cash on hand; smaller ones may have uneven cash flows or may be "shopping" the policy to third parties.
  • Insist that the company set up an escrow account with a reputable, independent financial institution before the company sends the offer papers for your signature. An escrow account will let you be sure that the funds are available to cover the offer.
  • Insist on a timely payment. Once the insurance company has made the necessary changes, you should get your money within two to three business days from the escrow agent. No more than a few months should go by from the initial contact with the company to the closing. Check with your state Attorney General's office or department of insurance to see if there are complaints against the company before you do business.
  • Ask the company about possible tax consequences and implications for public assistance benefits. Some states require viatical settlement companies to make these disclosures and tell you about other options that may be available from your life insurance company.
  • Ask about privacy. Some companies may not protect a policyholder’s privacy when they act as brokers for payouts from potential investors.
  • Contact a lawyer to check on the possible probate and estate considerations. If you make a viatical settlement, there will be no life insurance benefits for the person you originally designated as beneficiary.


Links listed below are not endorsed or guaranteed by us in any way. We encourage you to follow the guidelines above and check these businesses out before following through on an offer. There are some businesses that engage in fraudulent activity in the viatical industry. Make sure the one you contact is credible.

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