Families can find themselves in difficult positions financially that leave them looking at a variety of options. However, some families can really be left scrambling when medical bills start to pile up while a loved one suffers a life-threatening or terminal illness.
This can lead individuals to look into selling off their life insurance policy for some financial peace of mind. They can also approach a broker about what’s called a viatical settlement to collect on the policy in some capacity. Let’s take a deeper look at these options for the sale of a life insurance policy.
What is a viatical settlement?
A viatical settlement is not common practice nor available to everyone. It’s a payout solely to someone who has been diagnosed with a terminal illness. The viatical settlement process starts with recruiting a broker who will shop your life insurance policy to independent buyers who will purchase that coverage for a one-time lump-sum payment. The payout will depend on the cash value of the policy, and it will inevitably be less than the death benefit paid upon a policyholder’s passing.
For example, an American Life Fund viatical can be used by a policyholder to alleviate debt and avoid bankruptcy, keeping the individual’s family from dealing with a difficult financial situation when they leave this earth. A viatical settlement company doesn’t offer guidelines as to what the money may be spent on.
Yes, it would be fine for cancer patients to use the money to pay off medical bills or pursue additional treatment. However, they can also use it to take a trip with their family or get extra help around their house with cleaning, home care, or child care.
What is a life settlement?
A life settlement is like a viatical settlement in that you can sell your policy for a one-time cash payment. However, this can happen at any given point. Typically, investors will look for life insurance policies to purchase and add to their portfolio. They will typically invest in sellers who are over age 65 and have limited life expectancies. The reason is that when you pass, the buyer gets the death benefit on that coverage.
Some people may opt for a life settlement if they can no longer afford the premium on their life insurance, relieving them from monthly payments. These settlements result in a larger sum than canceling or surrendering the policy altogether. A life insurance settlement can be immediately utilized for medical bills or to cover any sizable emergency cost.
To actually sell your policy, you’ll need to find a broker or a life insurance settlement company to help pursue a buyer on a secondary market. A broker will assure that multiple offers are put on the table for some level of cash value.
What You Need to Consider
When considering both life and viatical settlements, opting for the proper life settlement company is key. However, you may want to also look into potential legal action that could lead to financial freedom and peace of mind for your loved ones. It’s important to evaluate different specialized practice areas for lawyers.
For example, an estate attorney can help secure a financial plan for your life settlement or viatical settlement that can care for your family after your passing. Probate attorneys can also be a great help to executors and beneficiaries of an estate to help settle the last affairs of the deceased. This includes collecting and distributing assets, as well as selling real estate property. This will assure that your family has immediate access to these finances. Family lawyers can handle any outstanding legal issues that may remain for the future like custody of children.