Viatical Settlements And Life Settlements

Shawn Plummer

CEO, The Annuity Expert

What is a Viatical Settlement?

A viatical settlement, also known as a life settlement, is a financial transaction in which a person with a life-threatening illness sells their life insurance policy to a third party for less than its face value but more than its cash surrender value. The buyer becomes the new beneficiary and is responsible for paying future premiums, and they receive the full death benefit when the original policyholder dies.

How Much Does the Policy Owner Receive in a Viatical Settlement?

In a viatical settlement, the amount the policy owner receives typically ranges from 50% to 60% of the policy’s face value. This percentage can vary based on factors like the policy’s size, the policyholder’s life expectancy, and the premiums required to maintain the policy.

Viatical Life Insurance

Taxation of Viatical Settlements

The taxation of viatical settlements can be complex. Generally, if the insured is chronically or terminally ill, the proceeds from a viatical settlement may be tax-free. However, if the policyholder is not chronically or terminally ill, the proceeds may be subject to income tax. It’s crucial to consult a tax professional for specific advice regarding individual circumstances.

Key Aspects of Viatical Settlements

AspectDescription
DefinitionSelling a life insurance policy to a third party for immediate cash payout
Typical Payout50-60% of the policy’s face value
EligibilityGenerally for those with a life-threatening illness
TaxationCan be tax-free for chronically or terminally ill individuals
A Life Insurance Policyowner Sells Her Policy To A Third Party In A Viatical Settlement

Conclusion

Viatical settlements offer a way for individuals with life-threatening illnesses to access the value of their life insurance policies before death, often providing crucial financial relief. The payout usually ranges from 50% to 60% of the policy’s face value, and taxation depends on the health status of the policyholder. For more specific information and personalized advice, it’s important to consult financial and tax experts. Contact us today for a free quote.

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Frequently Asked Questions

What is a viatical settlement contract?

A viatical settlement contract is an agreement between a policyholder and a viatical provider in which the policyholder sells their life insurance policy for a lump sum of cash. The viatical provider becomes the policy owner and is responsible for paying the premiums.

What are the eligibility requirements for a viatical settlement?

Most viatical providers will require that the policyholder be at least 65 years of age with a face amount of a minimum of $100,000. The shorter a life expectancy, the higher the lump sum payout can potentially be.

Are viatical settlements legal?

Yes, viatical life settlements are legal in all 50 states.

How much is paid in a viatical settlement?

The amount of money paid depends on several factors, including the policyholder’s age, the policy’s face value, and the policyholder’s life expectancy.

What is the difference between viatical settlements and accelerated death benefits?

Viatical settlements and accelerated death benefits allow policyholders to receive money from their life insurance policies before they die. However, there are some key differences between the two.

With a viatical settlement, the policyholder sells their policy to a viatical provider for a lump sum of cash. The viatical provider becomes the policy owner and is responsible for paying the premiums.

With an accelerated death benefit, the policyholder can borrow against their policy’s death benefit while they are still alive. The policyholder is responsible for repaying the loan with interest, and the death benefit goes to the beneficiaries when they die.

What are the tax implications of a viatical settlement?

The proceeds are generally taxable as income. However, there may be some exceptions depending on the state in which you live. Therefore, it’s important to speak with a tax advisor before entering into a viatical settlement to ensure that you understand the tax implications.

What are the risks of a viatical settlement?

There are a few risks to consider before entering into a viatical settlement. First, if you live longer than expected, you may not have enough life insurance coverage to protect your loved ones. Second, if the policy is not properly structured, the death benefit may be subject to taxation. Finally, if the viatical provider becomes insolvent, you may not receive the full amount of the death benefit.

Who does a viatical settlement broker represent?

A broker represents the policyholder, not the viatical provider. The broker’s job is to find the best viatical provider for the policyholder and negotiate the settlement terms.

How do I find a viatical settlement broker?

You can request a quote from one of our qualified brokers by filling out the form above. We will help connect you with a broker who can answer any questions you have and help walk you through the process.

Who effectuates viatical settlement contracts?

A viatical settlement provider is a company that buys life insurance policies from policyholders for a lump sum of cash. The provider becomes the policy owner and is responsible for paying the premiums.

What factors does a viatical settlement provider consider when making an offer?

When considering an offer, a provider will look at several factors, including the policyholder’s age, face value, and life expectancy.

What are the risks of a viatical settlement?

There are a few risks to consider before entering into a viatical settlement. First, if you live longer than expected, you may not have enough life insurance coverage to protect your loved ones. Second, if the policy is not properly structured, the death benefit may be subject to taxation. Finally, if the viatical provider becomes insolvent, you may not receive the full amount of the death benefit.

Who is a viatical settlement provider?

A viatical settlement provider is a company that buys life insurance policies from policyholders for a lump sum of cash. The provider becomes the policy owner and is responsible for paying the premiums.

How much do viatical settlement brokers make?

Brokers typically charge a fee of 10-15% of the death benefit as their commission.

How much do viatical settlements pay?

Life settlements typically pay 50-80% of the death benefit, depending on the policyholder’s age and life expectancy.

What does the viatical settlement mean?

A viatical settlement means selling your life insurance policy to a third party for more than its cash value but less than its death benefit.

What are the benefits of a viatical settlement?

The benefits include receiving a lump sum of cash, avoiding probate, and having the flexibility to use the money however you want.

What does a viatical settlement allow you to do?

A life settlement allows you to sell your life insurance policy to a third party for more than its cash value but less than its death benefit.

What is a viatical settlement transaction?

A viatical settlement transaction is the sale of a life insurance policy by the policyholder to a third party for more than its cash value but less than its death benefit.

What is the difference between a life settlement and a viatical settlement?

A viatical and life settlement are the same things. There is no difference.

When can viatical settlements be issued?

Viatical settlements can be issued at any time.

How much is paid in a viatical settlement?

The amount paid depends on the policyholder’s age, the policy’s face value, and the policyholder’s life expectancy.

What are some of the risks associated with viatical settlements?

Some of the risks associated include: (1) if you live longer than expected, you may not have enough life insurance coverage to protect your loved ones, (2) if the policy is not properly structured, the death benefit may be subject to taxation, and (3) if the viatical provider becomes insolvent, you may not receive the full amount of the death benefit.

What does the word viatical mean?

The word “viatical” comes from the Latin word “viaticum,” which means “provision for a journey.” A viatical settlement is a journey that allows you to sell your life insurance policy to a third party for more than its cash value but less than its death benefit.

Are viatical settlements ethical?

Viatical settlements are ethical because they provide much-needed cash to policyholders while still alive. The policyholder is free to use the money however they see fit, and their family is protected financially in the event of their death.

Who will receive the death benefit after completing a viatical settlement transaction?

The death benefit is paid to the beneficiaries named in the life insurance policy.

What is the risk associated with buying a viatical?

The main risk associated with buying a viatical is that the policyholder may live longer than expected, and the death benefit will not be enough to cover the costs of their final expenses.

Who qualifies for a life settlement?

To qualify for a life settlement, the policyholder must be at least 18 years old and have a life insurance policy with a face value of $100,000 or more.

Shawn Plummer

CEO, The Annuity Expert

Shawn Plummer is a licensed financial professional, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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