What is a Viatical Settlement?

A viatical settlement involves a policyowner who is experiencing a terminal illness selling their life insurance policy to a third party for a lump sum payment that is less than the policy's death benefit but more than the cash surrender value. This arrangement allows the policyowner to access funds to cover medical expenses or other financial needs while they are still alive.

The nature of viatical settlements simplifies the financial burdens that can accompany severe health conditions by providing liquidity that might otherwise be tied up in the life insurance policy. The investor who buys the policy will eventually collect the death benefit when the insured dies, thus benefiting from the transaction.

This option directly correlates with the intent of viatical settlements, which are specifically designed to assist those facing serious health challenges.