4 Things You Need to Know About Viatical Settlements

People may opt to sell their life insurance policy for several reasons. Obtaining a life settlement offers easy access to a cash payout, enabling the seller to use those funds however they choose.

People may also opt to pursue a viatical settlement. Unlike life settlements, which are available to healthy policyholders, viatical settlements are available for policyholders with a terminal illness who wish to sell their life insurance policy. Read on to learn some of the crucial things you should know about viatical settlements to determine if a viatical settlement is right for you.

1. A valid life insurance policy is required to be eligible for a viatical settlement.

Viators must have a life insurance policy that they obtained no less than two years before pursuing a viatical settlement. The best life insurance companies may vary based on your region, and you must research your life insurance options before choosing a policy. Some of Canada’s best life insurance companies include Canada Life, The Co-operators, Desjardins, and Empire. Insurance companies offer term life insurance policies and permanent life insurance policies, including whole life insurance. To determine the best option for your insurance needs, read insight from insurance experts, and talk to insurance agents to ensure you secure a suitable policy. Once you purchase an insurance policy, you name a beneficiary, such as your spouse or another family member, who receives the death benefits when you die.

You must understand that term life insurance expires. If you don’t die before the end of the term, your beneficiary won’t receive the death benefits. Once it expires, you must renew it or switch to a permanent life insurance policy to have life insurance.

2. Viators must qualify for a viatical settlement.

Viatical settlements are for people with chronic illnesses or terminal illnesses. One of the distinctions between a viatical settlement and a life settlement is that viatical settlements offer higher payouts. The payout from both a life settlement and a viatical settlement will exceed the cash-in value of the policy, but a viatical settlement is the most lucrative option available. The reason buyers pay more for viatical settlements is based on the expectation the viator will pass away within two years of the purchase date. When the buyer purchases the life insurance policy, they name a new beneficiary to receive the death benefits from the policy. They assume responsibility for any outstanding premium payments owed. Minimizing those costs maximizes their potential profits.

Buyers typically expect viators to have a prognosis that puts their life expectancy at two years or less.

3. Viatical settlement companies guide viators through the viatical settlement process.


You must work with the top viatical settlement companies to ensure you receive the maximum payout possible for your life insurance policy. Viatical settlement companies specialize in locating third-party buyers for insurance policies. Viatical settlement companies verify that potential viators qualify for viatical settlements before pursuing a buyer, and they handle the paperwork for the viator. Once the sale is complete, the viatical settlement company transfers the lump sum payout to the viator, ensuring viators enjoy a smooth process and quick sale.

4. You can use the funds for anything.


The funds you receive from your viatical settlement payout are free from restrictions. You may opt to use the money to pay for your medical bills, prescription medications, or personal care. You may also use the money to create trust funds to provide for dependents, pay off your mortgage, or prepay for your funeral arrangements.

If you prefer, you can use your funds to travel around the world or complete items on your bucket list. The money viators receive is tax-free, ensuring viators can use all the funds received however they choose.

Viatical settlements offer life insurance policyholders a way to access funds in exchange for their life insurance policy while they’re still alive. A viatical settlement company secures a buyer and transfers the tax-free funds to the viator when the sale’s complete. There are no restrictions governing how viators can use their funds.

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