If you suffer from an illness or chronic disease, you likely have a lot of pressing matters on your mind. You may be focused on getting treatment for your condition or arranging your finances and other personal affairs. Perhaps you’re preparing to move from your home to another location, such as a long-term care facility or nursing home.
Whether you’re living independently or under the care of your medical provider, one thing is certain: Healthcare expenses can be costly, and Medicare doesn’t necessarily cover every service or treatment you might need.
For terminally or chronically ill seniors seeking a bit of relief, viatical settlements can provide financial assistance during particularly challenging times.
So, what are viatical settlements and how do they work? Here are the basic facts to know so that you can make an informed decision about what to do with your unwanted life insurance policy:
What is a viatical settlement, and how does it differ from a life settlement?
A viatical settlement is the transfer of ownership, or sale, of a permanent life insurance policy to a third party. Viatical settlements are designed specifically for the terminally or chronically ill, whereas life settlements are not. Viaticals also typically result in a larger payout than traditional life settlements, and are taxed differently, too.
How is my viatical settlement amount calculated?
Third parties will evaluate a few different criteria as they determine the value of your policy. First, they will assess the details of your life policy and the expected premium costs, as well as the type and size of the plan. Your overall health and life expectancy are also taken into account and can affect the amount you’ll receive.
What are the pros and cons of viatical settlements?
As with any financial transaction, there are both benefits and risks to consider before moving forward. The most immediate benefit of a viatical settlement is the lump sum payment you’ll receive in exchange for your permanent life insurance policy. This sum is larger than the surrender value, which is the amount of money you can withdraw if you surrender your policy back to your insurance carrier, making it a worthwhile investment for many terminally ill adults. You’ll also be relieved of the burden of premium payments, which many policyholders find difficult to keep up with over time. The extra cost savings, not to mention the influx of funds you’ll receive after settling, can help you pay for expensive medical or long-term care costs.
There are a few consequences to selling your policy, including the fact that your beneficiaries will no longer be eligible to claim the death benefit. In some cases, pursuing a viatical settlement can also put your Medicaid coverage at risk.
To learn more about viatical settlements and whether or not you qualify, start by getting a quote. Viatical settlements aren’t for everyone, but for many seniors, they can provide assistance and financial stability when they need it most.