Millions around the globe secure a life insurance policy for a wide variety of reasons, including for receiving such benefits as providing financial security for their family, supplementing retirement savings or covering the final expenses of their life. While beneficial, life insurance policies can get complex over time as various life events come and go. One such event is the unfortunate diagnosis of a terminal illness for those with life insurance. Fortunately, there are ways to benefit from life insurance money before passing away, including through viatical settlements.
What Are Viatical Settlements?
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Viatical settlements occur when a policyholder sells their life insurance in order to receive funds while they are still alive. In doing so, the beneficiaries originally listed on the policy will not receive the finances, instead going to the buyer. Those who participate in viatical settlements are usually terminally ill individuals who want to make use of the money they have before they pass away. Most of the time, they will use the finances to pay for medical or funeral expenses. Moreover, individuals typically sell to a third party, such as a settlement company. To qualify for a viatical settlement, an individual will usually need a diagnosis from their doctor declaring that they have less than 2 years to live or require assistance with daily life tasks.
Where to Find Information on Viatical Settlements
Viatical settlements require plenty of paperwork and understanding of the risks that come with taking out money before death. For instance, sellers may lose access to their current health insurance, and they will no longer provide financial security to their families. Buyers also have to take on the risks of an unpredictable payoff date, dealing with the loss of money if the policyholder lives longer than expected. Therefore, it’s essential to understand what exactly a viatical settlement entails. Fortunately, there are plenty of resources available to learn about every facet of the process through guides provided by investment sites, insurance companies, and financial brokers.
How to Figure Out Your Policy’s Value
If you are in the position where you would like to pursue a viatical settlement, you will need first to do the required research. Ask your life insurance company about your policy’s cash value to see what you could potentially receive. After, like with all other financial decisions, get quotes from various companies to see what offers you can get from potential buyers. While looking into these companies, make sure you understand what, if any, taxes need to be paid.
You can also look into whether you will lose any benefits by selling your policy and see if you have the ability to withdraw from the deal after the fact in case you change your mind. If you’d prefer, you can also consider using a broker, who will take care of researching these records and obtaining all necessary medical records and health information and making the bids with companies. Keep in mind that the buyer of your health insurance can check on your health status over time.
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