Insurance Settlement Options
- elderly/man and woman leaving hand in hand image by L. Shat from Fotolia.com Life insurance settlements are a way to gain cash from a life insurance policy. Life insurance settlements, or viatical settlements, involve selling the life insurance policy to a viatical settlement company or investor in order to obtain cash from the policy before the death of the insured. In recent years there has been a number of fraud schemes that have given viatical settlements a bad name. This has led many in the industry to begin using the terms senior settlement or life settlements. They are all the same. There is no difference between a viatical settlement and a senior or life settlement.
- Viatical settlements are typically chosen by individuals facing a life-threatening or catastrophic illness who need to gain cash from the insurance policy. In this type of settlement the insured, referred to as the viator, sells or assigns the life insurance policy to an investor or viatical settlement company in exchange for a percentage of the value of the policy.
The settlement is negotiated, but is strongly influenced by the diagnosis and prognosis of the insured. The potential investor will subject the insured to direct questioning before making a decision to invest in the life insurance policy. Most people receive between 60 and 80 percent of the policy value from a settlement company or investor. The investor takes over the premium payments for the life of the insured. Although the insured is free to spend the money as necessary or desired, terminal patients are often required to pay income tax on the settlement amount.
- Potential candidates for life settlements include men over 65 and women over 70 with a life insurance policy of at least $100,000. Terminally ill patients and individuals with a life expectancy less than 12 years may also be eligible. Any of these people may have different reasons for gaining cash from their life insurance policies. Some may be ill while others may not want to keep their policy or cannot afford their payments.
- Viatical settlements have become commonplace. Along with the increase of reputable companies investing in viatical settlements there has been an increase in fraud schemes and deceptive practices. The California Department of Insurance advises all individuals considering a viatical settlement to research the settlement company prior to signing a contract.
Viatical Settlements
Potential Candidates
Consumer Warning
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