Viatication, also known as a viatical settlement or life settlement, refers to the process of a severely ill individual selling their life insurance policy to another party in exchange for a lump sum of money. The buyer of the policy receives the funds upon the death of the sick person. This practice is commonly observed among individuals with AIDS.
Viatication is a process where a terminally or chronically ill policyholder sells their life insurance policy to a third party in exchange for a lump-sum payment. This allows the policyholder to receive money while they are still alive, while the purchaser receives the insurance benefit upon the policyholder’s death. For instance, an AIDS patient may sell their life insurance policy to a third party for a lump-sum payment that is lower than the policy’s face value. When the patient passes away, the third party receives the insurance benefit. This example demonstrates how viatication functions. The terminally ill patient can use the money received for medical expenses or other necessities. The purchaser assumes the risk that the patient may live longer than anticipated, but if the patient dies earlier than expected, they receive the insurance benefit and make a profit.
Viatication is the process of selling a life insurance policy to a third party for a lump sum payment, typically when the policyholder is terminally ill.
Yes, viatication is legal in most states, but there are regulations and requirements that must be followed.
Typically, only the policyholder or the policyholder’s legal representative can viaticate a life insurance policy.
The most common reason for viatication is to obtain immediate funds for medical expenses or other financial needs when facing a terminal illness.
The amount you receive from viaticating your life insurance policy will depend on the terms of the policy and the offer from the viatical settlement provider.
The tax implications of viatication can vary depending on the specific circumstances, so it’s important to consult with a tax professional.
In most cases, you cannot viaticate a life insurance policy that is not yet in force, as the policy must be active and have a cash surrender value.
No, the viatical settlement provider cannot change the beneficiary of the life insurance policy.
After viatication, the viatical settlement provider becomes the new owner and beneficiary of the life insurance policy.
There may be alternatives to viatication, such as accelerated death benefits or other financial assistance programs, so it’s important to explore all options before making a decision.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 16th April 2024.
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