By Mashum Mollah
Life insurance is a tangled web of information. It can be incredibly challenging to navigate all the considerations that govern a life insurance policy and its eventual payout. One way to take control of the capital value of your life insurance policy is to sell it for a Viatical Settlement—a lump sum payment as an exchange for the eventual death benefit that your beneficiaries would receive (the life insurance policy’s ‘face value’) upon making a claim on your policy.
How does Viatical Settlement work?
A viatical settlement is a settlement of your current life insurance policy. Firms like the American Life Fund Viatical Settlement Company buy life insurance policies as a business practice in order to get you the cash you need for medical treatment, unexpected bills, housing upgrades, or even a vacation. They take over the monthly payments on your policy and in return become the legal beneficiary of the payout.
It’s important to note that a viatical settlement payment is less than you would receive from the death benefit due to your heirs by the life insurers who wrote the policy in the first place. Often viatical settlements equal roughly 50 or 60% of the payout. However, it’s also important to remember that nearly all life insurance policies lapse due to non-payment of premiums or are disputed by the insurance agent as a result of some nuanced terms that may or may not prevent the payout from ever occurring.
What kind of policy should you have?
The dirty secret of the life insurance industry is that most people simply don’t keep current on their accounts and lose the benefits altogether, leading to a huge profit margin for policy writers. This is because many people use life insurance as a hedge during working years and decide they no longer need the protection—or that the monthly payments are no longer worth it—after this period has passed.
General wisdom suggests that you should maintain a whole life insurance policy in order to cover any debts you might carry throughout life, but term life insurance is an attractive option for those looking to protect their families. Illness and tragic accidents can strike at any time, and a policy that replaces a spouse’s earning potential for the lifetime of your children is an essential cover that will get you through the difficulty that follows this sort of tragedy. The USDA estimates that a child costs over $230,000 to raise. This makes wage replacement a crucial part of early family planning in order to provide all the necessary clothing, educational tools, and meals that your child will require.
Who is eligible for Viatical Settlement?
Once this stage of your life has passed, keeping a life insurance policy can seem like an additional burden rather than a safety net. Life settlements are a flexible option for cashing in on the value held and are a strong financial option for many carrying policies they no longer need. This is particularly attractive for seniors, regardless of preexisting conditions or any current illnesses.
A viatical settlement is different from a standard life settlement in that viaticals are offered only to those with chronic conditions or to the terminally ill. They may seem like a cold financial transaction, but there is a measure of compassion involved. Viatical settlements are often used to afford treatments and proper care.
Seeking out quotes and information from viatical settlement companies is fairly straightforward, and you can quickly get a sense of what your policy may be worth in raw payout potential. The process is easy with the third party broker negotiating any final arrangements for the transfer of the insurance policy with the original life insurers for you.
A viatical settlement is a great way to take advantage of the cash value of your life insurance policy today if you meet the eligibility requirements. The money is yours to use any way you want, so take advantage of it now in order to enrich your life.
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