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What Happens Under a Viatical Settlement?

What Happens Under a Viatical Settlement?

Life insurance is often considered as a means to help loved ones pay for your final expenses; however, situations may arise that would make having access to those funds prior to your passing the smartest financial option. Life Credit’s Living Benefit Loan Program allows you to borrow against your life insurance policy’s death benefit in order to cover cancer care and other pressing financial obligations. Another option is  a settlement called a viatical, life insurance can be sold to another party. There are pros and cons to viatical settlements, which each person needs to carefully consider before choosing the path that’s right for them.

What happens under a viatical settlement?

This is an option that can only be considered when someone is diagnosed with a terminal illness, typically with a life expectancy of less than two years. In this case, the person may want to access the funds to take care of end-of-life planning, such as home care or hospice. Consulting with your medical team to have them assess and document your prognosis should be one of the first steps anyone should take who is considering a viatical settlement.

Other factors to consider are the length of your policy — viatical life insurance settlements usually only apply to policies older than two years — and whether the policy was issued by a licensed and insured provider. The value of the policy is also a major consideration, and one that involves its age, the cost of the premiums and the unique health circumstances of the policyholder. What happens under a viatical settlement is that the buyer will often agree to pay less than its face value, but more than the cash value it has accumulated. Most buyers look for policies that are worth at least $1 million, though policies with less value can still be eligible.

Determining if a viatical settlement is right for you involves some tough choices, and should always include detailed research and consultation with financial professionals.

Call Life Credit at 888-274-1777 or contact us online to learn more!

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Viatical Settlement vs. Living Benefit Loan

A viatical settlement means selling your policy permanently to a third-party investor. You receive a lump sum (typically 50-80% of the death benefit), but your beneficiaries lose all coverage. The process takes 2-4 months and involves medical underwriting, investor bidding, and legal review.

A Living Benefit Loan is a fundamentally different approach. You borrow against the death benefit, keep your policy, and your beneficiaries still receive the remaining benefit. Funding takes as few as 3 business days with no credit check.

Who Qualifies for a Viatical Settlement?

Viatical settlements are typically available to individuals with:

If you qualify for a viatical settlement but want to keep your policy, a Living Benefit Loan may be a better fit. Compare all options side by side →

Tax Implications

Viatical settlement proceeds may be tax-free for terminally ill individuals under IRC §101(g). For chronically ill individuals, the tax treatment varies. Living Benefit Loan proceeds are generally not taxable since they're structured as a loan, not income. Always consult a tax professional for your specific situation.

Frequently Asked Questions

Is a viatical settlement my only option?

No. A Living Benefit Loan lets you access up to 50% of the death benefit while keeping your policy. Compare all options at lifecreditcompany.com/your-options.html.

How long does a viatical settlement take?

Typically 2-4 months. A Living Benefit Loan funds in as few as 3 business days.

Are viatical settlements taxable?

May be tax-free for terminally ill individuals under IRC §101(g). Consult a tax professional.

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