Viatical is short for viatical settlement. A viatical settlement is the sale of a policyholder’s life insurance policy to a third party for more than its cash surrender value, but less than the benefit- in the case that the policyholder is either terminally or chronically ill.
If the policyholder is neither terminally nor chronically ill the transaction is referred to as a life settlement rather than a viatical settlement.
For more information on the history of both viaticals and life settlements check out this life settlement industry timeline.
Why distinguish between viatical and life settlements?
Viaticals generally have different tax treatment than standard life settlements. Additionally, viaticals can be regulated differently depending on the state.
Our very first blog post talked about the tax advantages that viatical settlements have over standard life settlements.
That said, the truth is that many people refer to life settlements and viatical settlements synonymously. The term life settlement has grown in popularity more recently as the industry aims to distance itself from the shady past of viaticals during the aids epidemic.
What does this mean for me?
If you are thinking about selling your life insurance you should be aware of both viatical and life settlements.
First, they are slightly different, and knowing about both will help you self categorize and ask the right questions as you approach a transaction. For example, if you believe that you qualify for a viatical settlement you can work with your doctor and provider to make sure you get beneficial tax treatment.
Second, they are very similar, and gathering information regarding both viatical and life settlements will give you more complete information about selling your life insurance policy.
I’d like to explore selling my life insurance – what’s next?
If you already know that you want to sell your life insurance and are looking to get an idea of what your policy is worth, you can use our estimate tool.
Hopefully this post helps answer some questions around viaticals. If you have any additional questions feel free to leave them in the comments below.