A life insurance policy can be a very valuable thing. When you’re younger and earning money to support your family, your life insurance policy is an essential safety net — it guarantees that, in the event of your untimely death, your family will be supported financially and will have fewer money-related headaches at a time of terrible stress and trauma. However, you may reach a point at which the life insurance payout no longer feels like an absolutely necessary safety net. Instead, it will be just another asset that contributes to your net worth — and one that is beyond your reach to spend, since it will only pay out when you pass away!
That can be a frustrating thing, especially if you find yourself in a position where you really could use some more liquid assets. For instance, you may find that you fall ill with a terrible disease — which, on top of all the misery and stress that attend it, may also put you in a financial jam. Healthcare is very, very expensive, and serious and terminal illnesses can require a lot of pricey care. If you end up in this situation, you’ll wish that you could exchange your eventual life insurance payout for cash now — and, in certain circumstances, you’ll be able to do exactly that.
Life settlements and viatical settlements
It’s well-known that there are situations in which cash in your checking account will be worth much more to you than an eventual life insurance payout to your beneficiaries. And if you’re older or terminally ill, you may have a pretty good idea of how much time you have left. Put those things together, and you have something to offer: A financial payout that will come along on a relatively predictable schedule. That’s an appealing offer to financial organizations, which is why some such organizations will actually offer cash in exchange for your insurance payout.
A life settlement, or viatical settlement, is an agreement under which you sell your policy for cash. But a viatical settlement, which has tax advantages and other important features, is not available to everyone. To get your hands on a viatical settlement, you’ll need to meet certain criteria.
Who is eligible for a viatical settlement?
The difference between a viatical settlement and a life settlement is that a viatical settlement is something that only certain people have access to — specifically, people whose life expectancies are not as long.
For organizations that offer viatical settlements, a shorter life expectancy means a quicker and more predictable return on their investment. That usually translates to better deals for the person selling his or her policy. Plus, viatical settlements are tax-exempt!
Let’s talk specifics. To be eligible for a viatical settlement, your life expectancy needs to be less than 24 months. You’ll also need to be terminally or chronically ill. The latter means that you don’t necessarily have to have a terminal illness to get a viatical settlement — so your life expectancy doesn’t have to be directly tied to a diagnosis, as long as it’s within the 24-month range. With that said, it does have specific requirements. To be deemed “chronically ill” in the sense that matters here, you’ll need to meet specific requirements, like being unable to perform two or more “acts of daily living,” which include things like using the bathroom and eating, on your own.
If a viatical settlement appeals to you, you should confirm your eligibility by working with a company that specializes in these sorts of transactions. Companies like American Life Fund will get you the best possible deal, giving you the maximum amount of cash to cover your medical expenses, allowing you to live your best possible life.