The United States has some worrying statistics when it comes to end-of-life finances. According to LIMRA’s 2018 Insurance Barometer survey, only 60% of Americans have any form of life insurance. Of that number, a certain percent aren’t completely happy with their life insurance policy, and do not think it goes far enough. Life insurance companies are also reporting a change in trends due to the rise in popularity of pre-paid funerals, and cheaper health care.
Traditionally, life insurance payouts, otherwise known as death benefits, would go to a policyholders next of kin or nominated beneficiary and would be use to clear debts that were usually accrued towards the end of life (such as palliative care and funeral costs). Today, life insurance policies are only one of multiple options of what to do with your finances when your life is coming to a close. One such option is a viatical settlement, but in order to get the best deal on it, there are few things you’d need to consider.
Firstly, do you have life insurance?
Firstly, there is absolutely nothing wrong with having a life insurance policy. It fact, it’s recommended that you do so. No one wants to consider what will happen to their money after they are gone, simply because it is a morbid thing to consider. However, the debts that we build in life pass on to our loved ones when we pass away and, especially if that passing is unexpected, you’ll want to ensure that your family are covered.
Particularly if you are one of the 40% of people in the United States who doesn’t have a life insurance policy, then it is definitely recommended that you check out some quotes from a life insurance company like North American Life Insurance. They cater to policyholders of all genders, ages and demographics and have monthly premium rates that start at $9 for a $100k payout when you pass away. Plus, without a life insurance policy, you cannot apply for a viatical settlement.
When is it right to use a viatical settlement?
There are two main prerequisites that need to be in place before you can apply for a viatical settlement. Firstly, you must already have a life insurance policy in place, as viatical settlements are not there to replace them. Instead, viaticals are almost akin to a sale of life insurance. The second prerequisite is that a viatical settlement can only be reached when a life insurance policyholder has a chronic or terminal illness that will render them completely incapacitated or deceased within two years.
The process for attaining a viatical settlement starts when a life insurance policyholder approaches a viatical broker with the intent on selling their policy for an upfront lump sum. The broker will find a third party (known as a beneficiary) who will take over the policy’s monthly premium payments and receive the death benefit of the original policyholder when they pass away. In exchange, the third party pays for the policy upfront for a cash payment which, although lower than the death benefit would be, is a higher amount that the life insurance company would offer as a policy surrender value.
Top viatical settlement brokers, such as American Life Fund, aim to offer up to 70% of what the death benefit would have been as part of their viatical settlements. However, the popularity of viatical settlements is based in the convenience the upfront cash payment offers, despite not being as much money. If there are any end-of-life care costs that a policyholder does not want to saddle with loved ones after passing, then these can be taken care of. Alternatively, the money can be spent on travelling or experiences with loved ones before it’s too late. What you do with the viatical settlement is, frankly, up to you, and you alone.
Doesn’t sound like you? You have other options.
Of course, if you are fit and healthy and life insurance doesn’t fit with what you want to do, you can opt for a life settlement instead of a viatical. These are similar, except the policyholder has a life expectancy that goes beyond two years, and life settlements provide a quick way to make a lump sum. However, viatical settlements do tend to be worth more depending on how much time of life expectancy a seller has, which means that for life settlements, selling the policy back to the life insurance company may still be a more lucrative option.