Life settlements seem to be all the rage these days. They’re considered to be revolutionary, helping insurance policy holders get financial freedom. What makes life settlement different from a viatical settlement, though? Let’s take a look.
What Is A Life Settlement?
A life settlement is a financial trade or transaction made between the person who holds the policy and a purchaser. The transaction allows the policy holder to transfer the ownership and beneficiary rights of their policy to a third party, instead of having it lapse. By doing so, they forgo the responsibility of having to pay for the policy premiums, which are then handled by the new beneficiary, i.e., the policy purchaser.
Life settlements are typically targeted to senior citizens who are at least 70 years and have a life expectancy of more than two years. Individuals who fall into this category usually don’t need their life insurance policy anymore. This may be due to a number of reasons, such as:
- The premium payments for the insurance policy have become unaffordable
- The insurance policy (term life insurance policy) is close to its expiration date
- The individual may want to increase their retirement income
- The individual is in need of some extra cash that can come out of a life settlement
- The individual doesn’t have long-term insurance but requires long-term care
- The individual needs to pay for their medical expenses, including unexpected medical procedures and bills
- The individual’s insurance needs aren’t the same as what they were when they purchased the policy
- The individual simply doesn’t want or need the policy anymore
Whatever the reason for selling an insurance policy may be, the policy holder receives a cash payout in return. Thus, not only do they get to let go of a policy that’s no longer suiting their needs, but also get upfront payment. This gives them the financial freedom to spend their money on whatever they actually want, instead of continuing to pay premiums each month.
By opting for a life settlement, you get to spend your money on your own terms. It’s a lot more effective than letting the policy lapse in which case they wouldn’t be entitled to the money they’d otherwise receive.
What Is A Viatical Settlement?
A viatical settlement is a form of life settlement. The main principles of a viatical settlement and a life settlement are pretty much the same. In viatical settlements too you get to sell your life insurance policy to a third party, making them the new owner and beneficiary. The difference between the two types of settlements is that viatical settlements are reserved for individuals with a life expectancy of 24 months or less.
For instance, if an elderly individual has a terminal illness and a life expectancy, of less than two years, they can then opt for viatical settlement. They may be selling their life insurance policy for health reasons or to cover medical costs. Make sure you consult a professional life settlement broker before you proceed with getting a viatical settlement as they can better guide you on whether you qualify for this type of settlement.
About Prosperity Life Settlements
The brokers at Prosperity Life Settlements help individuals sell their life insurance for cash. We also offer a free life insurance settlement calculator.
Get in touch with our agents today to determine if you qualify for a life settlement.