Owning a life insurance policy is a part of becoming an adult. As soon as you become eligible for life insurance, you must start paying for the premiums so that you are set for life, primarily when you no longer work, either because of retirement or illness that renders you unemployable. There are instances when life hands us challenges that are hard to win, such as a critical illness that gives you a limited time to live and enjoy your life. What will happen to your life insurance if this happens? You may want to look into viatical settlement options. So, what is viatical settlement and how can it help you?
Viatical settlement explained
This is a type of life insurance settlement where you sell your life insurance policy to another party for a sum of money if you learn that you are terminally ill and have only a limited time to live. Being terminally ill requires you to spend a considerable amount of money on medications and hospitalization. If your only asset left is your life insurance after you exhaust your life savings paying for your medical bills, you can sell it so you can use the money for your needs. A viatical settlement only works if you have a terminal illness, and you want to sell your policy. The amount of the settlement will be considerably less than the face value of the insurance you are selling, especially if you are still paying its premiums. The insurance buyer will assume the payment of the premiums.
Viatical versus life settlement
How different is a viatical settlement from a life settlement? In the former, you can be of any age and be terminally ill and given a specific time frame for you to live to sell your policy. In the latter, there is an age limit, usually between 65 and 70. You don’t have to be in an acute and critical medical situation to sell your policy. Both of these settlement types will pay the third party who bought the plan at the time of your death. The insurance company will carry out the payment to the new policy owner.
When to sell your policy
When is the best time to look for a buyer for your life insurance policy? The most common situation in which terminally ill patients sell their plans is when they can no longer pay for the monthly premiums due to rising medical bills and other expenses. Another instance to consider selling is when the policy is due to expire soon. If you want to live a comfortable life in your remaining days or you want to tick off items on your bucket list, you can go for a viatical settlement.
A terminal illness invalidates a life insurance policy, so before it becomes genuinely invalid, you can start looking for a third person who will be willing to assume the payments on your plan and pay the lump sum that you can spend on worthwhile things, such as hiring a lawyer to settle your will.
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