Viatical settlement originated from the Latin word Viaticum, meaning the Eucharist given by a priest to a dying person. Viatical settlement therefore refers to the purchase of the life insurance policy before the maturity date or the death of the policyholder. In it a lump sum amount is paid to the ill-policy owner, also called as viator, in exchange of the death benefits of the policy. Generally those policy holders who are suffering from very serious diseases like AIDS, cancer, heart problem, kidney failure etc and who are having a very small life expectancy will choose viatical settlements with their life insurance policies. This cash life settlement reduces the financial stress of the policyholder during his/her final days. Generally cash life settlement companies purchases the insurance policies from the viators for a fixed percentage of the policy amount depending on the number of premiums paid hitherto and the health conditions of the policy owner. Then they make all the arrangements with the insurance companies requesting the change of ownership and beneficiary of the insurance policy. Once it has been done, the company pays the remaining premium amounts to the insurance company, and upon the demise of the old policyholder the company receives the full policy amount from the insurance company. However the company has to face the risk involved if the viator survives even after the predicted life expectancy or if the insurance company undergoes bankruptcy. On the other hand, the risk for the viator is the settlement at lower price than the value of the policy. So risks are there for both the parties. If the company resells the policy to some other cash life settlement company, the old policyholder doesnt hold any responsibility against the second buyer company. The policyholder can sell any type of insurance policy, term or group, under viatical settlement. It will take almost four to five weeks for the policyholder to get offers for the purchase of the policy and up to three weeks to get the amount from the buyer. The viatical cash settlement companies purchase policies from those people having the life expectancies of up to five years. Even these companies may insist on the minimum amount of the policy and the reputation of the insurance company before providing viatical settlement. From the point of view of the policyholder, it is very essential to be very cautious before choosing a suitable viatical life insurance broker. Owing to the illness, mentally or physically, the policyholder may not be in a position to choose a viable broker. He/she should take ample time to take an informed decision. Moreover there should not be any pressure on the policy owner to make him to accept the offer give by the broker. The policyholder can change his time at any point of time. If the policyholders physical and mental status is not permitting to take right choice of the broker, then there is one alternative available in the hands of the holder. He/she can opt for Accelerated Death Benefit (ADB) on the insurance policy. Under this, the policy owner can avail a part of the death benefit of the policy now with the remaining benefit going to the beneficiary of the policy. However the policyholder should continue paying premiums. |
