What is a Viatical Settlement?

A viatical settlement is a specific type of life settlement that involves individuals who are suffering from a terminal illness. The transaction is usually made tax-free by the IRS, as long as the insured meets certain criteria stated by a medical professional.

A viatical settlement is a legal and viable option for individuals suffering from a terminal illness to sell their life insurance policy for an amount that is more than the cash surrender value but less than the claim amount.

In exchange for transferring ownership, the insured receives a cash settlement that can often be four times greater than the cash surrender value.

A viatical settlement is not a loan, it is a one-time cash transaction that results in a full transfer of ownership in exchange for a lump sum. The money belongs entirely to the policy seller and can be spent at his or her discretion. Viatical Settlements can also be in the form of a paid-up death benefit.

 

Terms to Know

• Life Settlement – The transfer of a life insurance policy from a policyholder to a third-party buyer for a cash payout.

• Cash Surrender Value – The amount of money a policyholder receives if they cancel a policy. The total amount received is the policy’s cash value minus fees associated with policy cancellation.

• Death Benefit – The money a beneficiary (or beneficiaries) receives upon the death of the person insured on the policy.

• Viatical Settlement – A type of life settlement designed for terminally or chronically ill policyholders.

How Is This Option Different Than Normal Life Insurance Purchases?

Selling your life insurance policy to pay for medical needs is specifically for individuals suffering from a terminal illness. The transaction can typically be done tax-free, so long as the insured meets certain criteria as stated by a medical professional.

At its core, it is essentially the same as other life settlement options; with the major caveat being the insured is typically suffering from a terminal illness and has a life expectancy of fewer than two years.

Viatical

• The insured is terminally/chronically ill.

• The proceeds typically range from 50% to 80% of the death benefit.

• The IRS allows proceeds to be received as a tax-free gain so long as the insured meets certain criteria as stated by a medical professional.

Senior

• The insured is typically a senior in their late 70s.

• The proceeds are usually around 10% to 80% of the death benefit, depending on life expectancy.

• The funds are normally subject to taxation unless they meet IRS guidelines.

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Viatical Settlement Eligibility

To be eligible for a Viatical Settlement the policyholder must be terminally ill or chronically ill with a life expectancy of fewer than two years.

Most types of policy types qualify, including term life.

The average payout of a life insurance sale is 4-6 times the cash surrender value of the policy. At Abacus Life, we pay a policyholder an average of 6-8 times the cash surrender value of their life insurance policy.

Being a direct buyer, Abacus has created a streamlined process to make selling your policy fast while cutting out the middle man so we can pay you more.

When Is The Right Time To Pursue a Viatical Settlement?

For many individuals facing a terminal illness, a viatical sale can be a strong financial solution.  You may be able to cover all or part of the costs involved in your medical care; including travel, stay, and your actual medical costs. Some of the most common reasons you may consider a viatical settlement include:

You Can No Longer Afford Premium Payments

Depending on the terms of your policy, changes in the insurance market and poor policy performance could drive up the price of the premium payments
you pay. Or you may have experienced an unexpected financial issue – like increased medical bills, legal issues, assisted living costs, or tax issues – that’s now stretching your budget.

 

Funds Are Needed To Pay For Medical Care Or Some Other Expense

Coping with a medical crisis while still worrying about medical bills works against the goals of palliative care and hospice. With the cost of healthcare continuing to rise, even those with excellent health insurance are struggling to keep up with medical expenses. Viatical settlements can provide an inflow of funds that can be used to pay off bills or fund experimental/alternative treatments that may not be covered under insurance

 

Additional Money To Improve Your Quality Of Life

Patients and their families can receive funds to pay for medical care or quality of life experiences. We commonly see clients use their funds to tackle their “bucket-lists.” Many insured want to be able to see their family enjoy their life insurance money now, rather than not being present to share in their happiness.

 

If you are struggling with medical bills, having an issue keeping up with your premiums, or just want immediate income, a viatical settlement could be right for you. We at Abacus advise that anyone considering a settlement take a close look at their life insurance and financial situation to make sure they are making the correct choice for themselves and their family. If you do not have an immediate need for a lump sum of cash, we suggest not seeking a life settlement as realistically, the greatest payout you can receive is the death benefit.

How Many Different Options Are There?

Retained Benefit

The Retained Benefit option means you would no longer pay any premiums and retain a portion of your benefit.

Beneficiaries will receive a guaranteed percentage when the policy ends, but you have no further obligations or payments to make.

• Guaranteed Percentage

• No Future Payments

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Traditional

The Traditional option is to sell your full life insurance policy for a cash amount above the policy’s surrender value.

You have no further obligations or claims to the policy, with all future premiums paid by the buyer.

• Cash Lump Sum

• No Future Payments

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Hybrid

The Hybrid option is a combination of two, where you would sell a portion of your life insurance policy.

With this option, you receive a cash payment now, your beneficiary receives a guaranteed percentage of the benefit when the policy ends, and you have no further obligation to pay future premiums.

• Guaranteed Percentage

• Cash Lump Sum

• No Future Payments

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How Much is My Policy Worth?

Each case is specific, and there is no one-size-fits-all answer. We handle each case individually and with utmost confidentiality and sensitivity, as understanding your options will require knowledge of personal details:

• Policy Type

• Policy Face Value

• Age

• Health Status

To see exactly how much your policy is worth, we recommend you to get an estimate now using our calculator or contact us at 800-561-4148 to learn more.

Settlement Calculator

Viatical Settlement Process

1. Deciding to Sell

Before making a decision, the policyholder and their beneficiaries must make the conscious decision to pursue this option. This means contacting your financial advisor or the Abacus team and looking into all alternatives to make sure that it is the most advantageous solution for you. There is no cost or obligation to accept an offer at any time.

2. Determining Eligibility

The policyholder must be terminally ill or chronically ill with a life expectancy of fewer than two years. The information disclosed will be used by an in-house medical underwriter who will calculate the insured's life expectancy and determine how much the policy is worth at no cost to the insured.

3. The Offer

Abacus, or the chosen buyer, would then extend an offer to the insured. The offer would be more than the price, but less than the net death benefit. The buyer must be licensed in the statein which the owner of policy resides.

4. Acceptance

If the amount offered by the licensed buyer is acceptable to the policy seller, they can choose to accept the offer and request the required documents for review.

5. Contracts

At this time, the licensed buyer generates state-approved contracting documents. These documents are utilized to record the life settlement transaction as well as spell out the agreement between the seller and the purchaser. Both parties must sign and notarize the contracts.

6. Verification

Once the contracts are executed and all the required accompanying documents have been received, the verification process begins. Often completed by a third party like a law firm, this verification agent will check that all the contracting documents have been completed properly. They may also check that the policy is in full force and good standing with the insurance company. They will verify that the funds for the purchase have been put in an escrow account for the policy seller.

7. Change of Ownership

Subsequently, a request for ownership change will be sent to the insurance carrier. This ensures that the owner is changed from the current policyholder to the buyer or the financing entity that the buyer names as owner.

8.Funds Transfer

After the insurance carrier has confirmed that the purchaser is listed as the owner, the escrow agent is instructed to release the funds to the seller. The new owner is now responsible for all premiums going forward and the seller has received payment for the transaction.
This concludes the transaction and the insured is free to use the money at their discretion.

Are Viatical Settlements Taxable?

 The transaction is usually made tax-free by the IRS, as long as the insured meets certain criteria. A medical professional, usually a doctor, confirms the terminal diagnosis.

For more information on how life insurance proceeds are taxed, visit the IRS.

Viatical Settlement Regulations

Over the past decade, the market has become incredibly well regulated. The entire life settlement market is regulated on a state-by-state basis instead of nationally. Therefore, the responsibility falls on each state’s government to make sure that companies are behaving ethically. The majority of states do require specific licensing and practice strict oversight to ensure customer safety.

Nothing contained on this Website constitutes tax, accounting, regulatory, legal, insurance or investment advice. Neither the information, nor any opinion, contained on this Website constitutes a solicitation or offer by the Virtual Advisor Group or its affiliates to buy or sell any securities, futures, options or other financial instruments, nor shall any such security be offered or sold to any person in any jurisdiction in which such offer, solicitation, purchase, or sale would be unlawful under the securities laws of such jurisdiction. Decisions based on information contained on this Website are the sole responsibility of the visitor. In exchange for using this Website, the visitor agrees to indemnify and hold the Virtual Advisor Group, its officers, directors, authors, consultants, employees, affiliates, agents, licensors and suppliers harmless against any and all claims, losses, liability, costs and expenses (including but not limited to attorneys' fees) arising from your use of this Website, from your violation of these Terms or from any decisions that the visitor makes based on such information.

The proposals, investments and strategies discussed in the Website may not be suitable for all investors and are not obligations of the Virtual Advisor Group or its affiliates or guaranteed by the Virtual Advisor Group or its affiliates, consultants and employees.

The Virtual Advisor Group  makes no representations that the contents are appropriate for use in all locations, or that the information transactions, securities, products, instruments, or services discussed on this site are available or appropriate for sale or use in all jurisdictions or countries, or by all investors or counter parties. By making available the information on the Website, The Virtual Advisors Group does not represent that any investment vehicle or advice is better or worse, available or suitable for any particular user. All persons and entities accessing the Website do so on their own initiative and are responsible for thcompliance with applicable local laws and regulations. Fixed, Indexed and certain other Annuity products are contracts and require you to complete your due diligence like any other retirement or investment product before you purchase for your portfolio or goals.

All investments involve risk and may lose value. The value of your investment can go down depending upon market conditions. Self directed I.R.A. investments are subject to certain prohibited transactions and regulations under I.R.S. rules. Fixed income investments are subject to risk including interest rate, credit, market and issuer risk. Currency exchange rates may cause the value of an investment to go up or down. Alternative strategies involve higher risks than traditional investments, may not be tax efficient, and have higher fees than traditional investments; they may also be highly leveraged and engage in speculative investment techniques, which can magnify the potential for investment loss or gain. 2020  Virtual Advisor Group LLC. 

State Insurance Licenses #

AL 3000618669, AR 11977459, AZ 11977459, CA 4001229, CO 613924, CT 002646782, DC 3000616547, DE 3000616491, FL W590202, GA 3288416,

HI 495922, IA 11977459, ID 735590, IL 11977459, IN 757268, KS 11977459, KY DOI-1051588, LA 826435, MA 2096146, MD 3000616471, ME PRN336282,

MI 11977459, MN 40645230, MO 8387930, MS 10629044, MT 3000616474, NC 11977459, ND 11977459, NE 11977459, NH 11977459, NJ 3000616528,

NM 11977459, NV 3464038, NY LA-1562077, OH 1253001, OK 3000616539, OR 11977459, PA 907324, RI 3000616500, SC 11977459, SD 40526091, TN 2449529, TX 2435809, UT 735502, VA 1135478, VT 3464587, WA 1026638, WI 11977459, WV 11977459, WY 409203

106 N Front St. Phillipsburg MO 65616

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© 2021 Virtual Advisor Group

Nothing contained on this Website constitutes tax, accounting, regulatory, legal, insurance or investment advice. Neither the information, nor any opinion, contained on this Website constitutes a solicitation or offer by the Virtual Advisor Group or its affiliates to buy or sell any securities, futures, options or other financial instruments, nor shall any such security be offered or sold to any person in any jurisdiction in which such offer, solicitation, purchase, or sale would be unlawful under the securities laws of such jurisdiction. Decisions based on information contained on this Website are the sole responsibility of the visitor. In exchange for using this Website, the visitor agrees to indemnify and hold the Virtual Advisor Group, its officers, directors, authors, consultants, employees, affiliates, agents, licensors and suppliers harmless against any and all claims, losses, liability, costs and expenses (including but not limited to attorneys' fees) arising from your use of this Website, from your violation of these Terms or from any decisions that the visitor makes based on such information.

The proposals, investments and strategies discussed in the Website may not be suitable for all investors and are not obligations of the Virtual Advisor Group or its affiliates or guaranteed by the Virtual Advisor Group or its affiliates, consultants and employees.

The Virtual Advisor Group  makes no representations that the contents are appropriate for use in all locations, or that the information transactions, securities, products, instruments, or services discussed on this site are available or appropriate for sale or use in all jurisdictions or countries, or by all investors or counter parties. By making available the information on the Website, The Virtual Advisors Group does not represent that any investment vehicle or advice is better or worse, available or suitable for any particular user. All persons and entities accessing the Website do so on their own initiative and are responsible for thcompliance with applicable local laws and regulations. Fixed, Indexed and certain other Annuity products are contracts and require you to complete your due diligence like any other retirement or investment product before you purchase for your portfolio or goals.

All investments involve risk and may lose value. The value of your investment can go down depending upon market conditions. Self directed I.R.A. investments are subject to certain prohibited transactions and regulations under I.R.S. rules. Fixed income investments are subject to risk including interest rate, credit, market and issuer risk. Currency exchange rates may cause the value of an investment to go up or down. Alternative strategies involve higher risks than traditional investments, may not be tax efficient, and have higher fees than traditional investments; they may also be highly leveraged and engage in speculative investment techniques, which can magnify the potential for investment loss or gain. 2020  Virtual Advisor Group LLC. 

State Insurance Licenses #

AL 3000618669, AR 11977459, AZ 11977459, CA 4001229, CO 613924, CT 002646782, DC 3000616547, DE 3000616491, FL W590202, GA 3288416,

HI 495922, IA 11977459, ID 735590, IL 11977459, IN 757268, KS 11977459, KY DOI-1051588, LA 826435, MA 2096146, MD 3000616471, ME PRN336282,

MI 11977459, MN 40645230, MO 8387930, MS 10629044, MT 3000616474, NC 11977459, ND 11977459, NE 11977459, NH 11977459, NJ 3000616528,

NM 11977459, NV 3464038, NY LA-1562077, OH 1253001, OK 3000616539, OR 11977459, PA 907324, RI 3000616500, SC 11977459, SD 40526091, TN 2449529, TX 2435809, UT 735502, VA 1135478, VT 3464587, WA 1026638, WI 11977459, WV 11977459, WY 40920