Viatical settlements

A viatical settlement is the name for a transaction in which an independent finance company buys an existing life insurance or endowment policy from a person who is terminally ill. All future benefits from the policy are assigned to the finance company, but the ill person can have access to a percentage of their policy value before his or her death. This is known as a living benefit.

When a finance company buys a life insurance policy from a person who is terminally ill, the original policyholder receives a percentage of its value (usually 50–80%) as an immediate cash lump sum.

The finance company then becomes responsible for all further payments of premiums, and receives all money paid by the insurance company when the policyholder dies. Finance companies offering this service will have differing qualifying requirements. They may need to discuss your medical condition in confidence with your doctor. You will be asked detailed questions about the policy you wish to sell, your medical details and your personal situation (eg if you have dependants under the age of 18, other provision must be made for them).

Viatical settlements are usually available only to people who are expected to live less than three years. However, these policies are always assessed on an individual basis. Sometimes money can be recovered from life insurance policies in other ways, such as surrendering the whole policy to the insurance company. It is always important to seek advice from a financial adviser before agreeing to a viatical settlement, as these transactions may have effects on other sources of income such as your entitlement to benefits| or grants.