BIF Instructor Jerry Mee, CFP®, CRC® is devoting this episode of the BIF Bites Podcast to viatical settlements, including how to qualify for them, what their transfer value is, and why you need to know this before taking the CFP® Exam.
What Are Viatical Settlements?
A viatical settlement is a financial transaction in which a person who is terminally ill sells their life insurance policy to a third party to receive an immediate lump sum cah payment. This is generally less than the policy's death benefit but usually more than its surrender value. After the settlement occurs, the buyer assumes responsibility for any remaining premium payments and ultimately collects the policy's full death benefit upon the death of the insured person.
An Example of a Viatical Settlement
If a person with a life expectancy of two years sells their $500,000 life insurance policy to a viatical settlement provider, they may receive $250,000 in cash. The buyer pays all future premiums and receives the $500,000 death benefit when the insured passes away. This arrangement can provide the policyholder with necessary funds through their final years. However, their beneficiaries will no longer receive the death benefit.
Listen to Jerry explain it in more detail!
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