How Is a Viatical Settlement Different from a Life Settlement?

Life settlements and viatical settlements both involve the sale of a life insurance policy so they may seem identical at first glance. However, there are some key differences to consider.

A life settlement is typically considered when a life insurance policy is no longer needed, wanted, or if the holder simply can no longer afford it. In such cases, they may sell the policy to a third party buyer for an agreed upon price. For life settlements, the policyholder must be 70 years of age or older and have a policy value of $100,000 or more.

Viatical settlements are a type of life settlement. These types of settlements are for individuals with serious illnesses such as Alzheimer’s, ALS, or cancer. In these settlements, the policyholder sells their life insurance policy to a third party, at a discounted rate, in exchange for immediate funds. This is typically done in cases where the policyholder will need a great amount of financial assistance due to their illness. As with life settlements, most companies require policies to have a value of $100,000 or more.

History of viatical settlements

While many people have never heard of them, viatical settlements have been practiced since the 1911 Supreme Court ruling that life insurance policies are public property and can be legally sold to third parties. Viatical settlements became prominent during the AIDS epidemic of the 80s, in which patients were able to sell their insurance policies in order to afford treatments to significantly extend, and in some cases save their lives.

Qualifying for a viatical settlement

In order to qualify for a viatical settlement, the potential seller has to meet three basic criteria. First, the seller must be someone with a life-threatening illness. Second, the life insurance policy must be at least two years old. Lastly, the policy must have a minimum value of $100,000.

All life insurance policy types are accepted, although there are variables that will determine the amount offered from the company handling the settlement. These can include things like the type of illness the seller has, the stage of the illness, the policy’s value, or any other factors deemed relevant.

Reasons to pursue a viatical settlement

One of the most common reasons a person may wish to pursue a viatical settlement is because they simply can’t afford insurance premiums due to their illness. In such cases, the viatical settlement is a practical way to keep their policy.

Viatical settlements can also be a good option if a term policy is about to expire. Instead of letting the policy run out, it may be possible to convert it to a permanent plan and then sell it.

And, of course, a viatical settlement is the best option if there is simply no other way for the seller to afford the medical care they need. A viatical settlement could provide a way for the seller to not only afford their care but also afford a higher quality of life.

Advantages vs. other resources

If one decides that a viatical settlement is right for their situation, the following are the main benefits compared to other options. A viatical settlement will, in nearly all cases, provide a bigger payout than any form of financial assistance. Second, they have a great advantage over life settlements in that viatical settlements are tax-free.

For those who wish to pursue this option, the process is often as brief as a two-page application and a payout within days if the offer is accepted. 

How to Find Low-Cost Insurance as a Smoker

Getting a life insurance policy is a smart financial move that provides your family with protection should something ever happen to you. What you pay for a life insurance policy depends upon a variety of factors, including your age, your sex, and your health. Another major factor in how much you pay is if you’re a smoker. Smokers pay significantly higher rates than those who don’t. That doesn’t mean getting a life insurance policy has to break the bank.

How Much More Does a Smoker Pay?

It’s no surprise that smokers pay a higher rate for life insurance than non-smokers. Individuals who smoke are more likely to pass away sooner than those who don’t, making them a bigger risk to insure. What does come as a surprise to many smokers is just how much more smoker’s rates are. The rates vary from one company to another, but smokers can generally expect to pay 30% to 50% more than non-smokers for the same plan.

Be Honest About Smoking

When applying for a life insurance policy, it’s important that you’re upfront about your smoking habit. You’ll be asked a series of questions, one of which will ask about your smoking (or tobacco) use within the past 12 months. Many life insurance policies will also require a medical exam, during which you’ll have a blood test and a urine test. Tobacco will show up on these tests. If you lie about your usage, it can result in an alteration of your policy or cancellation of the policy completely. Some people look into the lower cost final expense insurance if they smoke.

Get Several Quotes

You don’t have to settle with the first life insurance provider you find. There are numerous companies out there. You may have seen a few advertised on television. You may have received a few letters in the mail. If you perform an internet search, you’ll find many more you might have never heard of before. Get quotes from several different insurance providers. You’ll notice that even though you provide the same information to each company, your quotes will vary. Getting several quotes will help you to compare coverages and price so that you can get the best policy for the best price.

Quit Smoking

Quitting smoking can help you to significantly lower how much you pay for your life insurance policy. You have to be smoke-free for at least 12 months, however, in order to qualify for non-smoker rates. This doesn’t mean that you should delay getting life insurance coverage. The longer you wait, the more expensive coverage becomes. You’ll pay more for your policy as a smoker, but it is possible to lower your rates later. When getting quotes for a life insurance policy, be sure to ask about getting your rates lowered should you quit smoking. Quitting smoking can be hard, but your life insurance policy can provide you with additional motivation to finally ditch the habit. After you’ve been smoke-free for 12 months, contact your insurance provider and ask to take a new medical exam. After taking a new medical exam, which should show that you don’t have any tobacco left in your system, you’ll be able to qualify for non-smoker rates.

Life insurance is one of the most important financial moves you make for your family. You’ll pay higher rates as a smoker, but that doesn’t mean you should delay getting coverage. Shop around and get quotes from different insurance companies and make sure that you ask them about lowering your rates after you quit.