America is currently home to 46 million people 65 years of age or older, and the number of older adults is rising. According to some projections, by 2034 there will be more seniors than children. Older people have a greater risk of suffering from strokes, cancer, heart disease, diabetes, pneumonia, and Alzheimer’s disease. The Centers for Disease Control (CDC) lists all of these medical issues among the top ten causes of death in the United States.
It’s common for older people and people with severe health issues to face financial challenges. Older or terminally ill people may hear about viatical settlements and wonder if they can be used to address their financial needs. Read on to learn about these settlements, who qualifies for them, and how the money can be used.
What is a viatical settlement?
A viatical settlement is a legal term for selling your life insurance policy to a buyer. The sale is typically handled by a viatical settlement company, such as American Life Fund. The seller approaches the settlement company and provides the documentation required to qualify. The settlement company locates a buyer. The seller receives a single cash payout for their life insurance policy.
Are there restrictions governing how to use the money?
Once you receive your settlement, you are free to use the money as you see fit. The money can be used to cover daily life expenses, medical treatment, or supplements to ease your pain and reduce the medical symptoms you experience, among other options. Your settlement may enable you to reduce your monthly expense. You may opt to use the funds to pay medical bills or to pay off your mortgage.
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These settlements are not restricted to practical expenses. You can use the money to complete your bucket list. Perhaps you’ve always wanted to travel overseas, take your grandchildren to Disney World, or ride in a hot air balloon. Your viatical settlement funds can be used to fulfill those lifelong dreams and make lasting memories with your loved ones.
What are the advantages?
There are many advantages to opting for this kind of settlement. For one, the money you receive is tax-free. You get to keep the entire amount, and you can use the money yourself instead of having your policy payout given to others after you pass away.
Another advantage is that the buyer assumes responsibility for any remaining policy payments due. Since you no longer have to make payments on your policy, you will reduce the monthly expenses you would have if you were still paying for your life insurance policy.
There are, of course, downsides to this as well. The viatical settlement company will become the policy’s beneficiary. This means your dependents or heirs will not receive funds from your life insurance policy. You will also not receive your policy’s full payout amount. Buyers offers are less than the policy’s value, with the payout amount depending on your medical condition and life expectancy, among other criteria.
How do viatical and life settlements compare?
Viatical settlements are specifically for individuals who are terminally ill. Any individual can pursue life settlements. Buyers pay less money for life settlements because the current policyholder may live for several years.
One of the benefits of a life insurance policy is to protect your loved ones from incurring funeral expenses and bills after you pass away. If a viatical settlement enables you to cover these expenses in advance, or if you’ve already paid off your mortgage and prepaid for your funeral, a viatical settlement may be an ideal way to obtain funds to cover your personal and medical expenses. If you don’t have dependents or heirs, a viatical settlement may be ideal.
Those who have dependents who will need financial support after you pass away may want to discuss their options with a financial adviser to ensure that a viatical settlement is the best choice.