What do viatical settlements involve?

Viatical settlements specifically involve viatical companies purchasing life insurance policies from individuals who have terminal illnesses. This process allows individuals, who may be facing a shortened life expectancy, to sell their life insurance policies for a lump sum payment that is often higher than the cash surrender value but lower than the death benefit. The amount received can provide immediate financial relief for medical bills, end-of-life expenses, or other financial needs.

In this context, it is crucial to understand that the transaction primarily facilitates individuals facing serious health challenges to gain access to funds during a difficult period in their lives. The viatical company then becomes the policyholder and is responsible for paying future premiums, with the intention of collecting the death benefit when the insured passes away.

Other options describe related concepts but do not encapsulate the essence of viatical settlements as accurately. For instance, selling policies to other individuals, assigning benefits to a bank, or offering lower premiums for terminal illness coverage do not accurately reflect the specific nature and intent of viatical settlements. Each of those options entails different arrangements and purposes, demonstrating that viatical settlements are a unique financial tool designed for people with terminal conditions.