Viatical Settlement vs Life Settlement: What’s the Difference?

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When you reach retirement age or start considering how you are going to finance your retirement, you may have a lot of questions. One common question is, “what’s the difference between a viatical settlement vs. life settlement?” They both involve selling a life insurance policy, but the reasons for selling your coverage are vastly different.

What is a viatical settlement?

A viatical settlement is what you get when you sell your life insurance policy for medical reasons. If you have two years or less to live due to a terminal or chronic illness, you could qualify for this type of settlement. Usually, when people need to cover expensive medical bills so as not to leave their family in debt, they will sell a life insurance policy to cover the medical costs for the period before passing. One potentially complex advantage to a viatical settlement is, that for terminally ill patients, the payout is tax free, if a doctor has determined that the patient will live no longer than two years. Also, for those who have been diagnosed as chronically ill instead of terminally ill, the part of the payout used to cover long-term medical expenses (outside of what’s covered by insurance) is tax free as long as the patient has been certified chronically ill by their physician. Tax laws are complicated and change somewhat frequently, so if you’re considering a viatical settlement, make sure you consult with a financial advisor.[1]

What is a life settlement?

A life settlement is when seniors, age 65 and older who have a life expectancy greater than two years, sell a life insurance policy that isn’t necessary anymore and get a cash payout in return. There are two big advantages to using a life settlement. For one, you can get a life settlement at any time, as long as you and your policy qualify, in order to supplement your retirement savings. The second advantage is that by getting rid of an unneeded life insurance policy, you get rid of your monthly premium payments. This can give you a little more breathing room if you thought your retirement funds are going to be spread a little thin or can help fund your dream vacation or home. A life settlement can help you spend your retirement years living life on your terms.

If you think that you need some extra money to help cover medical bills for a terminal illness, a viatical settlement may be for you. But if you feel like you need some extra money to help cover the cost of a vacation, medical bills, or just to pad your retirement funds, a life settlement may be the answer you’re looking for. Did you know you can sell all, or even a portion of, a life insurance policy, even term insurance? If you have questions about viatical settlements vs. life settlements, contact Life Settlement Advisors today and get started towards the retirement you want.

Case Study: Rose divorced with no children and had a 20-year term life insurance policy. Rose has stage IV breast cancer and was given 2 years to live. Rose sold her life insurance policy and used the funds to check off a few items on her bucket list and pay off her medical bills.

Leo LaGrotte
Life Settlement Advisors


Get in touch with Life Settlement Advisors today to take the first step toward converting your policy into cash.
Life Settlement Advisors
Leo LaGrotte
At Life Settlement Advisors, we strive to be a voice of confidence and assurance for our clients. Our goal is to educate you about the life settlement process so you can make an educated decision about whether it is right for you.

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