What is a Viatical and/or Life Settlement?
A Viatical and/or Life Settlement is the sale to a third party of an existing life insurance policy for more than its cash surrender value but less than its net death benefit. The industry generally uses the term “Viactical Settlement” to refer to a transaction involving a terminally or chronically ill insured and a “Life Settlement” to refer to a transaction involving an insured who is not terminally or chronically ill, generally over the age of sixty-five (65). However, as used in the laws and regulations of each state, these terms are not consistently used in this manner. For example, some states use the term “Viatical Settlements” to refer to the sale of all life insurance policies, regardless of whether the insured in terminally or chronically ill or not. And at least one state uses the term “Life Settlements” to refer to all transactions, including ones in which the insured is terminally or chronically ill.
