A viatical 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.

Regulatory usage of the terms “viatical settlement” and “life settlement” varies by state. However, the market generally uses the term viatical settlement to refer to instances where the insured is terminally ill with a life expectancy of less than two years. A life settlement focuses on policies insuring older individuals with life expectancies greater than two years. 

Historically, if an owner of a life insurance policy found that the policy was no longer needed due to changed needs or circumstances, the owner could elect to cancel the policy and receive the policy’s cash surrender value as a lump sum.

In the past several years, a number of companies have raised pools of capital and created a more liquid secondary market for life insurance policies.  Simply put, these companies will competitively bid on the purchase of an existing policy taking into account the insured’s current age, state of health, and the overall economic environment In other words, if they qualify, those wishing to cash in their policies can now get a competitive market quote based on several bids. Click here to see what factors determine whether you qualify.  

The buyer (called a provider) becomes the new owner of the life insurance policy, pays future premiums, and collects the death benefit when the insured dies.

The sale of an existing life insurance policy by its owner is regulated in many states. If you live in one of the regulated states, you should know the rules that apply. You can find much information on this web site. Click here to find your state and the information that applies to you. 

Providing information about selling your policy, who should sell, how to sell, and to whom to sell is central to the mission of the Viatical and Life Settlement Association of America.

Frequently Asked Questions

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 “Viatical 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.

Does my state regulate Viatical and/or Life Settlements? 

Viatical/Life Settlements are regulated by state Insurance Departments.  Some states have enacted statutes addressing the sale of life insurance policies insuring non-terminally or chronically ill individuals and some only laws that only regulate the sale of life insurance policies insuring terminally or chronically ill individuals and others do not regulate the transaction at all.  Of those states that regulate the transaction, most require both the Viatical/Life Settlement Broker (facilitator of the transaction) and Viatical/Life Settlement Provider (purchaser of the policy) to be licensed.  Please click here for detailed state by state information.

How much money will I get if I sell my life insurance policy? 

The value of a life insurance policy is determined by a number of factors, including, but not limited to, the age and medical condition of the insured, type of insurance policy, rating of the issuing insurance company and amount of premium payments to keep the life insurance policy in force. 

What types of life insurance policies can be sold? 

Most types of life insurance policies can qualify, however, the most common are Universal Life, Whole Life, and convertible Term Life.

After I sell my policy, are there any restrictions on how I can use the money? 

No, there are no restrictions on use of the funds – the money is yours to spend as you like.

Are the proceeds of a Viatical/Life Settlement taxable? 

The proceeds are tax-free up to the amount you have paid in premiums during the life of the policy.   Whether or not and how the balance of the proceeds will be taxed depends on your specific situation.  Please consult your tax advisor for additional information.

What are some of the reasons why I might consider the sale of my policy?

• The policy is no longer needed or wanted

• To pay for healthcare costs

• Premium payments have become unaffordable

• Considering lapse or surrender of the policy

• Change in estate planning needs

What happens to the policy after I sell it? 

All rights and obligations of the policy are transferred to the new owner.  You will no longer be responsible for making premium payments on the policy, the new owner will.  The new owner will name a new beneficiary of the policy who will collect the proceeds upon the insured’s passing.

Contact us to discuss a Life Settlement or Viatical offer 

Portions of the above content was provided courtesy of the Viatical and Life Settlement Association of America.