Introduction
The most common application of the viatical settlement is a scheme where the policyholder, in return for a one-time lump payment, sells the right to the contract to a third party. Upon the death of the insured, the policy beneficiary will be paid. The new owner of this policy is, generally, the buyer who is also the premium payer for the rest of the time there is a definite period to which the contract applies when he may have to wait for the death of the insured before the benefits are paid
Good Scenario:
A Viable Alternative to Traditional Life Insurance Sometimes a viatical settlement can turn into the best solution for those holders who are struggling to keep up with their life insurance premiums. This is what usually happens in cases of serious illnesses or short life spans. They can sell their policy to another person who will give them a one-time payment to cater for their expenses, bills, and family.
Even if a guy has a unit-linked term life insurance policy ($500,000 benefit), he can still be the best example of a viatical settlement policyholder who has been diagnosed with a deadly disease. One day he thinks there is no hope for him and he was told by the doctor that he has only 2 years more to live. He comes up with a viatical settlement company and he was given a lump sum totaling $150,000 in lieu of the policy. Now, they can take care of their family and get the moneys without having to pay back the remaining ife insurance premiums.
Bad Scenario:
Untrustworthy Providers Manage to Make Use of Policyholders On the downside, not all viatical settlements are of good scenarios. Bad situations also result from the efforts of some companies that use such practices. There were insurance companies acted not wisely which led people to sign viatical settlement agreements for much less money than they were worth.
Worst Scenario:
Fraudulent Providers and Misrepresentation In some cases, viatical settlements can transform into a bad status or can arrive at the worst-case scenario due to fraudulent providers and misrepresentation. In other words, in cases where viatical settlement companies have used false promises to win the goodwill of the policyholder, e.g., claiming that as a policyholder, if you agree to transfer the policy, you will get a huge sum, but in reality, you may just receive a substantially smaller amount, or no amount at all, as such a transfer is fraud even more so when the policy is a second-to-die one. In short, the policy holder may get only a fragment of that payment or no payment at all.
Weird Scenario:
Policies with Unusual Clauses and Conditions In some cases, viatical settlements can involve unusual clauses and conditions in the policies. In some instances, some men are reported to freely marry one time in exchange for a $5,000 bride but disappear afterward. This is a case of the policyholder having a life insurance policy that can only be cashed out if and only if the policyholder dies from a certain cause, for instance, shark attack. The policyholder has no other possibility for selling his policy other than viatical settlement providers, thus this will be a weird scenario.
Complicated Scenario:
Interpreting the Policy and its Value In some cases, viatical settlements can be complicated due to the interpretation of the policy and its value. For instance, a stipulation with clauses stating that the insurance of the deceased was a one here ago lapse policy or a car loss policy etc, and the policy is a life insurance second to die after the other policyholder is deceased. Therefore, the policyholder would be restricted to a few viatical settlement providers who would be willing to buy the policy, making it a weird scenario.
Conclusion:
To sum up, to a viatical settlement, the policyholder can get a lump sum of money in advance for their life insurance policy, before their death. These are typically used by insureds who need money for sickness or other financial problems or their policies are obsolete or unaffordable. Even though viatical settlements bring a lot of benefits, they are not suitable for everybody and they also carry a variety of potential risks and drawbacks.
It is wise to be fully informed about viatical settlement and a complete balancing of the advantages and disadvantages before actually going for policy sale. On top of that, the policy type you hold, your health issues, and the settlement agreement issued from the insurance company are other factors that are important to consider.
In case you have made up your mind to find a viatical settlement, it is of a great importance to get in touch with a trustworthy and knowledgeable broker who can show you the way and guarantee that you will be fairly paid for your policy. In the final analysis, by taking decisions based on facts and a thorough explanation of the viatical settlement concept, you will be able to make the most out of your life insurance policy and will be able to also secure financial stability for yourself and your family.