Is the seller of life settlement sure to die? Viatical Settlements

If one were to look from the perspective of an investor, purchasing a viatical settlement is much akin to buying a bond with a negative valued coupon and dubious redemption date. This is due to the fact that the return of the viatical settlement chiefly depends on the life expectancy of the seller-when he or she becomes deceased.

Viatical Settlement

A viatical settlement is the absolute sale of a life insurance policy by the owner of the policy before the maturation of the said policy. Sales of viatical settlements are at a price discount from the face amount of the policy. However, viatical settlements are normally in excess of the insurance premiums paid or current surrender value of cash. This offers the seller an instant cash settlement. Viatical settlements generally involve insured customers with a life expectancy of two years or less. In nations without state-subsidized healthcare, along with high healthcare costs-the United States-this is considered a very practical way to pay out severely high health insurance premiums faced by extremely ill individuals.

Viatical settlements became popular in the United States in the late 1980s due to the increasing AIDS epidemic. The early victims of this dreadful disease in the United States were mainly homosexual men, many of whom were rather young.

Viatical Life Settlement

A viatical life settlement involves insured customers with longer life expectancies (normally two to fifteen years). A viatical life settlement may be considered a better alternative than a viatical settlement, but there are still plenty of risks involved. The general consensus of viatical settlements is that they are seriously risky. This is due to the fact that the return is unknown, since it's not probable to determine when an individual will die. To invest in a viatical settlement is simply speculating on death. The longer the life expectancy, the less costly the insurance policy (such as with a viatical life settlement), but the return is normally lower. Without a shadow of a doubt, this has to be one of the more morbid investments money can buy.

Although there seems to be more cons than pros when it comes to viatical settlements, one of the benefits is that viatical settlements assist in making tough choices a bit easier by creating a peace of mind. A viatical settlement can generally provide terminally ill insured customers financial solutions for serious financial dilemmas.

Continue to: Viatical Settlements: Benefits and Problems

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