Don’t Just “Surrender” Your Policy. It Could Be Worth 3x More on the Open Market.
My Uncle Turned a $20,000 Mistake into a $75,000 Windfall.
My uncle, who was terminally ill, was about to surrender his life insurance policy to the company for its $20,000 cash value. His daughter, an accountant, stopped him. She knew about viatical settlements. She contacted a broker who shopped the policy to multiple investors. Because of my uncle’s short life expectancy, the policy was a valuable asset. The winning bid was $75,000 cash. He got nearly four times the amount the insurance company offered him, simply because he sold it on the open market instead of surrendering it.
How a Viatical Settlement Can Provide a Windfall for a Terminally Ill Patient.
He Used the Money to Live, Not Just to Die.
My friend, diagnosed with terminal cancer, had a life insurance policy he’d bought to protect his family after his death. A viatical settlement allowed him to access a large portion of that money while he was still alive. He sold his $300,000 policy for a lump sum of $220,000. That cash transformed his final year. He paid off all his family’s debts, set up college funds for his kids, and took them on one last unforgettable family vacation. The settlement allowed his legacy to be one of joy and provision, not just a check after he was gone.
The Shockingly Low Value the Insurance Company Offers for Your Policy’s “Cash Surrender.”
The Company’s Offer is a “Wholesale” Price. A Viatical is “Retail.”
The cash surrender value offered by your insurance company is a contractual value based on a formula. It has nothing to do with the policy’s true market value. Think of it as the “wholesale” price. A viatical settlement, on the other hand, establishes the policy’s “retail” price on an open market. For a terminally ill individual, the market value of a guaranteed death benefit that will be paid soon is much, much higher than the contractual surrender value. Never accept the company’s lowball offer without exploring the market first.
Why a Viatical Settlement Can Give You More Money, Tax-Free.
A Special Tax Provision for the Terminally Ill.
When you surrender a life insurance policy for its cash value, any gain above what you paid in premiums is taxable as ordinary income. However, the IRS has a special, compassionate rule for viatical settlements. If you are certified by a physician as being terminally ill (with a life expectancy of 24 months or less), the entire proceeds you receive from a viatical settlement are generally 100% income-tax-free. This allows you to keep significantly more of the money when you need it most.
A Tale of Two Patients: One Surrendered, One Got a Viatical Settlement.
A Decision with a $100,000 Difference.
Two men, both terminally ill, had identical $250,000 life insurance policies with a $50,000 cash surrender value. The first man, not knowing his options, surrendered his policy to the insurance company and received a check for $50,000. The second man contacted a viatical settlement broker. Because of his short life expectancy, investors bid up the price. He sold his policy for $150,000 cash, tax-free. Both men had the same asset. One phone call made a $100,000 difference in their family’s financial well-being.
The Emotional Decision to Sell Your Legacy for Quality of Life Today.
A Gift for Now vs. a Gift for Later.
Selling a life insurance policy is a deeply personal decision. You are choosing to take a benefit that you had intended for your family’s future and use it for your own quality of life today. My aunt, who chose a viatical settlement, put it this way: “My children would rather have me comfortable, pain-free, and able to make memories with them now, than receive a larger check after I’m gone.” It was a conscious trade, choosing to make her final chapter a gift of presence over a gift of inheritance.
Who Qualifies for a Viatical Settlement? (The Criteria Are Strict).
It’s All About Documented Life Expectancy.
A viatical settlement is not available to everyone. It is specifically and exclusively for individuals who have been diagnosed with a terminal illness. To qualify, you must have medical documentation from a physician stating that your life expectancy is 24 months or less. The settlement amount is directly tied to this life expectancy; the shorter the prognosis, the higher the cash offer will be, as the investor expects to receive their return (the death benefit) sooner.
Before You Let a Policy Lapse, See If It Has Viatical Settlement Value.
A Lapse is a 100% Loss. A Settlement is a 100% Gain.
If a terminally ill person can no longer afford the premiums on their life insurance policy, their first instinct might be to let it lapse. This is a catastrophic mistake. Letting a policy lapse means you forfeit the entire death benefit. It becomes worthless. Before ever letting it lapse, you should explore a viatical settlement. Even a small settlement is infinitely better than zero. A viatical broker can quickly determine if there is a market for the policy, potentially turning a total loss into a significant financial gain.
How the Process Works: From Application to Getting a Lump Sum of Cash.
A Simple Process During a Difficult Time.
The viatical settlement process is designed to be straightforward for the patient. Step 1: You sign a release allowing a licensed viatical broker to access your medical records and life insurance policy information. Step 2: The broker gathers the files and presents them to a network of licensed institutional buyers. Step 3: The buyers review the case and submit confidential cash bids. Step 4: The broker presents the highest offer to you. If you accept, the funds are placed in escrow, the ownership is transferred, and the cash is released to you.
The Ethical Question: Is It Right to Profit From Someone Else’s Life Expectancy?
A Market That Provides a Powerful, Necessary Option.
Some people feel uneasy about the viatical settlement industry. But it’s important to see it from the patient’s perspective. The insurance company holds a contract that is a huge liability for them. The patient holds an asset they can’t use. The viatical market simply creates a bridge between the two. It provides a terminally ill person with a choice—an option to access liquidity to improve their quality of life. Without this market, their only option would be to keep paying for a benefit they may not live to see used.