For individuals who are hard up on their finances due to the demanding nature of health care services for the terminally ill, people are sorting through their options in order to obtain readily needed money. There are other options to accumulate much-needed money, such as obtaining a bank loan. However, in order widen one’s scope regarding other options; the role of viatical settlements will be discussed thoroughly. A viatical settlement is one option that individuals with terminal illnesses should consider. Moreover, to understand if viatical settlements are appropriate actions for an individual to take, it is important to discuss the pros and cons of this type of life policy settlement.
Viatical settlements were formed to address the needs and concerns of individuals who are diagnosed with severe or deadly diseases or illnesses. Individuals who are facing such dilemmas are expected to need financial resources with the high cost of medical care and other health care services or accommodations. Serious illnesses, such as HIV and AIDS initiated the formulation and introduction of viatical settlements to the public. (ViaticalWeb, 2008) In general, viatical settlements are conducted as a deal between an individual suffering from life-threatening or recurring diseases or illnesses and another individual. Individuals who are diagnosed with aforementioned states or phases of illnesses are allowed to sell their life insurance policies to other people. This is the primary purpose of viatical settlements. (DOI, 2008)
The cost that will be paid for the life insurance is reduced from the total sum of money that will be obtained from the death benefit. Although this is the case, it will prove to be an advantage to life insurance owners who are in need of ready money for patient care purposes. (DOI, 2008) To engage in viatical settlements, individuals should be able to meet requirements for eligibility. These requirements include the period of activity of the policy, consent is obtained from the owner of the policy, and the owner of the policy is diagnosed accurately with a terminal illness. (Condor International Financial Services, 2008)
One advantage of viatical settlements is that through the process, the individual who is terminally ill benefits from his life insurance policy through the transaction. Although the amount that will be received is less than the total amount of money that will be received by the beneficiary after death, the owner is still able to gain hard money through the sale. Moreover, the money that will be obtained from the sale may be used for health care services, or any other expense. Furthermore, when the transaction is dealt with, the individual will no longer be required to pay for the insurance policy. Another advantage is that after reviewing the background of the patient, and the insurance life policy, he may be able to receive the payment less the tax expenses. (Condor International Financial Services, 2008)
Putting up an individual’s life insurance policy for sale also has disadvantages. In this case, selling a life insurance policy might have negative results to one’s access to public assistance programs. Once the life insurance policy is sold, the individual might have problems with public assistance programs such as Medicaid, Social Security, Aid to Families With Dependent Children or AFDC, and other accommodating and supportive assistance programs. (Bennett, 2008) Another disadvantage from selling life insurance policies is that the individual will only be able to gain a small amount of money as compared to the face value of the accumulated sum. Also, the insurance benefits for family members are not assured, once the life insurance policy is sold. It was aforementioned that in some instances, the payment for life insurance policies to individuals may be tax free, but for those transactions that require tax payments, the sum that will be received comes down to a small amount of money. (Evans & Manogue, 2008)
Viatical settlements were proven to be of use, especially to individuals who are suffering from terminal illnesses. Although this type of settlement might be a good way to gain money for medical expenses and health care services, it is also important to weigh the advantages and the disadvantages of the outcomes of the settlement. It is highly advisable that individuals who are considering employing viatical settlements, contact professional lawyers in order to fully understand what the settlement is all about. The most important thing to consider is the particular need or concern of the individual, and whether a viatical settlement would prove to resolve the pressing need of the owner.