by Demarco Gonzalez | July 9, 2018 11:15 am
Life insurance is something that a lot of people nowadays have started investing in. People would make premium payments every year dedicatedly and raise an asset. And still, life insurance feels like an asset that can’t be liquidated. When there is a crisis situation and you need money, you might feel like all the money you invested in it stays there locked up, inaccessible. This is where the life settlement and viatical settlement market came into being. While it is not at its peak yet, the rapid growth of its apparent benefits would soon take it there.
With all of that being said, there are two terms involved here- life settlements and viatical settlements. Both look very similar as if one concept has two names with just slight changes here and there. However, both are two different things that have their own exclusive conditions. Both life settlements and viatical settlements mean instant cash in exchange for your policies. But there are bigger differences that you just can’t overlook. Here, we break these terms down for you and explain more about them.
A viatical settlement is the kind of settlement that you only get when your life expectancy is 2 years or less than that. Basically, people with some sort of terminal illness are the ones that qualify for this kind of settlement. These being the major criterion; everything else being constant, you have to prove that your life expectancy is 2 years or lesser through medical reports.
The amount of money you get through this settlement could be half the amount of death benefit. However, the older you are, the more money you get when you sell your life insurance policy. A viatical settlement is not taxable if you are terminally ill.
People generally opt for a viatical settlement when they need capital to meet medical expenses pertaining to their health state. Also, at a critical stage like this, a person would not be able to pay the premium. So, this is an ideal choice for someone who is terminally ill and needs money.
Life settlement gets you cash when you meet certain criteria. Unlike viatical settlement, the life expectancy doesn’t have to be 2 years or lower. In fact, it has to be higher than 2 years. However, besides being higher than 2 years, it can be as low as possible to get you the maximum amount of money. You should also be 65 years or older in order to qualify for a life settlement.
Another major distinction between a viatical settlement and life settlement is that a life settlement is taxable. However, you should seek the assistance of a tax advisor to help you figure out how much tax you would have to pay for your life settlement amount.
Exchanging your life insurance policy for a life settlement is a good decision if you are no longer able to bear the expenses of your annual premium. You can also use the life settlement amount to pay off debts in a crisis situation, given you are 65 years or older and you meet other criteria.
For both viatical settlements and life settlements, there are both brokers and settlement providers. These are the people or companies that help you sell your life insurance. While brokers act as mediators between you and the buyer, providers can even be your buyers. Out of both the options, however, life settlement providers are more preferred. Life settlement companies are licensed and it is easier to verify their credibility.
Both life settlement and viatical settlement are good alternatives if you want to liquidate your life insurance policy amount. Based on which criterion you fit in, you can choose between the two. With the help of best life settlement companies, you can get the best return on your policy.
Source URL: http://betacash.org/all-about-life-settlements-viatical-settlements/
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