What happens under a viatical settlement?
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Thereof, how does a viatical settlement work?
A viatical settlement is when someone who is terminally or chronically ill sells their life insurance policy to a third party. The policy seller receives a lump sum cash payout that is more than the cash surrender value, but less than the death benefit. A viatical settlement is one of them.
Also, is a viatical settlement protected from creditors? Also, a viatical settlement may be considered income for tax purposes. Finally, a viatical settlement may be subject to the claims of creditors. On the other hand, a life insurance policy's death benefit proceeds are generally not income taxable, nor subject to the claims of creditors.
Furthermore, which of the following correctly describes what happens under a viatical settlement?
A viatical settlement takes place when the insured of a life insurance policy (also known as the viator) sells their life insurance policy to a third party (the viatical settlement provider) for a lump sum cash payout—this payout is less than the death benefit, but more than the cash surrender value.
How much do viatical settlements pay?
In general, the larger the life insurance policy size, the larger the life settlement offer. This is because the death benefit payout to the investor is larger. So an average life settlement offer on a $100,000 policy may be around $20,000 and an average offer on a $1,000,000 may be around $200,000.