Viatical Settlements: Myths and Misconceptions

A viaticum refers to any provision given to a person about to go on a long journey. An oddly beautiful phrase, perhaps, to describe a rather macabre practice becoming increasingly popular in the financial and estate planning industry.

If you are terminally ill or elderly, and you have exhausted all your assets, you have probably encountered the concept of a viatical settlement. You may have even considered whether it is a good choice for you and your family, especially if you are burdened with expensive medical bills or palliative care during the final stages of your life.

The following are three myths and misconceptions about viatical settlements that prevail, in spite of evidence that disprove them.

Myth #1: No one is willing to buy

You may be surprised to learn that in the investment world, there is a subset of eccentric and somewhat morbid individuals who purchase life settlements. It’s a risky move, financially, since there is no guarantee of an instant payoff or even necessarily a high one. 

Plenty of egregious financial planners target naive investors with promises of fast returns and high rates. But it’s easy to see why investing in life settlements is a different sort of game than investing in, say, real estate or a new restaurant chain. Aside from the policy owner’s prognosis, there is very little to indicate to anyone when the payout will come.

Though investors might not always be well-informed, as the seller, you should be. With the guidance of a reputable viatical settlement company, you will be able to learn everything you can before you make the difficult decision to sell your life insurance policy and cash in. 

Myth #2: The viatical industry only courts the terminally ill

While viatical settlement companies experienced a surge of popularity in the 1990s during the AIDS crisis, in part due to the addition of a brand new benefit to policy owners known as the Accelerated Death Benefit (ADB), the industry has begun broadening their horizons. In today’s unstable economy, viatical settlements are appealing even to those with minor illnesses that may or may not shorten their lifespan. 

While the elderly and the terminally ill remain the most likely to utilize viatical settlement benefits, plenty of people with chronic illnesses are taking advantage of the option, too. However, it’s typically risky for investors to purchase a policy without knowledge of your prognosis. That’s why you will be asked to provide accurate and honest details of your medical history on your application, and why lying about your health condition is unacceptable.

Myth #3: Investors can count on high payouts from terminally ill patients

Investors are taking a risk no matter whose policy they invest in. As the policyholder, you are actually much more likely to benefit financially from a viatical settlement. That is why the viatical industry works so hard to provide this option to patients who are facing crushing medical bills and living expenses during their final years of life.

Additionally, it’s important to remember that “terminally ill” refers to individuals with a life expectancy of 12 to 24 months. It doesn’t just mean any person with a terminal illness. Of course, there are always exceptions to the rule. No physician can predict the future with complete accuracy. After all, plenty of patients with stage four cancer far outlive their life expectancy, sometimes very comfortably so. 

The doubt and uncertainty about your life expectancy and how you will afford living expenses in the case of a medical miracle is one of the main reasons why terminally ill individuals choose to cash in on their life insurance policies. The payout is direct, immediate, and beneficial. Knowing the facts from fiction will help you ensure you get the best compensation possible in exchange for your life insurance policy.