The common reason why people purchase life insurance is to protect their families from incurring debt due to medical or funeral expenses.  They also hope to leave some money for their children or grandchildren when they pass away.  But then, there are times when dire needs arise immediately before one’s death.  And we are talking about terminal illness.  Hospital bills must be soaring and so terminally ill people feel the need to accept cash settlements in lieu of their life insurance policies to take care of their own needs.

Here is where viatical statements come in.  A viatical settlement is a large amount of cash given to terminally ill people, known as viators. This money is given in exchange for the death benefits of their life insurance. The word viatical or viator comes from a Latin origin, known as viaticum, which means provisions of a journey.

Viators or sellers (the terminally ill patients) benefit from these sorts of settlements as they receive a huge sum of money from it on their remaining days.  Investors benefit from it, too, as this could bring them high rates of return.

This simplest way that it works is if the investor pays some percentage of the value of the policy.  For example, if the person pays 50%, and then becomes the beneficiary of the policy, the investor will then be responsible for paying the premiums that are associated with his life insurance policy.

As investments, viatical settlements can be risky. Although the policyholder will eventually pass away, the amount received by the purchaser of the policy is determined by the date on which the policyholder actually dies. The return will be less than anticipated if that person lives longer than expected. The purchaser runs the risk of actually losing money if the policyholder lives much longer than expected and additional premiums must be paid in order to keep up the policy.  He will then be earning less of a return than expected.

The risk of this settlement for the viator is settling at a too low price while the risk for the investor is not receiving the death benefit if the company goes bankrupt or if the insured committed some sort of fraudulent information on the application.

However, you must be aware of the fact that this investment is not regulated, meaning that there will be little or no protection for investors.

Tips for potential viators:

* Many viators take into account Investigational New Drugs (IND) when pricing policies. Make sure that you price accordingly
* You have no obligations to a second buyer
* Check with your insurer to find out if your policy includes Accelerated Death Benefits. If you qualify, you can make a lot more money.
* Don’t apply to only one viatical company. See who gives you the most money.

Tips for Investors:

* Don’t use your (IRA) for viatical settlements.
* Don’t buy a policy within the contestability period. It’s too big of a risk