The term viatical gets its name from the Latin word "viaticum," which means "provisions for a journey." Viatical settlements are payments made in cash to people who sell their life insurance. They are basically transactions whereby a written agreement is entered into, under which a life settlement provider acquires a policy. This policy insures the life of an individual by paying the owner or certificate holder compensation that is less than the net death benefit of the policy. It then becomes the buyer's responsibility to pay the remaining premiums. Upon the viator's demise, the buyer can collect the benefits. Both parties face a certain degree of risk. The risk for the viator is that he might have to sell the policy at a very low rate. The investor also risks losing money if the viator lives longer than his expected lifetime prediction. But if the seller of the policy dies sooner than was estimated, the buyer is in for a profit. There is one more angle, and that is the risk of the insurance company going bankrupt, in which case the investor suffers. There are also chances that the insured had committed some sort of fraud while filling in the life insurance application, and so the insurance company may not be in a position to pay the benefits. Given the above scenario, the question arises why one should go in for viatical settlements. The positive side is that the viator (seller) gets lump sum settlements to ease the financial strains of his final days. The buyer gains by becoming the beneficiary of the policy. It is a gamble - a gamble on death. This may sound disturbing to a lot of people, but if the transaction is carried out in a fair manner, the settlements can provide relieve the financial strains of the person who is already undergoing the emotional and physical trauma of a terminal illness. |
