A viatical settlement is an agreement among three parties for the purchase of a valid life insurance policy. You, the insured, are the viator. You offer your life insurance policy or policies for sale to the highest bidder through your agent, the broker. Your broker forwards the policy and other information about you to several investors, known as providers. The providers study your case and calculate a cash value for your policy. It is to your and your broker's advantage that the broker secures the highest offer for your policy. Once you, your broker, and the provider have reached a mutually beneficial agreement, you surrender your policy to the provider, and the provider settles directly with you. The provider, now the owner of the policy, assumes the premiums and receives the final benefit. Your broker receives compensation from the provider, and you spend your money as you see fit.

On the viator's end, receiving a viatical settlement is a relatively simple process. First of all, your insurance company must agree to your selling the policy, which must be non-contestable, paid-up, and in your possession for at least two years. You need to prove that you have a terminal illness and a life expectancy of less than thirty-six months. Laws prohibit brokers and providers from forcing you to see a particular physician, so the testimonies to your condition come from the doctors who know you best. The more medical evidence you provide, the greater your chance of receiving a settlement. You then complete an application, provided by your broker, who does the rest of the paper- and footwork. In most instances, you do not pay viatical settlement brokers for their services. The providers pay the brokers.

When you have completed the application process, your broker puts your life insurance policy on the market. Providers make cash offers on policies according to the type of policy, its face value, and the viator's prognosis. The largest settlements often go to those with the shortest life expectancies, because providers want to avoid paying the policy's premium for an extended period. Providers deduct the amount they expect to pay in premiums while the viator remains living from the end benefit value of the policy. And since providers are essentially investing in a security--your life insurance policy--they also consider their own profit margins when making you an offer. At any rate, you can expect to receive cash offers worth between 20% and 72% of the face value of your policy.

Keep in mind that when you receive an offer for your policy, you are under no obligation to accept it. The decision of whether to accept or reject a provider's offer is yours alone. You even have the option of returning the entire settlement to the provider within fifteen days of receiving it. However, you also must reimburse the provider for any premiums it has paid on the policy. If you choose to accept an offer, the money is yours to keep--tax free! That's right! As a result of the 1996 Health Insurance Portability and Accountability Act, a person who receives a viatical settlement is exempt from federal income and capital gains taxes if his or her life expectancy is fewer than twenty-four months.

Viatical settlements have allowed many to enjoy comfort and security in their last days. Maybe you'd like to free your loved ones from the responsibility of paying off your medical debts after your passing. Or maybe you'd like to treat yourself and your family to something memorable. A viatical settlement could make either possibility a reality. One may be right for you.