"Know thyself."
-Thales

Know thyself.  No kidding. Knowing exactly what you want for yourself and your loved ones during your last days can eliminate unnecessary worry from an already stressful time. When trying to decide whether a viatical settlement is right for you, you may have the following questions:

What if I simply surrender my life insurance policy?

When you surrender your policy, you resell it to the company from which you bought it. Insurance companies usually pay the cash value of your policy plus interest. If you have owned the policy for only a few years, your policy probably doesn't have that great of a cash value. Again, it makes sense to consult with a viatical settlement broker in order to determine which option generates the most money. Since viatical settlement offers are based on the face value of the policy, not its cash value, there's a good chance a viatical settlement would work in your favor. And remember, there are no charges or taxes to pay on a viatical settlement.

Can't I borrow money against the cash value of my insurance policy?

You certainly can, if you have a policy that accrues a cash value as you pay premiums. But if you have term life insurance, you're out of luck. Unlike permanent life policies (whole, universal, or variable), term life insurance doesn't build a cash value. You receive cash from a viatical settlement on any life insurance policy, term or permanent.

I have permanent insurance, so borrowing is an option.

Yes, those who have permanent life insurance may borrow against the cash value of their policy. But how much is your policy worth?  If you have owned a policy for only a short time, chances are that a viatical settlement will generate more cash than borrowing against the policy. Furthermore, your insurance company will deduct the unpaid balance on the loan from the end benefit.

Viatical settlements are never worth 100% of the face value of the policy. What does it matter if the insurance company deducts an unpaid loan from my end benefit?

Two factors may influence your decision: interest and taxes. If you decide on a viatical settlement, you never pay federal income or capital gains taxes. However, a loan against the value of your policy may or may not be taxable. And since a viatical life insurance settlement is not a loan, you don't have to pay interest.

How does an Accelerated or Living Benefits Rider on my policy compare with a viatical settlement?

The money you receive from a Living Benefits Rider (LBR) may be taxable--you should check with a personal tax advisor before deciding whether to add one to your policy. Also, if you bought your policy before 1985, there may be a fee for adding a LBR to your policy. Finally, if you elect to receive only a portion of your end benefit, you still hold responsibility for paying the premiums until your death. A viatical settlement is a less complicated, and possibly more lucrative, choice.