Viatical Settlement

AAA

DEFINITION of 'Viatical Settlement'

An arrangement in which someone with a terminal disease sells his or her life insurance policy at a discount from its face value for ready cash. The buyer cashes in the full amount of the policy when the original owner dies. Also referred to as a Life Settlement.

INVESTOPEDIA EXPLAINS 'Viatical Settlement'

This is extremely risky. The rate of return is unknown because it's impossible to know when someone will die.

If you invest in a viatical settlement, you are basically speculating on death. Therefore, the longer the life expectancy, the cheaper the policy. But because of the time value of money, the longer the person lives, the lower your return. This is undoubtedly one of the more morbid investments you can buy.

RELATED TERMS
  1. European Life Settlement Association ...

    An organization created to promote fair standards for the life ...
  2. Advance Funding

    This refers to any advance made on a future commitment or payment. ...
  3. Life Insurance

    A protection against the loss of income that would result if ...
  4. Viager

    A (French) real estate agreement where property is sold on a ...
  5. Terminally Ill

    A person who is sick and is diagnosed with a disease that will ...
  6. Face Value

    The nominal value or dollar value of a security stated by the ...
RELATED FAQS
  1. What is long-term care?

    Long-term care refers to a collection of services that are intended to meet the medical and non-medical needs of disabled ... Read Full Answer >>
  2. How does life insurance help high net worth individuals protect their businesses ...

    Life insurance protects the businesses and personal wealth of high-net-worth individuals, or HNWI, by guaranteeing their ... Read Full Answer >>
  3. What is the usual profit margin for a company in the insurance sector?

    The best estimates of the average insurance company net profit margin are between 3 and 8%, with a likely median average ... Read Full Answer >>
  4. What financial ratios are most useful for an investor to evaluate the liquidity of ...

    An insurance company, like any other nonfinancial company, needs access to liquidity in case it needs to fulfill its debt ... Read Full Answer >>
  5. In what ways does government regulation impact the insurance sector?

    Regulation is not consistent among all forms of insurance. The kinds of regulations imposed on AIG for guaranteeing credit ... Read Full Answer >>
  6. What are the benefits of high net worth insurance?

    High-net-worth individuals (HWNI) face unique insurance challenges and tend to gravitate towards different insurance products. ... Read Full Answer >>
Related Articles
  1. Options & Futures

    Haunting Wall Street: The Halloween Terminology Of Investing

    Beware of zombies and Jekyll and Hyde companies! Read about the spooky terms circulating Wall Street.
  2. Professionals

    Indexed Universal Life Policies: Watch These Risks

    By properly vetting indexed universal life policies, advisors and savers can avoid contracts that could prove overly costly over the long run.
  3. Professionals

    An Advisor's Guide to Prof. Liability Insurance

    A guide to what financial advisors need to know about professional liability insurance.
  4. Insurance

    India's Two-Child Policy

    As of 2014, 11 Indian states have passed laws to restrict Indian citizens from having no more than two children.
  5. Economics

    What Does Asymmetric Information Mean?

    Asymmetric information describes a situation where one party in a transaction knows more than the other.
  6. Fundamental Analysis

    How to Calculate a Combined Ratio

    Combined ratio is a formula used in the insurance industry to measure the performance of an insurance company.
  7. Professionals

    Tips for Helping Clients with Life Insurance Needs

    Life insurance needs will likely change over the client’s lifetime and again financial advisers can provide an objective sounding board.
  8. Insurance

    Explaining Insurance

    Insurance is a form of contract between an individual and an insurance company that spreads risk in exchange for premium payments.
  9. Insurance

    Don't Lose Your Wealth Due To Healthcare Costs

    This article will highlight the use of an ILIT type of trust to protect wealth in the case of serious illness and transfer wealth in the event of death.
  10. Economics

    How Big Data Has Changed Insurance

    No longer confined to technology, big data has become integral to providing solutions to the insurance industry's long standing challenges.

You May Also Like

Hot Definitions
  1. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  2. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  3. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  4. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  5. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  6. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
Trading Center