Viatication

AAA

DEFINITION of 'Viatication'

The selling of a life insurance policy by a terminally ill person, so that person can receive a benefit from the policy while still alive and the purchaser of the policy can receive a payment when the seller dies.


Though viatication may seem quite morbid, it does benefit both the buyer and the seller. The purchaser pays the seller less than the full benefit of the policy in order to earn a return on the investment. The seller uses the proceeds to pay for medical treatments and/or improve quality of life while he or she is still alive when other sources of funds are exhausted. Viatication, also called a viatical settlement or life settlement, can also be used when the policyholder no longer wants the life insurance policy for any reason, even if he or she is not terminally ill.

INVESTOPEDIA EXPLAINS 'Viatication'

The downsides of viatication for the policy holder are that he or she will not receive the full value of the policy and his or her beneficiaries will no longer receive the policy proceeds unless there happens to still be money left over from the viatical settlement when the policyholder dies. Thus, viatication somewhat defeats the original purpose of purchasing life insurance, but it does offer flexibility in determining how the policy proceeds will be used. An alternative to viatication is to borrow against the cash value of a permanent life insurance policy (this option is not available with term life insurance, however).

RELATED TERMS
  1. Cash-Value Life Insurance

    A type of life insurance policy that pays out upon the policyholder's ...
  2. Viatical Settlement

    An arrangement in which someone with a terminal disease sells ...
  3. Term Life Insurance

    A policy with a set duration limit on the coverage period. Once ...
  4. Permanent Life Insurance

    An umbrella term for life insurance plans that do not expire ...
  5. Viator

    A person with terminal or a life-threatening illness who sells ...
  6. Face Value

    The nominal value or dollar value of a security stated by the ...
Related Articles
  1. How Much Life Insurance Should You Carry?
    Insurance

    How Much Life Insurance Should You Carry?

  2. Profit From Unwanted Life Policies With ...
    Options & Futures

    Profit From Unwanted Life Policies With ...

  3. Life Insurance: How To Get the Most ...
    Retirement

    Life Insurance: How To Get the Most ...

  4. Life Insurance Clauses Determine Your ...
    Home & Auto

    Life Insurance Clauses Determine Your ...

comments powered by Disqus
Hot Definitions
  1. 80-10-10 Mortgage

    A mortgage transaction in which a first and second mortgage are simultaneously originated. The first position lien has an ...
  2. Passive ETF

    One of two types of exchange-traded funds (ETFs) available for investors. Passive ETFs are index funds that track a specific ...
  3. Walras' Law

    An economics law that suggests that the existence of excess supply in one market must be matched by excess demand in another ...
  4. Market Segmentation

    A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will ...
  5. Effective Annual Interest Rate

    An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following: ...
  6. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
Trading Center