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.

BREAKING DOWN '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. Viatical Settlement

    An arrangement in which someone with a terminal disease sells ...
  2. Accelerated Benefits

    A clause in certain life insurance policies that enables the ...
  3. L Bond

    An L bond is an alternative investment providing high yield in ...
  4. Adjustable Life Insurance

    A type of life insurance that combines features of term and whole ...
  5. Variable Life Insurance Policy

    A form of permanent life insurance, Variable life insurance provides ...
  6. Viator

    A person with terminal or a life-threatening illness who sells ...
Related Articles
  1. Financial Advisor

    How Life Insurance Settlements Are Evolving

    The life insurance industry marches forward by offering more ways that consumers can access the death benefits in their policies. Here's one of the newest.
  2. Managing Wealth

    Profit From Unwanted Life Policies With Life Settlement

    With a life settlement you could cash in on your policy money now.
  3. Investing

    Making A Living On Death Bonds

    Find out if these macabre bonds are just the new blood your portfolio needs.
  4. Managing Wealth

    An Introduction To Life Settlements

    A life settlement is the trading of a life insurance policy under specific circumstances. Learn what it's all about.
  5. Retirement

    Beware the Sneaky Math of Universal Life Insurance

    Universal life insurance's cash value can be a cash cow – if there's any left. Read on to see if it'll work as an income source after you've retired.
  6. Insurance

    Why You Should Buy Life Insurance

    If you haven't thought about life insurance or you're toying with the idea, we give you some reason why it might be wise to buy.
  7. Personal Finance

    The Best Life Insurance for Military Families

    Two of the most common types of life insurance are term and whole life. Here's why the latter isn't a good idea for most military families.
  8. Insurance

    What's Better: Whole Life or Term Insurance?

    Life insurance can be a difficult decision to make, especially for a young adult. Here's a look at the benefits and costs of getting whole life insurance.
  9. Insurance

    When Life Insurance Isn't Worth It

    So, you're thinking about buying life insurance, but do you really need it?
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 Answer >>
Hot Definitions
  1. Life Insurance

    A protection against the loss of income that would result if the insured passed away. The named beneficiary receives the ...
  2. Price Elasticity Of Demand

    A measure of the relationship between a change in the quantity demanded of a particular good and a change in its price. Price ...
  3. Market Capitalization

    The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying ...
  4. Frexit

    Frexit – short for "French exit" – is a French spinoff of the term Brexit, which emerged when the United Kingdom voted to ...
  5. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  6. Down Round

    A round of financing where investors purchase stock from a company at a lower valuation than the valuation placed upon the ...
Trading Center