DEFINITION of 'Viator'

A viator is a person with a terminal or life-threatening illness who sells his life insurance policy at a steep discount to pay for health-care costs or improve quality of life. The person or entity who purchases the policy takes over the premium payments for the remainder of the victor's life and usually receives a percentage of the policy's face value, around 50-70%, in a cash payment. Upon the viator's death, the third party who purchased the policy receives the full death benefit.

BREAKING DOWN 'Viator'

A person may choose to become a viator if he is diagnosed with an incurable illness and determines his beneficiaries no longer need the death benefit of his policy, and that he can put the money to better use while still alive, such as paying for medical treatments. The percentage of the death benefit received by the viator is negotiable. Factors that influence how much he receives include his estimated remaining lifespan and the policy's premium costs. A viator with longer to live receives a lower percentage of the policy's face value than one expected to pass away within weeks or months.

How the Process Works

Suppose a person receives a medical diagnosis that concludes he has only six months to a year to live. He has a life insurance policy worth $1 million that he took out when his children were minors, but they are now grown and self-sufficient. They no longer risk being destitute without his income. The insured decides he has a greater need for the money while he is still alive than his children do after he dies. He seeks out a third party to take over the rights to the policy in exchange for an up-front payment that represents a percentage of the death benefit.

The third party reviews the insured's diagnosis and the policy itself and presents an offer to pay $600,000 for the rights to the policy. The insured receives the money in a lump sum. The third party takes over paying the policy's premiums and receives the full $1 million death benefit when the insured dies.

Potential Complications

Viatical settlements are controversial and can be fraught with risk. The third party has a financial interest in the insured dying as quickly as possible, since it receives its money faster and does not have to make as many premium payments. On rare occasion, a person diagnosed with a terminal illness is miraculously cured, perhaps because a medical advancement emerges at just the right time. In this scenario, the third party is stuck with a policy that might not pay a benefit for decades to come.

RELATED TERMS
  1. Acceleration Life Insurance

    A type of policy that pays a portion (typically 25\% or 50\%) ...
  2. Life Insurance

    A protection against the loss of income that would result if ...
  3. Accelerated Death Benefit - ADB

    A benefit that can be attached to a life insurance policy that ...
  4. Level Death Benefit

    A life insurance payout that is the same whether the insured ...
  5. Guaranteed Issue Life Insurance ...

    A type of financial-protection policy that provides cash to a ...
  6. Terminally Ill

    A person who is sick and is diagnosed with a disease that will ...
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. Investing

    CEO of TripAdvisor's Viator Resigns (TRIP)

    Barrie Seidenberg, CEO of TripAdvisor Inc. (TRIP) travel brand Viator, has announced her resignation from the company.
  3. Financial Advisor

    Advising FAs: Explaining Life Insurance to a Client

    Life insurance was initially designed to protect the income of families, particularly young families in the wealth accumulation phase, in the event of the head of household's death.
  4. Insurance

    Critical Illness Insurance: Get Paid If You Get Sick

    This coverage will allow you to focus your attention on getting well, rather than getting by.
  5. Insurance

    5 Things You Didn't Know About Life Insurance

    Life insurance policies can be simple or complex; make sure you know as much as you can before setting up yours.
  6. Investing

    Making A Living On Death Bonds

    Find out if these macabre bonds are just the new blood your portfolio needs.
  7. Insurance

    Whole or Term Life Insurance: Which Is Better?

    Learn the difference between term life insurance and whole life insurance. Understand when it is beneficial to buy each type of life insurance.
  8. Financial Advisor

    Getting Life Insurance in Your 20s Pays Off

    Find out how Americans in their 20s can benefit from a well-thought-out life insurance policy, especially if they are able to build cash value for retirement.
  9. Retirement

    How Survivorship Life Insurance Works

    Should you buy a survivorship life insurance policy?
Hot Definitions
  1. Block (Bitcoin Block)

    Blocks are files where data pertaining to the Bitcoin network is permanently recorded.
  2. Fintech

    Fintech is a portmanteau of financial technology that describes an emerging financial services sector in the 21st century.
  3. Ex-Dividend

    A classification of trading shares when a declared dividend belongs to the seller rather than the buyer. A stock will be ...
  4. Debt Security

    Any debt instrument that can be bought or sold between two parties and has basic terms defined, such as notional amount (amount ...
  5. Taxable Income

    Taxable income is described as gross income or adjusted gross income minus any deductions, exemptions or other adjustments ...
  6. Chartered Financial Analyst - CFA

    A professional designation given by the CFA Institute (formerly AIMR) that measures the competence and integrity of financial ...
Trading Center